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2014/09/23: Better Growth, Better Climate - The New Climate Economy Report

Countries at all levels of income have the opportunity to build lasting economic growth and reduce the immense risk of climate change.

But the next 15 years are critical for action.

Sir Nicolas Stern, auteur du rapport éponyme chiffrant le prix de l'inaction entre 5 et 20% du PIB mondial (5'500 milliards d'euros !):

"Are we going to look our grand-children in the eyes ?

And tell them that we understood the issues, that we recognised the danger and the opportunities, and still we failed to act ?"

Let's act about it: ‪#‎PriceOnCarbon‬ !

A new pathway
for economic policy.

Countries at all income levels have the opportunity to build lasting economic growth and at the same time reduce the immense risk of climate change. But action is needed now.

The Global Commission, advised by some of the world’s leading economists, sets out a ten point Global Action Plan for governments and businesses to secure better growth in a low-carbon economy.

We live in a moment of great opportunity.

The next 15 years will be critical, as the global economy undergoes a deep structural transformation that will determine the future of the world’s climate system.

It will not be “business as usual”. The global economy will grow by more than half, a billion more people will come to live in cities, and rapid technological advance will continue to change businesses and lives.

Low-carbon and climate-resilient growth is possible. The capital for the necessary investments is available, and the potential for innovation is vast. What is needed is strong political leadership and credible, consistent policies.

But without urgent action, warming could exceed 4°C by the end of the century, with extreme and potentially irreversible impacts.

This report lays out how countries across the world can reduce the risks of climate change and achieve high-quality, resilient, and inclusive economic growth.

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Global Action Plan


Chapter one | Overview:

The Challenge

We live in a moment of great opportunity, and great risk.

The opportunity is to harness the expanding capacities of human intelligence and technological progress to improve the lives of the majority of the world’s people. Over the last quarter of a century, economic growth, new technologies, and global patterns of production and trade have transformed our economies and societies. In developing countries, nearly 500 million people have risen out of poverty just in the last decade – the fastest pace of poverty reduction for which we have data. 1 But still 2.4 billion live on less than US$2 a day, and urbanisation, rising consumption and population growth have put immense pressure on natural resources.

The next 10–15 years could be an era of great progress and growth. 2 In this period we have the technological, financial and human resources to raise living standards across the world. Good policies that support investment and innovation can further reduce poverty and hunger, make fast-growing cities economically vibrant and socially inclusive, and restore and protect the world’s natural environments.


Chapter two | Cities:

Engines of national and global growth

Cities are crucial to both economic growth and climate action. Urban areas are home to half the world’s population, but generate around 80% of global economic output, 76 and around 70% of global energy use and energy-related GHG emissions. 77 Over the next two decades, nearly all of the world’s net population growth is expected to occur in urban areas, with about 1.4 million people – close to the population of Stockholm – added each week. 78 By 2050, the urban population will increase by at least 2.5 billion, reaching two-thirds of the global population. 79

The stakes for growth, quality of life and carbon emissions could not be higher. The structures we build now, including roads and buildings, could last for a century or more, setting the trajectory for greenhouse gas emissions at a critical time for reining these in.


Chapter three | Land Use

Protecting food, forests, and people

Explore the full Land Use Chapter

Rapid global population growth, urbanisation, rising incomes and resource constraints are putting enormous pressure on land and water resources used by agriculture and forests, which are crucial to food security and livelihoods. Roughly a quarter of the world’s agricultural land is severely degraded, 100 and forests continue to be cleared for timber and charcoal, and to use the land for crops and pasture. 101 Key ecosystem services are being compromised, and the natural resource base is becoming less productive. At the same time, climate change is posing enormous challenges, increasing both flood and drought risk in many places, and altering hydrological systems and seasonal weather patterns.


Chapter four | Energy

Better energy, better climate

Explore the full Energy Chapter

We are in a period of unprecedented expansion of energy demand. Global energy use has grown by more than 50% since 1990, 134 and must keep growing to support continued development. As much as a quarter of today’s energy demand was created in just the last decade, and since 2000, all the net growth has occurred in non-OECD countries, more than half of it in China alone. 135 Past projections often failed to anticipate these dramatic shifts, which nonetheless have affected the energy prospects of nearly all countries. The future is now even more uncertain, as projections show anything from a 20% to 35% expansion of global energy demand over the next 15 years. 136

A major wave of investment will be required to meet this demand: around US$45 trillion will be required in 2015–2030 for key categories of energy infrastructure. 137 How that money is spent is critically important: it can help build robust, flexible energy systems that will serve countries well for decades to come, or it can lock in an energy infrastructure that exposes countries to future market volatility, air pollution, and other environmental and social stresses. Given that energy production and use already accounts for two-thirds of global GHG emissions, 138 and those emissions continue to rise, a great deal is at stake for the climate as well.


Chapter five | Economics of Change

A framework for growth and change

Explore the full Economics of Change Chapter

The world is changing rapidly: the share of output from emerging markets and developing economies is rising sharply; the global population is growing and moving to rapidly expanding cities; energy systems are being built and rebuilt. At the same time, the risks of dangerous climate change are increasing.

There is a perception that there is a trade-off in the short- to medium term between economic growth and climate action, but this is due largely to a misconception (built into many model-based assessments) that economies are static, unchanging and perfectly efficient. Any reform or policy which forces an economy to deviate from this counterfactual incurs a trade-off or cost, so any climate policy is often found to impose large short- and medium-term costs.

In reality, however, there are a number of reform opportunities that can reduce market failures and rigidities that lead to the inefficient allocation of resources, hold back growth and generate excess greenhouse gas emissions. Indeed, once the multiple benefits of measures to reduce GHG emissions are taken into consideration, such as the potential health gains from better local air quality, many of the perceived net costs can be reduced or eliminated.


Chapter six | Finance

Financing a low-carbon future

Explore the full Finance Chapter

Transitioning from a high-carbon to a low-carbon economy will require significant investment. Businesses, land owners, farmers and households will need to invest to improve efficiency; energy producers will need to switch to low-carbon generation. Governments will need to expand and enhance infrastructure productivity, and also seek to influence the direction of private finance through regulation, incentives, co-investment, risk-sharing instruments and other policy measures.

Much of the needed investment in low-carbon infrastructure can be handled through existing structures and mechanisms, with the help of effective policy, regulation and market signals. But for some investments – most notably a low-carbon transition in the power sector – creating efficient finance structures and attracting finance is more challenging and may require dedicated policy.


Chapter seven | Innovation

Transformation through innovation

Explore the full Innovation Chapter

Innovation is central to economic growth – long-term gains in productivity and new product development are determined by trends in innovation. Innovation also makes it possible to continue growing our economies in a world of finite resources. The importance of innovation is a recurring theme throughout this report; it is essential to transforming global energy systems, agriculture and cities. It also depends on and is shaped by factors discussed in the report, from investment strategies, to effective regulation of markets, to climate policy.

The Organisation for Economic Co-operation and Development (OECD) has projected that if current trends continue, as the global population grows from 7 billion in 2010 to more than 9 billion in 2050, per capita consumption will more than triple, from about US$6,600 to US$19,700 per year, and global GDP will nearly quadruple, requiring 80% more energy. 186 Sustaining growth at that scale will only be possible with radically new business models, products and means of production.


Chapter eight | International Cooperation

A better climate through cooperation

Explore the full International Cooperation Chapter

Globalisation has been a major driver of both low- and high-carbon growth over the last 25 years. International trade and investment have enabled a huge expansion of global production, raising greenhouse gas emissions, but they have also helped advance the low-carbon economy. The increasingly global integration of supply chains for products such as solar and wind power components, for example, has helped dramatically reduce their costs. 205

The low-carbon economy is now a global phenomenon. International trade in environmental goods and services totals nearly US$1 trillion per year, or around 5% of all trade. 206
Trade in low-carbon and energy-efficient technologies alone is expected to reach US$2.2 trillion by 2020, a tripling of current levels. 207 
Two-fifths of that market is expected to be in emerging and developing economies, 208 and the suppliers come from all over the world. In just the solar power sector, China and the US trade around US$6.5 billion worth of goods each year. 209

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