1 1 THE GLOBAL COMMISSION ON THE ECONOMY AND CLIMATE 14 April 2015
Jul 27, 2015
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THE GLOBAL COMMISSION ON THE ECONOMY AND CLIMATE
14 April 2015
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Better Growth, Better Climate; The New Climate Economy Report
Commissioned by 7 countries: Colombia, Ethiopia, Indonesia, Norway, Sweden, South Korea, United Kingdom
Led by a Global Commission: 23 former heads of state, CEOs and heads of international institutions. Chaired by Felipe Calderon, former President of Mexico
Overseen by an Economic Advisory Panel of 14 world leading economists, chaired by Professor Lord Nicholas Stern
Delivered by 8 research institutes:
Online interactive report
Synthesis report in multiple languages
Included contributions from 120+ organisations
(Managing Partner)
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Members of the Global Commission
Jean Pascal TricoireCEO, Schneider
Electric
Felipe Calderón (Chair)Former President,
Mexico
Ingrid BondeCFO and Deputy CEO, Vattenfall
Sharan BurrowGeneral Secretary, International Trade
Union Confederation
Chen YuanFormer Chairman,
Chinese Development Bank
Helen ClarkAdministrator, UNDP
Luísa DiogoFormer Prime
Minister, Mozambique
Dan DoctoroffFormer CEO, Bloomberg
S. (Kris) GopalakrishnanCo-founder, Infosys
Angel GurríaSecretary General,
OECD
Chad HollidayChairman-designate,
Shell
Sri Mulyani IndrawatiManaging Director and
COO, World Bank
Caio Koch WeserVice Chairman, Deutsche Bank
Ricardo LagosFormer President,
Chile
Michel LièsCEO, Swiss Re
Trevor ManuelFormer Finance
Minister, South Africa
Takehiko NakaoPresident, Asian
Development Bank
Eduardo PaesMayor, Rio de
Janeiro
Annise ParkerMayor, Houston
Paul PolmanCEO, Unilever
Nicholas Stern (Vice-Chair)IG Patel Professor at the
London School of Economics and Political Science
Zhu LevinFormer CEO, China International Capital
Corporation
Jens StoltenbergFormer Prime
Minister, Norway
Maria van der HoevenExecutive Director,
International Energy Agency
Ngozi Okonjo-IwealaMinister of Finance,
Nigeria
Naina Lal KidwaiChairman, HSBC
India
Suma ChakrabartiPresident, EBRD
Kristin Skogen LundDirector General, Confederation of
Norwegian Enterprise
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Main findings of the Commission:
• Economic growth and climate mitigation can be achieved together. We do not need to choose.
• A growing number of businesses, cities and countries are demonstrating this. Recent technological and policy developments mean that even more opportunities are available today.
• About US$ 90 trillion in infrastructure investment is needed from 2015-2030 to meet development needs. We need to choose if it will be low-carbon and climate resilient. Making it low-carbon would not cost much more, and fuel savings could fully offset additional investment costs.
• But, if we lock in the wrong path, we risk significant economic and social impacts of climate change. We need to act urgently.
• There are multiple economic benefits of action, such as reduced health costs from air pollution, less congestion and road deaths, and enhanced energy, water and food security. In many cases, these will outweigh the costs of action.
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World leaders picked up the core messages from the report
“...there does not have to be a conflict between a sound environment and strong economic growth.” President Barack Obama, USA
“There is no contradiction between climate action and economic stability and growth.”Ban Ki-Moon, UN Secretary-General
“If we get this right there need not be a trade-off between economic growth and reducingcarbon emissions.” Prime Minister David Cameron, UK
“The growth of our economies is compatible with the reduction of emissions.” President Dilma Rousseff, Brazil
“We need government, businesses and society to choose low-carbon paths and to make those choices now.”
Jeff Radebe, Minister in the Presidency, South Africa
“We need to see climate action not as a burden, but as an opportunity.”
President Park Geun-hye, Republic of Korea
“We need to combat the perception that climate action is incompatible with economic growth.”
Prime Minister Hailemariam Desalegn, Ethiopia
“This report made me optimistic about change”
Erna Solberg, Prime Minister of Norway
“The New Climate Economy report launched today is another milestone of climate economics.
Xie Zhenhua, Minister and Vice Chairman, NDRC
World leaders discussing climate and growth in September 2014
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Key drivers of growth and climate performance
RESOURCEEFFICIENCY
INNOVATION
INFRASTRUCTURE INVESTMENT
HIGH QUALITY, RESILIENT, INCLUSIVE = BETTER GROWTH
ENERGYLAND USE
CITIES
WIDER ECONOMY
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CITIES: Rapidly growing urban areas are key drivers of economic growth and emissions
Sources: Population split from 2011, GDP split estimate from Grubler et al 2007 cited in GEA 2012, Energy use split from GEA 2005, Emissions from World Energy Outlook 2006
52% of population
80% of GDP70% of energy consumption
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CITIES: A different model of urban development is possible: Atlanta and Barcelona have similar populations and wealth levels but very different carbon productivities
Atlanta’s built-up area Barcelona’s built-up area
Population: 5.26 millionTotal area: 16,605 km2
Urban area: 7692 km2
Transport carbon emissions: 6.9 tonnes CO2 p.c.
Population: 5 millionTotal area: 3263 km2
Urban area: 648 km2
Transport carbon emissions: 1.2 tonnes CO2 p.c.
ATLANTA BARCELONA
Source: LSE research, drawing on data from Atlanta Regional Commission (2014), Autoritat del Transport Metropolita (Area de Barcelona) (2013), GenCat (2013), UCSB (2014), D’Onofrio (2014), based on latest data.
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CITIES: A range of smart transport systems have taken off in numerous cities worldwide since 2000
Source: Sustainable Transport Adoption Curves, World Resources Institute, Embarq 2013
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CITIES: Bus rapid transit systems can carry up to 2 million passengers a day at less than 15% of the costs of a metro
Sources: Wright 2007, Cityfix.com, NY Times, LSE and NCE Cities – Paper 03 Accessibility in Cities: Transport and Urban Form
20,000 40,000 80,000
Passengers per hour per direction
Cap
ital
co
st
(US
$ m
illi
on
/km
)
0
20
40
60
80
350
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LAND USE: 800 million people were food insecure in 2012
Sources: Maplecroft's Food Security Risk Index 2013; Searchinger, T., et al.., 2013. Creating a Sustainable Food Future: A Menu of Solutions to Sustainably Feed More than 9 Billion People by 2050. World Resources Report 2013-14: Interim Findings. World Resources Institute, the World Bank, United Nations Environment Programme (UNEP), United Nations Development Programme (UNDP), Washington, DC.
To meet demand in 2050, the world will need 70% more calories, including 50% more cereals, 90% more meat, and 80% more dairy
Food Security Risk in 2012
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LAND USE: 5.2 Mha of forest is lost each year
Urban expansion
Infrastructure
Mining
Agriculture (local/subsistence)
Agriculture (commercial)
New land uses once trees are cut
Def
ore
stat
ion
are
a (k
m2
/ yea
r) 2
000-
2010
50,000
40,000
30,000
20,000
10,000
0
Africa Latin America
(Sub)tropical Asia
Source: Kissinger, G., M. Herold, and V. de Sy. 2012. Drivers of deforestation and forest degradation: A synthesis report for REDD+ policymakers.
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LAND USE: China’s Loess Plateau shows how an agricultural landscape approach can deliver economic and climate benefits
1990 2012
Source: World Bank project completion evaluations of the Loess Plateau Watershed Habilitation Projects I and II, 1999 and 2005.
• In an area of 640,000 sq. km, lifted more than 2.5 million people out of poverty, boosting farm incomes from $70 to $200 pp pa; lRR was 20% overall for a K-intensive approach, 27% for livestock components which grew in importance due to farm requests
• Average grain yields increased by 60% over 10 years
• Stopped Yellow River silting, reduced air borne dust to Beijing, and increased soil carbon storage
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LAND USE: Over 300 million ha of degraded land could be restored in Sub-Saharan Africa; the Niger case highlights the possibility
1980s
1980s Present Day
• Significantly improved agricultural productivity on 5 Mha and could be scaled further
• Farmers produce at least 100 kg/ha more now than before; more than doubled farm income for over one million households
• Agroforestry technique sequesters 1.6-10 tCO2e/ha
Source: WRI analysis using the following datasets: Protected areas: IUCN and UNEP. 2013. The World Database on Protected Areas (WDPA). Cambridge, UK: UNEP-WCMC. Croplands: Fritz, S. and L. See. 2013. Global Hybrid Cropland. Laxenburg, Austria: IIASA and IFPRI. Precipitation isohyets: FAO/UNEP Desertification and Mapping Project. 1986. Africa Mean Annual Rainfall. Geneva, Switzerland: UNEP/GRID. Impact for Niger Zinder case from worldagroforestry.org.
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LAND USE: South Korea expanded full forest cover from 35% to 64% of total land area between 1953 and 2007
Source: Government of South Korea
1953 2007
South Korea’s forests yield $94 billion annually in public benefits through air and water quality improvements, recreation, flood prevention, and others
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LAND USE: Tropical Forest Alliance - a new coalition to halt deforestation
Private Sector
Public Sector
Civil Society
Source: Tropical Forest Alliance 2020 website. See website for full list of partners.
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ENERGY: Growth in energy use has shifted to fast-growing Asian countries
Source: BP Statistical Review of World Energy 2013
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ENERGY: Economic value of premature deaths from PM2.5 air pollution
Source: NCE estimate, based on WHO mortality data
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ENERGY: Coal and unconventional fossil fuel reserves far exceed the carbon budget
Source: IPCC Working Group I; IIASA Global Energy Assessment 2012, BGR, 2013; BP Statistical Review of World Energy, 2014; IEA, 2013; World Energy Council, 2013
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1995 201020001990 20142005
USD/MWh
Current fossil fuelrange, indicative
Solar PV, historical
Best utility-scaleproject, 2014
Sources: Citi Research 2012; G. F Nemet, “Beyond the learning curve”, Energy Policy 34, 3218-3232 (2006)
ENERGY: The cost of solar PV is dropping fast
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ENERGY: Wind turbines have evolved to have 100 times more power generation capabilities than 30 years ago
Source: Adapted from the European Wind Energy Association
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ENERGY: Wind and solar power have become cost-competitive in several markets, even without subsidies
Source: REN21 Renewables 2014 Global Status Report; Deutsche Bank Markets Research; IEA 2013 Wind Roadmap.
Chile:
First solar plant with no govt. support
U.S. southwest:
Solar plant at ~8 ¢/kWh, competitive with coal
South Africa:
7 ¢/kWh wind, 30% cheaper than new coal
Brazil:
4.5 ¢/kWh wind, cheaper than any other source
Parts of India:
Wind at 6-10 ¢/kWh, close to coal at 5-8 ¢/kWh
U.S.
Wind at 5-8 ¢/kWh, cheaper than new coal
Wind also reported competitive with coal in Australia, Chile, Mexico, New Zealand, Turkey.
Rooftop solar cheaper than electricity retail rates in at least 11 countries
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ENERGY: Renewables’ accelerating share of growth in electricity production has shifted expectations
0%
20%
40%
60%
80%
100%
2003-2008
3.5 10.8
2013-2030, IEA (NPS)
2008-2013
10.6
1998-2003
3.12.4
1993-1998
1.9100%
2013-2030, BNEF (New
Normal)
Hydro
Nuclear
Wind
Other RES
Fossil
Solar
Source: Historical: BP Statistical Review of World Energy 2014; Projections: IEA World Energy Outlook 2013; Bloomberg New Energy Finance, Global Renewable Energy Market Outlook 2013 (Fact Pack). Projections were interpolated to start at 2013.
Shares of growth in electricity generation(Totals in TWh)
Historical Projections
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EFFICIENCY: Energy efficiency can be the biggest (and cheapest) energy “source”
Source: IEA, 2013: Energy Efficiency Market Report 2013 – Market Trends and Medium-Term Prospects
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INVESTMENT: Infrastructure capital spend is estimated to be marginally higher in a low-carbon scenario
Source: OECD (2006, 2012), IEA ETP (2012), modelling by Climate Policy Initiative (CPI) for New Climate Economy, and New Climate Economy analysis.
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INVESTMENT: Financing costs for solar power eliminate natural cost advantages in India
Source: Climate Policy Initiative, 2012. Meeting India’s Renewable Energy Targets: The Financing Challenge. Available from: http://climatepolicyinitiative.org/publication/meeting-indias-renewable-energy-targets-the-financing-challenge/
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Source: Tesla motors website, scdigest.com, autonews.com
Triggering competitive response
Transforming the auto industry Tesla market cap: $26bn
~25,000 cars sold in 2013 GM market cap: $54bn ~9.7 million cars sold in 2013
Promoting new materials
Pioneering batteries and energy storage
INNOVATION: Tesla motors is challenging the status quo in many industries, and creating huge wealth in the process
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INNOVATION: Google is becoming one of the biggest “clean tech” companies on the planet
Source: Google, Greentech Media
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POLICIES: Actions with economic benefits could deliver most of the greenhouse gas abatement needed by 2030
Source: Emissions estimates: IPCC AR5; New Climate Economy analysis based on expert input and multiple data sources
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POLICIES: There are significant subsidies to the high-carbon economy
$82 bn Renewables subsidies globally $544 bn
Fossil fuel consumption
subsidies, developing & emerging economies
Over $30 bn Company
car & parking tax benefits
in developed countries $55-90 bnFossil fuel support,
developed countries
Sources: OECD (2013), Inventory of Estimated Budgetary Support and Tax Expenditures for Fossil Fuels; IEA (2013), World Energy Outlook; IEA (2013), OECD (2014, forthcoming)
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POLICIES: Global growth of carbon pricing
SOURCE: This map was taken from the State and Trends of Carbon Pricing report 2014, developed by the World Bank and Ecofys, and published in May 2014.
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POLICIES: Energy R&D as a percent of GDP has been falling in most developed countries since the 1980s
Source: R&D figures and split from International Energy Agency (2013), Tracking Clean Energy Progress 2013, OECD/IEA, Paris, GDP figures from World Development Indicators 2014, adjusted for inflation from 2005 to 2010
Energy R&D as % of GDP in IEA member countries1
1974 1980 1985 1990 1995 2000 2005 20110.00%
0.02%
0.04%
0.06%
0.08%
0.10%
0.12%
11%
21%17%
27%
14%
4%5%
Other cross cutting technologies/research
Nuclear
Fossil fuels
Renewable energy
Energy efficiency
Hydrogen and fuel cells
Other power and storage technologies
Energy R&D split in 2011
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Climate performance off track: next 15 years critical
Source: IPCC
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A different growth pathway
CARBON BUBBLE
TODAY
LIMITS TOGROWTH
Growth performance
Good
Bad
Bad GoodClimate performance
NEW CLIMATE ECONOMY
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Next stepsThe Global Commission recommends 10 transformative actions
Source: NCE. For details please see the NCE Global Action Plan (2014)
1 Integrate climate risk into strategic decisions
Secure a strong international climate agreement
End perverse subsidies
Price carbon to send a clear market signal
Scale-up low-carbon innovation
Reduce the cost of capital for low-carbon investment
Move toward connected and compact cities
End deforestation
Restore degraded lands
Phase out unabated coal fast
2
3
4
5
6
7
8
9
10
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1. Integrate climate risk into strategic decisions
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2. Secure a strong international agreement
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3. End perverse subsidies
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4. Price carbon to send a clear market signal
40
5. Scale-up low carbon innovation
41
6. Reduce the cost of capital for low-carbon investment
42
7. Move toward connected and compact cities
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8. End deforestation
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9. Restore degraded lands
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10. Phase out unabated coal fast