The global economy is undergoing a remarkable transformation which is altering our ability to deal with climate change. The growth of emerging economies, rapid urbanisation and new technological advances are making possible a new path of low-carbon growth in ways that were not apparent even five years ago.
We know that if left unchecked, greenhouse gas emissions will cause devastating climate change. What is now becoming clear is that reducing emissions is not only compatible with economic growth and development; if done well, it can actually generate better growth than the old high-carbon model.
Take cities. The evidence – from Bogota to Barcelona, Curitiba to Copenhagen – shows that better planned cities based on mass public transport systems tend to be economically more dynamic and have much higher quality of life than those based on urban sprawl. They also have much lower carbon emissions. As a billion more people join the world’s urban population over the next 15 years, building smarter cities creates a huge opportunity to reduce the path of emissions at the same time as improving economic performance and social conditions.
The same is true in agriculture and land use. Agricultural productivity can now be transformed using new techniques which also cut emissions. Estimates suggest that restoring just 12% of the world’s degraded land could feed an extra 200 million people by 2030, helping to reduce deforestation, and therefore carbon emissions, while stimulating rural development and fighting poverty.
In energy, we are on the verge of a revolution. The price of solar and wind power has fallen so far that in places as diverse as Brazil, South Africa and Chile, renewable energy can now compete with fossil fuels without requiring subsidies.
At the same time, coal has become more costly and less secure. Many countries are now dependent on coal imports, while air pollution associated with coal and other fossil fuels has become one of the world’s biggest killers, causing seven million deaths a year. It is now likely that renewable energy could make up half of all new electricity generation over the period to 2030 – unthinkable just a few years ago.
Meanwhile a new wave of technological innovation, including digitisation, the development of new materials and the electrification of transport, offers the potential to transform the demand for energy, both in industry and by consumers.
All this is beginning to happen, with many examples from around the world of good policy, entrepreneurial businesses and competitive markets combining to generate low-carbon growth. And it is high-quality growth, too: measured not just by rising GDP, but in falling poverty, improved health and protected natural environments which are more resilient to the climate change now already occurring.
The evidence that economic performance can be enhanced even as carbon emissions are cut has been powerfully brought together in the new report of the Global Commission on the Economy and Climate, Better Growth, Better Climate. The report builds on a growing consensus on the benefits of low-carbon growth among leading international economic institutions, such as the Organisation for Economic Co-operation and Development (OECD), the World Bank and the UN Development Programme.
But the report also shows that these developments are not happening fast enough. If the world is to limit global warming to no more than 2 degrees celsius above pre-industrial times, global emissions will have to peak and then begin to fall in the next 10-15 years. That requires a major shift towards low-carbon investment.
Such a shift is now possible. Over the next 15 years around $90tn is likely to be invested in the world’s cities, land use and energy systems. If that is high-carbon investment, the world will “lock in” the risk of dangerous climate change. But if we build low-carbon infrastructure, we can achieve multiple economic, social and environmental benefits with vastly reduced emissions. We have a remarkable opportunity to shape the future of the global economy and the future of the climate system at the same time.
But governments must choose. Over recent years many governments have vacillated over climate policy. They have introduced carbon prices but then let them fall until they are near-useless. They have backed renewables but also subsidised fossil fuels. These inconsistent signals have created uncertainty for investors, damaging growth and retarding innovation.
Among the necessary policy shifts, two stand out. First, a strong and rising carbon price, implemented through tax or emissions trading schemes, is an essential foundation of a low-carbon economy. It ensures that polluters pay and efficiency is rewarded. The opportunity to use the revenues to consolidate public finances or to cut other taxes is a valuable bonus in difficult economic times.
Second, governments should achieve a strong and equitable international climate agreement next year. Such an agreement would send a powerful market signal that the future of the global economy will be low-carbon.
The prize before us is huge. We can build a strong, inclusive and resilient global economy which can also avoid dangerous climate change. But the time for decision is now.
