Better Growth, Better Climate: The New Climate Economy Presentation
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The New Climate Economy is the flagship project of the Global Commission on the Economy and Climate, a group of 28 global leaders in government, business, and civil society. Our Better Growth, Better Climate report explores how governments can grow their economies while reducing the risk of dangerous climate change. We encourage you to explore these slides and use them as a resource for your own work on the transition to a low-carbon economy.
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Better Growth, Better Climate: The New Climate Economy Presentation
- 1. 0 0 THE GLOBAL COMMISSION ON THE ECONOMY AND CLIMATE 14 April 2015
- 2. 1 1 Better Growth, Better Climate; The New Climate Economy Report Commissioned by 7 countries: Colombia, Ethiopia, Indonesia, Norway, Sweden, South Korea, United Kingdom Led by a Global Commission: 23 former heads of state, CEOs and heads of international institutions. Chaired by Felipe Calderon, former President of Mexico Overseen by an Economic Advisory Panel of 14 world leading economists, chaired by Professor Lord Nicholas Stern Delivered by 8 research institutes: Online interactive report Synthesis report in multiple languages Included contributions from 120+ organisations (Managing Partner)
- 3. 2 Members of the Global Commission Jean Pascal Tricoire CEO, Schneider Electric Felipe Calderón (Chair) Former President, Mexico Ingrid Bonde CFO and Deputy CEO, Vattenfall Sharan Burrow General Secretary, International Trade Union Confederation Chen Yuan Former Chairman, Chinese Development Bank Helen Clark Administrator, UNDP Luísa Diogo Former Prime Minister, Mozambique Dan Doctoroff Former CEO, Bloomberg S. (Kris) Gopalakrishnan Co-founder, Infosys Angel Gurría Secretary General, OECD Chad Holliday Chairman-designate, Shell Sri Mulyani Indrawati Managing Director and COO, World Bank Caio Koch Weser Vice Chairman, Deutsche Bank Ricardo Lagos Former President, Chile Michel Liès CEO, Swiss Re Trevor Manuel Former Finance Minister, South Africa Takehiko Nakao President, Asian Development Bank Eduardo Paes Mayor, Rio de Janeiro Annise Parker Mayor, Houston Paul Polman CEO, Unilever Nicholas Stern (Vice-Chair) IG Patel Professor at the London School of Economics and Political Science Zhu Levin Former CEO, China International Capital Corporation Jens Stoltenberg Former Prime Minister, Norway Maria van der Hoeven Executive Director, International Energy Agency Ngozi Okonjo-Iweala Minister of Finance, Nigeria Naina Lal Kidwai Chairman, HSBC India Suma Chakrabarti President, EBRD Kristin Skogen Lund Director General, Confederation of Norwegian Enterprise
- 4. 3 Main findings of the Commission: • Economic growth and climate mitigation can be achieved together. We do not need to choose. • A growing number of businesses, cities and countries are demonstrating this. Recent technological and policy developments mean that even more opportunities are available today. • About US$ 90 trillion in infrastructure investment is needed from 2015- 2030 to meet development needs. We need to choose if it will be low- carbon and climate resilient. Making it low-carbon would not cost much more, and fuel savings could fully offset additional investment costs. • But, if we lock in the wrong path, we risk significant economic and social impacts of climate change. We need to act urgently. • There are multiple economic benefits of action, such as reduced health costs from air pollution, less congestion and road deaths, and enhanced energy, water and food security. In many cases, these will outweigh the costs of action.
- 5. 4 World leaders picked up the core messages from the report “...there does not have to be a conflict between a sound environment and strong economic growth.” President Barack Obama, USA “There is no contradiction between climate action and economic stability and growth.” Ban Ki-Moon, UN Secretary- General “If we get this right there need not be a trade-off between economic growth and reducing carbon emissions.” Prime Minister David Cameron, UK “The growth of our economies is compatible with the reduction of emissions.” President Dilma Rousseff, Brazil “We need government, businesses and society to choose low-carbon paths and to make those choices now.” Jeff Radebe, Minister in the Presidency, South Africa “We need to see climate action not as a burden, but as an opportunity.” President Park Geun-hye, Republic of Korea “We need to combat the perception that climate action is incompatible with economic growth.” Prime Minister Hailemariam Desalegn, Ethiopia “This report made me optimistic about change” Erna Solberg, Prime Minister of Norway “The New Climate Economy report launched today is another milestone of climate economics. Xie Zhenhua, Minister and Vice Chairman, NDRC World leaders discussing climate and growth in September 2014
- 6. 5 Key drivers of growth and climate performance RESOURCE EFFICIENCY INNOVATION INFRASTRUCTURE INVESTMENT HIGH QUALITY, RESILIENT, INCLUSIVE = BETTER GROWTH ENERGY LAND USE CITIES WIDER ECONOMY
- 7. 6 CITIES: Rapidly growing urban areas are key drivers of economic growth and emissions Sources: Population split from 2011, GDP split estimate from Grubler et al 2007 cited in GEA 2012, Energy use split from GEA 2005, Emissions from World Energy Outlook 2006 52% of population 80% of GDP 70% of energy consumption
- 8. 7 CITIES: A different model of urban development is possible: Atlanta and Barcelona have similar populations and wealth levels but very different carbon productivities Atlanta’s built-up area Barcelona’s built-up area Population: 5.26 million Total area: 16,605 km2 Urban area: 7692 km2 Transport carbon emissions: 6.9 tonnes CO2 p.c. Population: 5 million Total area: 3263 km2 Urban area: 648 km2 Transport carbon emissions: 1.2 tonnes CO2 p.c. ATLANTA BARCELONA Source: LSE research, drawing on data from Atlanta Regional Commission (2014), Autoritat del Transport Metropolita (Area de Barcelona) (2013), GenCat (2013), UCSB (2014), D’Onofrio (2014), based on latest data.
- 9. 8 CITIES: A range of smart transport systems have taken off in numerous cities worldwide since 2000 Source: Sustainable Transport Adoption Curves, World Resources Institute, Embarq 2013
- 10. 9 CITIES: Bus rapid transit systems can carry up to 2 million passengers a day at less than 15% of the costs of a metro Sources: Wright 2007, Cityfix.com, NY Times, LSE and NCE Cities – Paper 03 Accessibility in Cities: Transport and Urban Form 20,000 40,000 80,000 Passengers per hour per direction Capitalcost(US$million/km) 0 20 40 60 80 350
- 11. 10 LAND USE: 800 million people were food insecure in 2012 Sources: Maplecroft's Food Security Risk Index 2013; Searchinger, T., et al.., 2013. Creating a Sustainable Food Future: A Menu of Solutions to Sustainably Feed More than 9 Billion People by 2050. World Resources Report 2013-14: Interim Findings. World Resources Institute, the World Bank, United Nations Environment Programme (UNEP), United Nations Development Programme (UNDP), Washington, DC. To meet demand in 2050, the world will need 70% more calories, including 50% more cereals, 90% more meat, and 80% more dairy Food Security Risk in 2012
- 12. 11 LAND USE: 5.2 Mha of forest is lost each year Urban expansion Infrastructure Mining Agriculture (local/subsistence) Agriculture (commercial) New land uses once trees are cut Deforestationarea(km2/year)2000-2010 50,000 40,000 30,000 20,000 10,000 0 Africa Latin America (Sub)tropical Asia Source: Kissinger, G., M. Herold, and V. de Sy. 2012. Drivers of deforestation and forest degradation: A synthesis report for REDD+ policymakers.
- 13. 12 LAND USE: China’s Loess Plateau shows how an agricultural landscape approach can deliver economic and climate benefits 1990 2012 Source: World Bank project completion evaluations of the Loess Plateau Watershed Habilitation Projects I and II, 1999 and 2005. • In an area of 640,000 sq. km, lifted more than 2.5 million people out of poverty, boosting farm incomes from $70 to $200 pp pa; lRR was 20% overall for a K-intensive approach, 27% for livestock components which grew in importance due to farm requests • Average grain yields increased by 60% over 10 years • Stopped Yellow River silting, reduced air borne dust to Beijing, and increased soil carbon storage
- 14. 13 LAND USE: Over 300 million ha of degraded land could be restored in Sub-Saharan Africa; the Niger case highlights the possibility 1980s 1980s Present Day • Significantly improved agricultural productivity on 5 Mha and could be scaled further • Farmers produce at least 100 kg/ha more now than before; more than doubled farm income for over one million households • Agroforestry technique sequesters 1.6-10 tCO2e/ha Source: WRI analysis using the following datasets: Protected areas: IUCN and UNEP. 2013. The World Database on Protected Areas (WDPA). Cambridge, UK: UNEP- WCMC. Croplands: Fritz, S. and L. See. 2013. Global Hybrid Cropland. Laxenburg, Austria: IIASA and IFPRI. Precipitation isohyets: FAO/UNEP Desertification and Mapping Project. 1986. Africa Mean Annual Rainfall. Geneva, Switzerland: UNEP/GRID. Impact for Niger Zinder case from worldagroforestry.org.
- 15. 14 LAND USE: South Korea expanded full forest cover from 35% to 64% of total land area between 1953 and 2007 Source: Government of South Korea 1953 2007 South Korea’s forests yield $94 billion annually in public benefits through air and water quality improvements, recreation, flood prevention, and others
- 16. 15 LAND USE: Tropical Forest Alliance - a new coalition to halt deforestation Private Sector Public Sector Civil Society Source: Tropical Forest Alliance 2020 website. See website for full list of partners.
- 17. 16 ENERGY: Growth in energy use has shifted to fast-growing Asian countries Source: BP Statistical Review of World Energy 2013
- 18. 17 ENERGY: Economic value of premature deaths from PM2.5 air pollution Source: NCE estimate, based on WHO mortality data
- 19. 18 ENERGY: Coal and unconventional fossil fuel reserves far exceed the carbon budget Source: IPCC Working Group I; IIASA Global Energy Assessment 2012, BGR, 2013; BP Statistical Review of World Energy, 2014; IEA, 2013; World Energy Council, 2013
- 20. 19 1995 201020001990 20142005 USD/MWh Current fossil fuel range, indicative Solar PV, historical Best utility-scale project, 2014 Sources: Citi Research 2012; G. F Nemet, “Beyond the learning curve”, Energy Policy 34, 3218-3232 (2006) ENERGY: The cost of solar PV is dropping fast
- 21. 20 ENERGY: Wind turbines have evolved to have 100 times more power generation capabilities than 30 years ago Source: Adapted from the European Wind Energy Association
- 22. 21 ENERGY: Wind and solar power have become cost- competitive in several markets, even without subsidies Source: REN21 Renewables 2014 Global Status Report; Deutsche Bank Markets Research; IEA 2013 Wind Roadmap. Chile: First solar plant with no govt. support U.S. southwest: Solar plant at ~8 ¢/kWh, competitive with coal South Africa: 7 ¢/kWh wind, 30% cheaper than new coal Brazil: 4.5 ¢/kWh wind, cheaper than any other source Parts of India: Wind at 6-10 ¢/kWh, close to coal at 5-8 ¢/kWh U.S. Wind at 5-8 ¢/kWh, cheaper than new coal Wind also reported competitive with coal in Australia, Chile, Mexico, New Zealand, Turkey. Rooftop solar cheaper than electricity retail rates in at least 11 countries
- 23. 22 ENERGY: Renewables’ accelerating share of growth in electricity production has shifted expectations 0% 20% 40% 60% 80% 100% 2003-2008 3.5 10.8 2013-2030, IEA (NPS) 2008-2013 10.6 1998-2003 3.12.4 1993-1998 1.9 100% 2013-2030, BNEF (New Normal) Hydro Nuclear Wind Other RES Fossil Solar Source: Historical: BP Statistical Review of World Energy 2014; Projections: IEA World Energy Outlook 2013; Bloomberg New Energy Finance, Global Renewable Energy Market Outlook 2013 (Fact Pack). Projections were interpolated to start at 2013. Shares of growth in electricity generation (Totals in TWh) Historical Projections
- 24. 23 EFFICIENCY: Energy efficiency can be the biggest (and cheapest) energy “source” Source: IEA, 2013: Energy Efficiency Market Report 2013 – Market Trends and Medium-Term Prospects
- 25. 24 INVESTMENT: Infrastructure capital spend is estimated to be marginally higher in a low-carbon scenario Source: OECD (2006, 2012), IEA ETP (2012), modelling by Climate Policy Initiative (CPI) for New Climate Economy, and New Climate Economy analysis.
- 26. 25 INVESTMENT: Financing costs for solar power eliminate natural cost advantages in India Source: Climate Policy Initiative, 2012. Meeting India’s Renewable Energy Targets: The Financing Challenge. Available from: http://climatepolicyinitiative.org/publication/meeting-indias-renewable-energy-targets-the-financing-challenge/
- 27. 26 Source: Tesla motors website, scdigest.com, autonews.com Triggering competitive response Transforming the auto industry Tesla market cap: $26bn ~25,000 cars sold in 2013 GM market cap: $54bn ~9.7 million cars sold in 2013 Promoting new materials Pioneering batteries and energy storage INNOVATION: Tesla motors is challenging the status quo in many industries, and creating huge wealth in the process
- 28. 27 INNOVATION: Google is becoming one of the biggest “clean tech” companies on the planet Source: Google, Greentech Media
- 29. 28 POLICIES: Actions with economic benefits could deliver most of the greenhouse gas abatement needed by 2030 Source: Emissions estimates: IPCC AR5; New Climate Economy analysis based on expert input and multiple data sources
- 30. 29 POLICIES: There are significant subsidies to the high- carbon economy Sources: OECD (2013), Inventory of Estimated Budgetary Support and Tax Expenditures for Fossil Fuels; IEA (2013), World Energy Outlook; IEA (2013), OECD (2014, forthcoming)
- 31. 30 POLICIES: Global growth of carbon pricing SOURCE: This map was taken from the State and Trends of Carbon Pricing report 2014, developed by the World Bank and Ecofys, and published in May 2014.
- 32. 31 POLICIES: Energy R&D as a percent of GDP has been falling in most developed countries since the 1980s Source: R&D figures and split from International Energy Agency (2013), Tracking Clean Energy Progress 2013, OECD/IEA, Paris, GDP figures from World Development Indicators 2014, adjusted for inflation from 2005 to 2010 Energy R&D as % of GDP in IEA member countries1 0.00% 0.02% 0.04% 0.06% 0.08% 0.10% 0.12% 1974 1980 1985 1990 1995 2000 2005 2011 11% 21% 17% 27% 14% 4% 5% Other cross cutting technologies/research Nuclear Fossil fuels Renewable energy Energy efficiency Hydrogen and fuel cells Other power and storage technologies Energy R&D split in 2011
- 33. 32 Climate performance off track: next 15 years critical Source: IPCC
- 34. 33 A different growth pathway CARBON BUBBLE TODAY LIMITS TO GROWTH Growth performance Good Bad Bad Good Climate performance NEW CLIMATE ECONOMY
- 35. 34 Next steps The Global Commission recommends 10 transformative actions Source: NCE. For details please see the NCE Global Action Plan (2014) 1 Integrate climate risk into strategic decisions Secure a strong international climate agreement End perverse subsidies Price carbon to send a clear market signal Scale-up low-carbon innovation Reduce the cost of capital for low-carbon investment Move toward connected and compact cities End deforestation Restore degraded lands Phase out unabated coal fast 2 3 4 5 6 7 8 9 10
- 36. 35 1. Integrate climate risk into strategic decisions
- 37. 36 2. Secure a strong international agreement
- 38. 37 3. End perverse subsidies
- 39. 38 4. Price carbon to send a clear market signal
- 40. 39 5. Scale-up low carbon innovation
- 41. 40 6. Reduce the cost of capital for low- carbon investment
- 42. 41 7. Move toward connected and compact cities
- 44. 43 9. Restore degraded lands
- 45. 44 10. Phase out unabated coal fast
Notes de l'éditeur
- The Commission has focused on three drivers of growth that affect every sector of the economy: resource efficiency, infrastructure investment, and innovation. There are major opportunities in three socio-economic systems: cities, land use, and energy systems. These three systems are crucial to the economy and emissions and can unlock multiple economic, social, and environmental benefits. Note: Cities include urban transport. Land use includes forests. Innovations include economy-wide innovation
- The urban share of the global population is expected to rise to 70% by 2050, with 90% of this growth coming in developing countries. The way that this urbanisation takes place will disproportionately affect both the economy and climate. Globally, $3 tn could be saved through 2030 by developing more compact, connected, and coordinated cities.
- UPDATED GRAPH (10 December 2014) Comparing Atlanta and Barcelona demonstrates what is possible through compact, coordinated, and connected urban development. Uncoordinated sprawl leads to higher costs of infrastructure, public service delivery, and transport. Urban sprawl in the US alone adds about $400bn per year. Compact, connected urban development – higher densities, mixed-use neighbourhoods, and walkable/transit-oriented environments – can unlock more productive and climate-friendly cities.
- Innovative use of existing technologies has led to alternative patterns of urban transport, such as bike-sharing, bus rapid transit, and car-free zones. Bike-sharing has expanded from 5 cities (4,000 bikes) in 2000 to 678 cities (700,000 bikes) today, with an additional 186 cities studying, planning, or building bike-sharing. Transit-oriented urban development provides significant cost savings. Houston spends about 14% of its GDP on transport, compared to 4% in Copenhagen. Thanks to its BRT system, bike/pedestrian paths, and zoning policies, Curitiba’s residents spend only 10% of their income on transport (one of the lowest in the country), per capita GHG emissions are 25% lower than the Brazilian urban average, and Curitiba is now one of the most affluent cities in Brazil. Stockholm reduced emissions by 35% from 1993-2010, but grew its economy by 41%. graph available at http://thecityfix.com/blog/on-the-move-pushing-sustainable-transport-concept-tipping-point-dario-hidalgo-heshuang-zeng/ Data source European Low Emission Zone (ELEZ). 2013. http://www.lowemissionzones.eu/. Accessed July 27, 2013 World Metro Database. World Metro Database. 2013. http://mic-ro.com/metro/table.html?feat=CICOOPLGSTLSDP&orderby=LG&sort=DESC&unit=&status=. Accessed on March 30th, 2013 BRT Center of Excellence, EMBARQ, IEA and SIBRT. “Global BRT Data.” Version 1.23. Last modified July 25, 2013. http://www.brtdata.org Shaheen, S., D. Sperling, and C. Wagner. Carsharing in Europe and North America: Past Present and Future. Transportation Quarterly, Vol. 52, 1998, No. 3, pp. 35-52. Shaheen, Susan A., Stacey Guzman, and Hua Zhang. "Bikesharing in Europe, the Americas, and Asia." Transportation Research Record: Journal of the Transportation Research Board 2143.1 (2010): 159-167. The World Carshare Consortium. One Thousand World Carshare Cities in 2009. http://www.ecoplan.org/carshare/. Accessed July 27, 2013 Meddin, Russell., and Paul DeMaio. The Bikesharing World Map. Metrobike LLC. (2013) https://maps.google.com/maps/ms?ie=UTF8&oe=UTF8&msa=0&msid=214135271590990954041.00043d80f9456b3416ced Accessed April 30th 2013 Wikepedia. List of Carfree places. 2013. Accessed http://en.wikipedia.org/wiki/List_of_car-free_places on September 5th, 2013 National Complete Street Coalition. 2012. Complete Streets Policy Adoption. Wikipedia. List of Smartcards. Accessed http://en.wikipedia.org/wiki/List_of_smart_cards on September 5th, 2013 Google Maps. Cites covered. Accessed http://www.google.com/landing/transit/cities/ on September 5th, 2013
- Over 160 cities have implemented bus rapid transit systems. The BRT systems can cost less than 15% that of a metro system. In Bogota, travel times have been reduced by 32% for system users, and traffic fatalities reduced by 88%. Local air quality improved in vicinity of BRT corridors. Since opening, it has removed 7,000 small private buses from roads, reducing the use of bus fuel — and associated emissions — by more than 60%. Such transit systems can help the world’s largest cities save up to 1.5 bn tCO2e annually by 2030. SOURCE: Cityfix.com for travel time and fatalities statistics, City officials quoted in NY Times 2009 article regarding private buses, NY Times, 15% figure from LSE and NCE Cities – Paper 03 Accessibility in Cities: Transport and Urban Form, p 10-11 http://www.nytimes.com/2009/07/10/world/americas/10degrees.html?_r=0 http://thecityfix.com/blog/why-is-transmilenio-still-so-special/ LSE cities: file:///C:/Users/Aparna/Downloads/NCE%20Cities%20-%20Paper%2003%20-%20Urban%20Transport%20and%20City%20Form%20-%20First%20Draft%20-%2030....pdf
- More than 840 million people regularly went hungry in 2012, predominantly in sub-Saharan Africa. A growing, richer population will compound pressure on food supplies and the natural resource base, and climate change is likely to exacerbate these challenges. Meeting rising food demand without compromising forests and other critical ecosystems will require much higher crop yields. In fact, crop yields must grow 1/3 more per year than the past 44 years’ growth to prevent new land conversion. Note: The Food Security Risk Index has been developed for governments, NGOs and business to use as a barometer to identify those countries which may be susceptible to famine and societal unrest stemming from food shortages and price fluctuations. Maplecroft reaches its results by evaluating the availability, access and stability of food supplies in 197 countries, as well as the nutritional and health status of populations.
- Forest loss and degradation and other land use change are responsible for 11% of total GHG emissions. Forests are under pressure from demand for wood products, with projections to 2050 showing a tripling of wood removals compared to 2010. The principal reasons given for cutting trees (forest degradation) in this source are logging and pulp in Asia and Latin America and charcoal in Sub-Saharan Africa. Clearing of trees also “makes available” land for agriculture, which used to be the main reason for cutting trees and still is in some places. However, experince in the last decade shows that agricultural growth does not need to be coupled with deforestation. In Brazil, anti-deforestation policies reduced the rate of deforestation in the Amazon by 76% between 2005 and 2012. During this time, soybean production grew by 29%, sugarcane by 70%, and beef by 8%. Note: The 5.2 Mha figure is land use change, and is net of reforestation and afforestation (gross deforestation is estimated at 13 Mha), sinc ethe land use has not changed on those parcels.
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- Forests are a critical form of natural capital that generate climate and economic benefits for countries, companies, and citizens. Past experience, such as in South Korea, shows that forest recovery can go hand-in-hand with economic development. South Korea’s forests provide a total of $94 billion in aggregate annual economic benefits, equivalent to 9% of the country’s 2010 GDP. This includes $23 bn in water benefits, $19 bn in air quality and carbon sequestration, recreation ($13 bn), and others. Restoring 350 mHA of lost or degraded forests globally could generate $170 bn in net benefits from watershed protection, improved crop yields, forest products; it would also sequester 1-3 GT CO2eq annually. 1. Bae, J., Joo, R., & Kim, Y. (2012). Forest Transition in South Korea: Reality, path and drivers. Land Use Policy, 29, 198-207 2. From Land Use Chapter – “water benefits (US$23 billion), carbon sequestration and air quality improvement (US$19 billion), erosion control (US$12 billion), forest-based recreation (US$13 billion), and other benefits (US$27 billion). The aggregate annual value of these economic benefits (about US$94 billion) is equivalent to about 9% of the country’s 2010 GDP. “ Source: http://english.forest.go.kr/newkfsweb/html/EngHtmlPage.do?pg=/esh/koforest/UI_KFS_0101_030000.html
- The Tropical Forest Alliance 2020 has committed to reducing deforestation in four major supply chains (palm oil, beef, soy, and paper and pulp) by 2015, and to halt natural forest loss altogether by 2020. The Alliance includes major companies such as Unilever, Pepsi Co, and Kellogg; national governments; and civil society organizations. Photo sources: Tropical Forest Alliance 2020 website, Wikipedia
- Since 2000, all of the net growth of energy use has occurred in non-OECD countries, with China accounting for more than ½ the increase. This new wave of energy demand may require around $45 tn in investment over the next 15 years, making this a critical window to avoid locking in high-emitting technologies. Note: This chart shows total energy use, not just electricity generation (the chart uses TWh as a unit of energy in general, not just electrical energy).
- Energy generation exacts a high toll on human health. Air pollution is a major reason why the “true” cost of coal exceeds that of just generating electricity: for the 15 major economies, poor air quality is valued at over 4% of GDP. Accounting for these costs can shift economic arguments away from coal. For example, coal-fired power has a financial advantage in much of Southeast Asia, at costs of US$60–70 per MWh. But properly accounting for air pollution can add a cost of US$40/MWh or more, enough to bridge or exceed the cost gap to alternatives.
- Coal reserves are by far the largest conventional source of potential future CO2 emissions, and alone exceed the carbon budget by a factor of ~2. The size of unconventional gas reserves are highly uncertain, but may be as large as coal. If we use gas as a “climate bridge”, we must hence plan to reach the other end of that bridge well before the gas reserves are used up, and leave much of them in the ground.
- Solar PV module prices have fallen 80% since 2008 and now cost half of what they did in 2010. At least 53 solar PV plants over 50 MW were operating by early 2014 in at least 13 countries; rooftop solar for homes is competitive with retail electricity prices in Australia, Brazil, Denmark, Germany, and Italy. Note: This chart shows indicative levelized costs for solar photovoltaics from 1990 to 2012, with the costs for the best utility-scale project in 2013-2014 indicated (Austin Energy in Texas). The precise level is indicative of typical costs for utility-scale projects in relatively sunny regions. Actual costs can vary up or down by at least 50% depending on solar resources, and even more with local cost of capital. Assuming 17% capacity factor, and 9.25% cost of capital.
- New materials have made wind turbines bigger, stronger, and more efficient. Today’s turbines produce more power per land area used and dollar invested. In 1990, wind power was 3-4x more expensive than fossil fuel electricity, but onshore wind is now on par with or lower than fossil fuels in Australia, Brazil, Mexico, South Africa, Turkey, and the US. Further innovations, such as digital technology that enables “smart wind” that can be more easily integrated into electric grids, make it even more feasible and attractive. Graph Source (tower added): http://www.forbes.com/sites/williampentland/2014/01/10/micro-windmills-may-one-day-power-your-smart-phone/
- Due to the rapidly falling costs of solar PV and wind power, they have become cost-competitive with coal even without subsidies in numerous markets around the world. In January 2015, a new record low price for solar - 5.85 c/kwh – was recorded in Dubai. Even where subsidies are necessary, required support is falling fast. Some assessments have suggested that by the 2020s, there will be no further need for subsidy of onshore wind and solar PV in Europe. Notes: The wind and utility-scale solar costs are based on bids in auctions for power purchasing agreements or similar deals, without subsidies where these were reported. The power plant in Chile is being built by Total and Etrion, and will compete on the open electricity retail market. Although no plants have been built without subsidies elsewhere, pricing of recent PPAs indicates that utility-scale solar is competitive with new coal plants even without subsidies (but partly because of high costs for new coal plants in US; would not be the case in most non-OECD countries). Rooftop solar being cheaper then retail electricity rates means that consumers or businesses can lower their total costs by installing solar panels and buy less electricity from the grid, and depends as much on local electricity rates as it does on solar costs. It does not mean that solar is competitive directly with fossil alternatives, since the cost of producing electricity often is far lower than retail rates paid by end-users. How many and which countries have cheaper rooftop solar than retail electricity rates varies slightly with sources and assumptions. 11 referred to here comes from Deutsche Bank Markets Research and include U.S. (California), Mexico, Argentina, China, Japan, Israel, Germany, Italy, Spain, Greece, and Denmark. May also note that India and Saudi Arabia would also be on that list if they did not subsidize electricity rates.
- This chart shows the share of different energy sources in the net *growth* of electricity generation in each period (not total generation). The share of carbon-free sources has accelerated sharply since the mid 2000s and are expected to continue to accelerate. This rapid emergence of renewables has shifted expectations, with many scenarios now envisioning much higher proportions of renewables in the future. Projections for the period 2013-2030 are shown for two sources: IEA World Energy Outlook, New Policies Scenario Bloomberg New Energy Finance, “New Normal” scenario from their 2013 Global Renewable Energy Market Outlook (by Guy Turner)
- The figure shows the actual increase in annual final energy consumption, and the energy that would have been needed without energy efficiency improvements. Energy services doubled, but energy use went up by only 20%. Energy efficiency can be more important than any actual energy source for providing growth in energy services. Significant potential exists in buildings, transport, and industry to improve energy efficiency – and capturing this potential will strongly affect future energy needs. For example, India’s demand may be 40% higher in a low-efficiency scenario vs. a very high-efficiency scenario (the difference is equivalent to all of the energy the country uses today). A great deal of evidence suggests that energy efficiency investments are cost effective: in the US, state-level efficiency programs regularly save consumers $2 and sometimes up to $5 per dollar invested. Efficiency standards that are regularly ratcheted higher induce innovation over time. Note: for the chart, the countries surveyed are Australia, Denmark, Finland, France, Germany, Italy, Japan, the Netherlands, Sweden, UK, and US.
- If investments are done well, the infrastructure capital spent in a low-carbon economy could be just 5% higher than in a business-as-usual case. This figure only considers upfront investment, ignoring for example lower operational expenditure for low-carbon energy. Therefore, the transition to low-carbon does not pose substantial additional costs to required expenditure. Note: Estimates are rounded. Base case estimates include infrastructure requirements for energy, transport, telecoms, water and waste. Energy includes power generation, electricity transmission and distribution, oil, gas, coal, and investment in more energy efficient infrastructure in energy end-use sectors including buildings, industry, and transport (transport engines). Power generation includes fossil-fuel plants and low-carbon technology such as renewables (incl. biofuels), CCS and nuclear. Oil includes upstream, refining, and transport investment. Gas includes upstream, T&D, and LNG investment. Coal includes mining investment. Transport includes road, rail, airports and ports. Reduced capital expenditures (CAPEX) from fossil fuels contains lower investment on fossil fuel power generation and on the supply chain. Reduced electricity T&D investment requirements are the result of improved energy efficiency lowering the demand for T&D compared to base case. This efficiency effect outweighs the increased demand for T&D from integrating renewables. Reduced capex from compact cities is the result of infrastructure savings across transport, telecoms, buildings (energy efficiency), water and waste when cities follow a more compact urban development model. Reduction of operating expenditures (OPEX) was calculated for the low carbon transition of a coal to renewables switch and of a reduction of oil in transport. The reduction is the net result of the increase of OPEX for renewables and low-carbon vehicles minus the reduction of OPEX for fossil fuels.
- In middle-income countries, high interest rates and low debt availability hinder low-carbon energy. Our analysis shows that in India, the cost and terms of debt alone can add 24-32% to the cost of utility-scale wind and solar PV projects. Creative financing solutions are required to overcome this barrier. Development finance institutions can provide the support required through equity, loans, guarantees, and insurance products to expand renewable energy and energy efficiency in middle- and low-income countries. Notes: Modeling based on typical projects in India and the US. LCOE for the US project is estimated to be USD 0.19/kWh. We normalize this to 100% and sequentially consider the impact of changes in CAPEX, Power Load Factor (output) and financing costs for the India project.
- Tesla is a success story of open innovation. Tesla partnered with many organizations throughout the value chain, such as Panasonic, Sotira, and Toyota, to create a substantially innovative product. Tesla uses new carbon fibre composites and uses thousands of lithium-ion commodity cells in their cars. In line with this open approach, they released its electric vehicle patents to the public. The business model – selling directly, rather than through franchised dealerships – is another innovative approach. Lastly, Tesla also benefitted from targeted public support by selling $130 million in zero-emission vehicle credits in 2013. Tesla & GM market cap updated May 27th 2014 – from http://finance.yahoo.com/q?s=TSLA
- Nest (top left) is an intelligent thermostat that learns your schedule and adjusts heating and cooling accordingly. Since October 2011, Nests have saved 2 billion kWh. Google is also driving energy efficient data centres and operations – their data centres use 50% less energy than the typical one. They have invested over $1 billion in renewable energy projects and are pioneering autonomous vehicles. http://www.google.com/about/datacenters/efficiency/internal/#temperature http://www.google.com/about/datacenters/efficiency/internal/#water-and-cooling
- The actions that we recommend in this report can yield at least half, and up to 90% of the reductions needed to meet the 2C scenario. Further, these recommendations would deliver multiple economic and social benefits, so there is reason to implement them even without the climate benefits. What is included: Cities – more compact urban form, with greater use of mass transport and urban technologies Land use – halt deforestation, restore degraded land, improve agricultural productivity, and reduce food waste Energy – remove fossil fuel subsidies, transition away from coal, and reduce methane emissions from oil and gas SLCP – reduce HFCs through regulation Manufacturing and service innovations – application of digital technologies to enhance efficiency Notes: Emissions level consistent with median of the IPCC AR5 SPM.4 scenarios range compatible with 430-480 PPM CO2EQ which provides scenarios in which it is likely that the temperature change can be kept to less than 20C by 2100; 2. Aerosols in the atmosphere can prevent solar energy from reaching the Earth’s surface allowing for higher levels of emissions in 2030. As aerosols are assumed to be phased out over time, achieving emissions of 42 GT by 2030 may require negative emissions in the second half of the century to maintain a 2 degree path. 3. Baseline emissions level consistent with median of the IPCC AR5 SPM.4 baseline scenarios for 2030 compatible with > 1000 PPM CO2EQ by 2100. Note: Estimates are rounded. Sources include: Cities: Oxford Economics, LSE Cities, SEI, Siemens; Land Use: IPCC AR5, Searchinger et al, Hoda, Wei-Feng Zhang et al, Jain, N. et al, FAO, WRI, WWF, UNEP, World Bank, IUCN, Verdone et al, Houghton, WHRC, WRAP; Energy: IEA, OECD, US EPA; Short lived climate forcers: Velders et al, Climate Works and European Climate Foundation, IGSD, US EPA, OECD; Manufacturing and service innovations: SMARTer 2020 based on analysis by Boston Consulting Group
- Most countries start from a position of negative carbon prices because of subsidies for fossil fuels. However, there are numerous limitations and costs of fossil fuel consumption subsidies: They are often economically inefficient, artificially incentivising greater use or production of fossil fuels than is economically efficient for a given welfare level There is an opportunity cost for selling energy domestically below its international price. These forgone revenues represent 5% or more of GDP in some countries. Increased consumption of fossil fuels causes significant environmental impact, increasing air pollution, excessive groundwater pumping, and accelerated climate change. Subsidies promote long-term lock-in into a high-carbon economy. Subsidies tend to favor well-off middle classes, rather than the poor: 80% of electricity subsidies for irrigation water pumping in Mexico accrued to the richest 10% of farmers. Many countries have successfully undertaken reforms, such as Ghana and Tunisia. Bolivia and Nigeria’s efforts have been less successful. The components for successful fossil fuel subsidy reform include: a comprehensive reform plan integrated with broader fiscal reforms; credible and targeted measures to protect the poor; a clear communications strategy; appropriately phased and sequenced price increases; and improvements in the efficiency of state owned enterprises From OECD presentation “The OECD’s approach to green growth” The OECD has estimated the value of support for fossil fuel production and consumption in OECD countries at around US$55-90 billion per year over the period 2005 to 2011, with most of this in the form of tax breaks for consumption. The IEA estimated fossil fuel consumption subsidies in emerging and developing countries at around US$540 billion in 2012. The majority of these were for energy consumption in net fossil fuel exporting countries. The OECD estimates company car and parking tax breaks are $30 billion alone… In contrast renewables are subsidised only $82 billion…
- Carbon pricing is the most economically efficient way to tackle the greenhouse gas market failure. Almost 40 countries and over 20 sub-national jurisdictions have carbon pricing in the form of an emissions trading scheme or a carbon tax, with 26 more planning them. The world’s emissions trading schemes are valued at about $30 billion p.a., with China now housing the world's second largest carbon market, covering the equivalent of 1,115 million tons of carbon dioxide emissions. Carbon prices incentivise low-carbon innovation, and the revenues can be recycled throughout the economy to wider benefits. It is important to consider carbon pricing as part of fiscal reforms that aim to increase economic efficiency through the productive use of the carbon pricing revenues raised. Countries/regions with well-designed carbon taxes, e. g., British Columbia, are demonstrating that carbon pricing works, it reduces emissions, has no impact on growth, that substitution opportunities are more prevalent than previously thought, and that it is possible to tackle equity issues. What remains difficult is the political economy. Even in countries where a price on carbon is successful and there is evidence of its success, there is still resistance, such as in Australia. Note: This map was modified in August 2014 for the purpose of this report, to reflect the abolition of the Australian carbon pricing mechanism from 1 July 2014. Since then, Chile has enacted a carbon tax. Copyright: © 2014 International Bank for Reconstruction and Development / The World Bank http://www.worldbank.org/en/news/feature/2014/05/28/state-trends-report-tracks-global-growth-carbon-pricing
- Another market failure relates to innovation, in particular the early stages of research and development. Knowledge spillovers cause firms to under-invest in R&D compared with the public optimum. Policies that direct government investment to R&D and promote innovation can help to remedy this market failure. However, public investment in energy R&D has been dropping steadily and is less than half of what it was in the late 1970s. 1 Mostly overlap with OECD countries
- Actions to reduce carbon emissions have long atmospheric time lags, so moderating climate change in 2040-50 requires cuts today. In the next 15 years, we are likely to invest about $90 tn in infrastructure. GHG emissions come from long-lived assets, such as power plants and buildings: once we build, the lifetime emissions are “locked-in”. The world is currently on track for about 4C of warming, which would represent an average global temperature not experienced for millions of years. Even 2C of warming, which we are aiming for, could lead to global aggregate losses of 0.2-2% of income – and damages are likely to be worse for poor populations in developing countries. Source: IPCC, Ottmar’s presentation
- Our report lays out recommendations for a different growth pathway. The current model of development is one that has been accumulating climate risks. However, there are also concerns that climate action is simply too costly and will derail economic growth goals. Our analysis demonstrates that there are opportunities to improve economic growth and climate performance together.
- The Commission sets out a 10-point Global Action Plan for governments and businesses to accelerate a strong growth and lower-carbon economy. The measures set out in the report can deliver significant economic benefits, even in the next five years. If done right, they will lead to net economic benefits, even before the climate benefits are considered. We examined a sub-set of the recommendations (those for which data was available, and which had good reason to believe there would be net economic benefits), and found that could deliver 50% and as much as 90% off the action needed to avoid dangerous climate change (that is, to be within a 2C pathway in 2030).
- Investors, businesses, cities, and governments are recognising that the risk of severe climate change threatens long-term economic growth and business performance. Integrating these climate and other environmental impacts into core development and investment strategies can reduce risk without harming performance. Climate and other environmental risks should be integrated into economic and business models, policy and project assessment methods, performance indicators, discounting approaches for costs and benefits, risk metrics and models, resilience tests, and reporting requirements. Businesses should adopt and implement a standardised Integrated Reporting Framework that includes assessment of climate risk and risk reduction strategies. Investors should develop an approach to report transparently on the carbon exposure of their assets and the potential risk of stranded fossil fuel assets. The G20, IMF, OECD, and MDBs should reflect climate risk assessment and reduction in their core processes.
- An international agreement will provide the confidence and trust needed for robust domestic policy action. International cooperation is essential to provide sufficient finance and technological cooperation to support developing countries, send a strong signal for investment, and ensure a level playing field to reduce competitiveness impacts. Governments should set clear, ambitious medium-term (e.g. 2025) national GHG emissions targets and agree on a global goal which would achieve annual emissions near or below zero in the second half of the century. Developed countries should commit to a pathway to mobilise US$100 bn annually by 2020 in public and private finance. All parties should strengthen cooperative initiatives to drive climate risk management and growth in energy-intensive industries and major commodities, and to phase out HFCs.
- Subsidies for fossil fuels and agricultural inputs amount to about $680 bn per year, and subsidies that under-price land conversion and public services support urban sprawl. Phasing out these subsidies can enhance economic efficiency, free up government resources to provide better targeted support, build agricultural resilience, and reduce greenhouse gas emissions. National governments should develop plans to phase out fossil fuel and agricultural input subsidies, exploring innovative approaches with development banks to reduce the impact on low-income households. Export credit agencies should restrict preferential terms for new coal power stations to supercritical or more efficient technologies, then phase out these preferential terms. Governments should work to redirect infrastructure spending away from urban sprawl and toward compact, connected, coordinated urban development.
- Carbon pricing – even a low initial price – can incentivise producers and consumers to shift behaviour and invest in assets, technologies, and systems that foster low-carbon growth. We find no evidence that carbon pricing slows growth. National governments should apply a clear and credible carbon price signal across the economy. Revenues from carbon pricing should be recycled to productive uses, for example cutting distortionary or poorly structured taxes. A share of the revenues should be prioritised to offset impacts on low-income households. Companies should apply a “shadow” carbon price to their investment decisions and support governments in establishing carbon pricing. Where political pressures for certain countries or sectors demand a lower price initially, ideally implement a predictable price escalator. Regulations, standards, “feebates”, and other approaches should be used to complement carbon pricing. These can also help foster low-carbon change in countries for which even a low level of carbon pricing is politically or institutionally difficult, preferably with flexibility built in to facilitate the introduction of carbon pricing later.
- Innovation is a fundamental driver of long-term growth, and advances in material science and digitalisation are already driving a low-carbon transformation. We can harness innovation with the right policies and programs to accelerate the transition to the low-carbon economy. Governments of the major economies should at least triple their energy-related research and development expenditure with the aim of exceeding 0.1% of GDP by the mid-2020s. Through carbon-pricing, performance-based codes and standards, and procurement policies, governments should strengthen the market pull for new low-carbon technologies. Governments should reduce barriers to the entry and scaling of new business models around “circular economy” and asset-sharing mechanisms, and trade in low-carbon and climate-resilient technologies. Donors should double investment in agriculture and agroforestry R&D to boost agricultural productivity, climate-resilient crop development, and carbon sequestration. Governments should collaborate to establish an international network of energy access “incubators” in developing countries to enhance R&D in distributed energy technologies.
- Our financial tools and approaches must enable access to finance for the up-front investment in low-carbon and climate-resilient infrastructure. Reducing the costs of capital can significantly boost investment in low-carbon infrastructure. The additional upfront investment can be partially or fully offset by lower operating costs. Donors and development banks should review lending and investment policies to phase of financing of high-carbon projects and strategies, except where there is a clear development rationale without viable alternatives. Governments and development banks should help provide financing institutions with the right skills and capacity to provide finance for low-carbon and climate-resilient infrastructure. In countries facing high interest rate environments, governments should shift support models toward more low-cost debt and away from feed-in tariffs. Governments and investor groups should help develop well-regulated asset classes, industry structures, and finance models for low-carbon energy investment that meet the needs of institutional investors.
- Connected, compact, and coordinated urban development could lower urban infrastructure spend by over US$3 tn from 2015-2030 and create more competitive, socially inclusive, resilient, and lower-emitting cities. Finance and urban planning ministries, development banks, and city mayors should commit to a compact, connected and coordinated urban development model centred on mass transport and resource-efficient service delivery. City authorities should use parking fees, land development taxes and other mechanisms to finance and incentivise smarter, more compact urban development with locally generated revenue. Governments and development banks should work to strengthen the creditworthiness of cities. City networks (C40, ICLEI) should create a Global Urban Productivity Initiative aimed at enabling sustainable urbanisation.
- Between 2000 and 2010, the world lost on average 13 mill ha of forest each year. Some estimates suggest that conserved and sustainably managed forests can generate US$6,000 or more in aggregate value per hectare per year through watershed protection, flood management, climate mitigation, landslide prevention, recreation, and other services. Deforestation should be halted by 2030. Developed countries should scale up payments for REDD+ to at leasts US$5 bn per year. Forest-rich countries should correct governance and market failures that undermine natural forest capital by improving land use planning and tenure, strengthening forest law enforcement, and increasing transparent management. Companies in the forestry and agricultural commodities sectors should commit to eliminating deforestation from their supply chains by 2020.
- Restoring lost or degraded forest and agricultural land enhances natural capital, food security, and biodiversity while providing climate adaptation and mitigation benefits. All parties must commit to restoring at least 150 mill ha of degraded agricultural land to bring it back into full productive use, which could generate US$36 bn in additional farm income, feed up to 200 mill people, and store about 1 bn tCO2e by 2030. Governments and the international community should commit to restoring at least 350 mill ha of lost or degraded forest landscapes by 2030, which could generate US$170 bn per year in ecosystem services and sequester 1-3 bn tCO2e per year.
- Coal is often the most lightly taxed fuel despite being the most polluting. Coal pollution contributes to an estimated 3.7 mill premature deaths each year. There are already signs of a shift toward a low-carbon energy system, but further policy action is needed to ensure more rapid deployment of renewables and energy efficiency solutions. Governments should reverse the “burden of proof” for coal-fired plants and build only if there are no feasible alternatives. All countries should aim for a global phaseout of unabated fossil fuel power generation by 2050, with high-income countries acting earlier and middle-income countries following. Governments and development banks should consider all costs and benefits of different energy sources in decision-making, including energy security, health costs, and climate risks. Governments should steer investment toward renewable energy, energy efficiency, and other low-carbon alternatives. Governments should assist workers and low-income households that may be adversely affected by shifts away from coal with appropriate social protection measures.