Better growth and a better climate: Why it pays to tackle both together

One of the biggest obstacles to climate action is the fear that it will stanch economic growth – and, in poorer countries, much-needed development. But a major new report co-authored by SEI shows that today’s fast-changing economy offers many opportunities to improve economic growth and reduce carbon emissions at the same time.

In fact, the evidence shows, there are real benefits to tackling both together, rather than separately.

“The New Climate Economy report refutes the idea that we must choose between fighting climate change or growing the world’s economy. That is a false dilemma,” said former President of Mexico Felipe Calderón, chair of the Global Commission on the Economy and Climate, which comprises 24 leaders from government, business, finance and economics in 19 countries.

“Today’s report details compelling evidence on how technological change is driving new opportunities to improve growth, create jobs, boost company profits and spur economic development,” Calderón added. “The report sends a clear message to government and private sector leaders: we can improve the economy and tackle climate change at the same time.”

The report is the product of an intensive year of research, analysis and consultations. It has been reviewed by an expert team of world-leading economists chaired by Lord Nicholas Stern, and was formally unveiled at a global launch event on 16 September at UN headquarters in New York, attended by UN Secretary-General Ban Ki-moon and government, business and finance leaders. Launch events were also held simultaneously in Stockholm – at the Swedish Environmental Protection Agency (Naturvårdsverket) – and in Oslo and Addis Ababa.

“The analysis shows that over the next 15 years, about US$90 trillion will be invested in infrastructure in cities, agriculture and energy systems worldwide,” said SEI Executive Director Johan L. Kuylenstierna. “How that money is spent is crucial. The world has an unprecedented opportunity to drive investment in low-carbon growth and achieve multiple benefits, including jobs, improved business productivity, and better health and quality of life.”

“The decisions we make now will determine the future of our economy and our climate,” said Lord Stern, co-chair of the Global Commission. “If we choose low-carbon investment we can generate strong, high-quality growth – not just in the future, but now. But if we continue down the high-carbon route, climate change will bring severe risks to long-term prosperity.”

In-depth analysis of key sectors

The report focuses on three key sectors of the global economy – cities, land use and energy. SEI helped design the project, led the work on energy, and also contributed to the cities research.

“We see how slowly the climate negotiations are moving, and part of the reason is a lack of information about the economic implications of different climate actions,” said SEI Research Director Måns Nilsson. “The value of this project is that it provides an in-depth review of the evidence. The findings will help us to formulate better national, city and business policies.”

The report identifies many opportunities to achieve growth while reducing emissions, but it stresses that to achieve them, governments and businesses need to improve resource efficiency, invest in good-quality infrastructure, and stimulate technological and business innovation. With regard to specific sectors, it finds:

• Cities: Building better connected, more compact cities based on mass public transport can save over US $3 trillion in investment costs over the next 15 years. These measures will improve economic performance and quality of life with lower emissions.

• Land use: Restoring just 12% of the world’s degraded lands can feed another 200 million people and raise farmers’ incomes by $40 billion a year – and also cut emissions from deforestation.

• Energy: As the price of solar and wind power falls dramatically, over half of new electricity generation over the next 15 years is likely to be from renewable energy, reducing dependence on highly polluting coal.

• Resource efficiency: Phasing out the $600 billion currently spent on subsidies for fossil fuels (compared to $100 billion on renewable energy) will help to improve energy efficiency and make funds available for poverty reduction.

• Infrastructure investment: New financial instruments can cut capital costs for clean energy by up to 20%.

• Innovation: Tripling research and development in low-carbon technologies to at least 0.1% of GDP can drive a new wave of innovation for growth.

The report finds that competitive markets and consistent government policy signals are essential for businesses and investors to create low-carbon jobs and growth. By establishing a strong carbon price and a level playing field through an international climate agreement, governments can unlock new investment and innovation.

“Major companies, smart investors and a new generation of entrepreneurs are already demonstrating how markets can drive low-carbon growth,” said Jeremy Oppenheim, Global Programme Director of the New Climate Economy project. “But inconsistent policy in many countries is now creating uncertainty, hurting investment and job creation. Businesses and investors need clearer market signals.”

The report ends with a 10-point Global Action Plan of practical recommendations that can achieve greater prosperity and a safer climate at the same time. These measures will all lead to net benefits to the economy, even before their climate benefits are considered.

Learn more about SEI and the New Climate Economy project »

Visit the New Climate Economy website »

Read the New Climate Economy report, Better Growth, Better Climate »