An increasing number of studies provide solid evidence that there are substantial co-benefits of climate action and that it is economically optimal to pursue a 2°C or lower warming. This is due to significant cost decreases in low-carbon technologies, while models have been updated to fully capture the societal costs of climate impacts and pollution. Time is running out, however, meaning that green investments and societal changes are required immediately. Economic stimulus focused primarily on growth would jeopardize the Paris Agreement and thereby also threaten long-term social and economic prosperity.
Eva Alfredsson, researcher at KTH and senior advisor to Global Utmaning wrote the text as a part of the report ”10 New Insights in Climate Science 2020” together with Erik Phil, Mikael Malmaeus, Joachim H Spangenberg and Detlef P van Vuuren. This text is an excerpt from the report ”10 New Insights in Climate Science 2020”. Read the entire report here
There is no trade-off between sustainability and economic development. A prosperous economy is dependent on productive ecosystems. The suggested economic stimuli in response to the COVID-19 pandemic provide a unique opportunity to accelerate the investments needed to reach the Paris Agreement and transition to a sustainable economy.
Increasing economic benefits on green transition
An increasing number of studies provide solid evidence that there are substantial economic benefits of climate action in the short as well as long term. Some integrated climate-economic models have previously found that strong mitigation to limit global warming to below 2°C would not be economically beneficial, but when updated with the latest data, these models instead suggest the Paris Agreement targets of 1.5°C or well below 2°C to be cost-optimal. Indeed, a recent study is suggesting that phasing out coal has enough co-benefits to health, local environment, and other direct societal effects that it would be cost-beneficial even when the future damage from a changing climate is not included.
One reason for the shifting economic assessments is that the technology development of renewable energy and electrification options has been much faster than assumed in most scenarios, giving rapid cost reductions. For instance, the global average cost of electricity from solar panels has fallen by 82% between 2010–2019. Of all the newly commissioned utility-scale renewable power generation projects, 56% had a cost lower than the cheapest new source of fossil fuel–fired power. Battery costs have also fallen by almost an order of magnitude in a decade. As a result, in many sectors, a decarbonization strategy will be easier to implement.
“Green growth” not as good as it seems
While the prospects for climate mitigation improve as the economics shift, the time to meet the Paris Agreement’s goals is decreasing and the carbon budget shrinks. Simultaneously, there is an immediate need to stimulate the economy in the wake of the effects of the coronavirus pandemic. This may seem like a perfect time for policies advocating “green growth,” i.e. economic growth decoupled from climate and environmental impacts.
In the short term, there is scientific support for a combination of investments in low-carbon technology that can simultaneously reduce emissions within the remaining carbon budget while stimulating the current economy. Scientific evidence, however, establishes that there is a lack of support for a strategy relying on decoupling of GDP growth and emissions as a safe method for achieving the goals of the Paris Agreement and long-term sustainability. While technological advances increase resource efficiency and reduce emission intensities, they have historically been outpaced by increases in economic growth and consumption. A recent body of research shows poor evidence for absolute and global decoupling of emissions from economic throughput. In general, high-income countries are also high-emissions countries. There are some examples of countries that have managed absolute decoupling and decreased their emissions, also when weighing in emissions of goods and services from abroad. However, these countries have started from high levels of emissions, had low economic growth, and targeted policy measures.
New economic strategies are required
The lacking historical evidence for decoupling climate from economic growth indicate that different and/or complementary strategies are required. There are models showing possible pathways where modest growth can be achieved while global temperatures are kept in line with the Paris Agreement. They do, however, require drastic behavioural change in addition to technology improvements in order to avoid rebound effects. The issue is that the time available is minimal, so measures need to be taken very rapidly, involving technical and behavioural change at unprecedented levels.
Weighing in the critical time factor, recent scientific evidence shows that if the economic recovery after COVID-19 has a primary focus on economic growth, with sustainability and climate mitigation as a secondary goal, it would jeopardize our last chance of achieving the Paris Agreement and safeguarding people’s health, well-being, and prosperous economic development. A primary focus on greening the economy through sustainable investments will, on the other hand, stimulate economic activity and give other co-benefits. Caution should be taken to avoid adverse environmental or social impacts in attempts to decouple climate change and economic development through, for instance, potential large-scale production of biofuels, geoengineering options, or conflict minerals. As the remaining carbon budget is limited, it is essential to use it on investments that lead to high net CO2 savings, i.e have a high return on investment in terms of CO2- emission reductions. While this is a universal necessity, it particularly applies to high-income countries that have the resources to invest in greener solutions.
Future Earth, The Earth League, WCRP (2021). 10 New Insights in Climate Science 2020. Stockholm