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Analysis: Climate action could bring $26 trillion economic boost, but we're wasting time

Governments must stop dragging their feet on phasing out fossil fuels subsidies and businesses should move faster to set science-based reduction targets.

Experts have been significantly underestimating the commercial benefits associated with climate action according to a major new report, which calculates how the global economy could enjoy a $26 trillion boost by 2030 if efforts to stop climate change are scaled up.

The latest analysis, released last week by the Global Commission on the Economy and Climate, found that if global infrastructure investment over the next 15 years is channeled into environmentally beneficial schemes such as renewable energy and green transport, the economic and social benefits are likely to far outweigh any costs.

Alongside a $26 trillion economic boost, the analysis also found that ambitious climate action to cut emissions from energy generation, cities, industry and agriculture could usher in 65 million new low-carbon jobs and avoid more than 700,000 premature deaths from air pollution, compared to a business-as-usual scenario through to 2030.

New report calls on governments of G20 economies to set a price on carbon of at least $40 to $80 by 2021 with plans to ramp it up further in coming decades.
Reform of fossil fuel subsidies and the setting of a carbon price alone could generate $2.8 trillion in funds, which could be used to finance urgent public priorities such as improved health care, the researchers found.

But despite the massive economic opportunity presented by the shift to a low-carbon economy change the shift towards sustainable infrastructure and business models is not coming fast enough, the paper concluded. Scientists long have warned the world must start to rapidly decrease emissions over the next two decades to prevent runaway global warming, yet analysis has shown current climate pledges from nations around the world are not enough to bend the emissions curve down to a safe trajectory.

To accelerate action, the report calls on governments of G20 economies to set a price on carbon of at least $40 to $80 by 2021 with plans to ramp it up further in the coming decades. It also calls for the phasing out of tax breaks and subsidies for fossil fuels and harmful agricultural practices by 2025 and urges policymakers to draw up energy transition plans to chart how their countries will shift to a net zero emission energy system.

Meanwhile, the report argues businesses must disclose the climate risks they face, ideally in line with the guidelines set by the international Financial Stability Board's Task Force on Climate-related Financial Disclosures (TCFD) last year. The report suggests greater transparency over climate risks is critical to helping the investment world shift its capital towards low carbon assets and minimize the risk of system shock from "stranded assets." The largest firms are also urged to set science-based targets in line with a 2 degrees Celsius trajectory by 2020 and invest at least $50 billion of new capital by the same date into solving some of the most pressing climate challenges.

Progress is already underway in some areas. Around 120 companies have verified Science-Based Targets in place, and once China fully implements its new carbon market from 2020, 19 carbon trading systems will be operating globally, covering almost half of the world's economic output. Prices set by these markets may be typically below the $40-80 a tonne rate recommended by the report, but reforms are underway in many markets to push up prices and accelerate the phasing out of the dirtiest infrastructure. 

But time is running out to deliver a sufficiently rapid low-carbon transition, the paper warned. "The next 10-15 years are a unique 'use it or lose it' moment in economic history as we expect to invest about $90 trillion in infrastructure to 2030, more than the total current stock," the report pointed out. "Ensuring that this infrastructure is sustainable will be a critical determinant of future growth and prosperity."

The report came the same day as the influential IPPR think tank published a sweeping new manifesto designed to tackle social injustice and deliver sustainable economic growth for the United Kingdom. "Prosperity and Justice: A Plan for the new economy" was produced by the IPPR Commission on Economic Justice, which includes a host of influential figures such as economist Mariana Mazzucato, JML founder John Mills, financier Dame Helena Morrissey, the TUC's Frances O'Grady and Archbishop Justin Welby.

The report sets out a 10-point plan to tackle social injustice and deliver a fairer and more rewarding economic model and includes new proposals to drive green growth and bring the economy back within environmental limits. 

"Environmental sustainability must lie at the heart of economic policy," it argued. "We cannot sustain either prosperity or justice if climate change continues on its present course, and if the world's environmental resources and life support systems continue to be degraded and depleted. Achieving a sustainable economy will require a transformation in the productivity with which we use resources. Such a 'green growth' strategy offers significant potential to create jobs and exports. But we are not currently on track to meet our statutory climate targets and our global environmental footprint is unsustainable."

The report calls for the introduction of a Sustainable Economy Act modeled on the 2008 Climate Change Act, which would require governments to set out comprehensive sustainable economic plans and policies, and the adoption of a specific green industrial strategy.

"This would integrate demand-side policies on decarbonization, achieving a zero-waste 'circular' economy and sustaining natural capital with supply-side support for U.K. businesses and innovation to meet these goals," it stated. "Such a strategy should support a 'just transition' for workers and communities affected by the process of change."

The two reports come ahead of crunch climate talks set to take place in Poland in December, where countries will be urged to step up their climate commitments governing the period from 2020 onwards. Currently the climate plans — submitted by countries as part of the Paris climate agreement — are only enough to put the world on a trajectory of a 3.4 degrees Celsius rise in temperatures, well short of the treaty's primary goal of limiting warming to "well below" 2 degrees.

Time is running out to deliver a sufficiently rapid low-carbon transition.
The latest round of United Nations talks got underway in Bangkok this week with a brief to deliver significant progress towards finalizing the rulebook governing the Paris Agreement and step up pressure on countries to strengthen their national decarbonization plans. 

But although research indicates climate action increasingly makes good business sense, fears are growing that a political backlash against emissions reduction efforts is underway, with new administrations in the United States and Australia rowing back on their support for ambitious carbon-cutting measures. Meanwhile, even in more supportive regions, such as the European Union, some political leaders are reluctant to strengthen post-2020 decarbonization plans.

U.N. officials responsible for guiding the international response to climate issues have this week been urging governments to pull together to ensure the Paris Agreement process remains on track to deliver its aims. They will be hoping the low-carbon growth story presented in the reports will go some way towards convincing recalcitrant leaders to double down on their green agendas. 

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