When it comes to investing in efforts to combat global warming, international financial markets have the money. What's missing? Political leadership and consistent policies that would make such investments happen, according to a new report.
If that financial spigot was to open, every country on the planet would have "the opportunity to build lasting economic growth" while reducing the risks posed by global warming, according to the report, formally released Tuesday by the Global Commission on the Economy and Climate.
The report, released a week before UN Secretary-General Ban Ki-Moon is set to hold a global climate summit at UN headquarters in New York, notes that investment decisions made during the next 15 years on areas as diverse as power generation, farming, and urban planning will have a profound influence on the prospects for holding global warming to 2 degrees Celsius (3.6 degrees Fahrenheit) above preindustrial levels by century's end.
Assuming an energy mix that reflects business as usual, the cost to install transportation, energy, and water systems and the build-out of cities as population grows will reach some $90 trillion over the next 15 years. A low-carbon approach would raise that investment by another $4.05 trillion.
By the time lower operating costs for low-carbon technologies are factored in, the cost difference between high- and low-carbon pathways "is a wash," says Manish Bapna, executive vice president and managing director of the World Resources Institute in Washington and one of the project leaders for the report.
The new report's broad message is that the world can put itself on a path that could accomplish between 50 and 90 percent of the emissions reductions needed to achieve the 2-degree goal "through a set of investments that make economic sense irrespective of their global climate benefits," he adds.
The commission overseeing the report is made up of 24 current and former business, economic, and political leaders from 19 countries. It was set up by seven developed and developing countries to provide an independent assessment of the economics of greenhouse-gas abatement.
The notion that combating global warming can be accomplished without triggering a wholesale economic tail spin isn't new.
In April, for instance, the Intergovernmental Panel on Climate Change noted that the cost of reducing emissions to a level that would stand the best chance of holding global warming to 2 degrees levels likely would be slight.
Between now and 2100, global consumption could grow between 300 and 900 percent in the absence of greenhouse-gas abatement efforts, according to the panel's Working Group 3. The cost of abatement would lower those figures to between 297 percent and 889 percent by the end of the century.
The results assume, however, that mitigation starts in earnest now, the world has set a single price on carbon, and all key technologies are available.
Few if any of these conditions have been met, however.
Nevertheless, a report that focuses on investments is timely now, Mr. Bapna says, because the world is at an inflection point. Economies are emerging from the Great Recession and are beginning to focus on long-term investments postponed by the recession.
The commission sets out 10 recommendations for investments or ways to free up money for them. Some of these include:
- Phasing out subsidies for fossil fuels, farm inputs, and reducing incentives for urban sprawl.
- Introducing strong, predictable, economy-wide carbon prices.
- Halting deforestation of natural forests by 2030.
- Restoring 1.9 million square miles of lost or degraded forest and farmland by 2030.
- Adopting a "strong, lasting, and equitable" global climate pact.
- Immediate phase-out of new coal-fire power plants that lack CO2 abatement technologies – basically tools for capturing and sequestering their CO2 emissions – in developed countries and a similar phaseout in middle-income countries by 2025.
Indeed, the recommendation on coal-fired plants is one of several that are likely to earn enormous push-back from utilities and the coal industry, among other interests, Bapna says.
"This is difficult stuff," he says. "There are many barriers that prevent the uptake of what are otherwise economically efficient investments."
One example involves the recommendation that cities take on a more compact character, in effect building up, not out. The report looks to Atlanta and Barcelona to illustrate the difference that size and its impact on transportation makes on a city's carbon footprint.
Both cities have comparable populations and levels of income. Atlanta's 5.25 million people are spread out over some 1,650 square miles, while Barcelona's 5.33 million occupy about 63 square miles. Between public and private transportation, Atlantans are responsible for 7.5 tons a year of CO2 emissions per person, while per capita emissions in Barcelona are roughly 10 percent of those in Atlanta.
The report readily acknowledges that megacities and even mature smaller cities are unlikely to reduce their expanses and notes other ways they can cut their carbon emissions.
Still, the equivalent of the population of Stockholm, or 1.4 million people, is moving into cities globally each week, with the majority of this growth occurring in so-called emerging cities in Asia and in the next 10 or 20 years in Africa.
Compact, well-connected cities are beneficial from a job-growth and productivity perspective, Bapna notes, in addition to climate, quality of life, and sustainability vantage points.
One element the report doesn't appear to address is the apparent mismatch between its envisioned planning horizon for investments – the next 15 years – and the IPCC's estimate that to achieve the 2-degree goal, emissions have to peak by 2020 and decline thereafter. That trajectory assumes that policies, technologies, and incentives such as a global price on carbon are in place now, with the world in effect hitting the ground running today.
"We take on a 15-year time frame because we feel that a 30-year time frame becomes less meaningful from a planning perspective. And something much shorter doesn't give enough time to model the type of transition we need to seek," Bapna says.
Still, he acknowledges that, at the end of the day, what matters is the concentration of CO2 and other greenhouse gases the atmosphere holds by 2100. The later that emissions peak, the harder the world will have to work over a shorter period of time to knock back emissions to the 2-degree level.
Even if all of the recommendations were adopted, "after 2030, we will need to continue to see quite aggressive annual reductions in aggregate emissions," Bapna says.