THE GLOBAL COMMISSION ON THE ECONOMY AND CLIMATE Better Growth, Better Climate: The New Climate Economy Report November 2014 0 0
The New Climate Economy Partnership: 7 Commi missi ssion oning ng Countries 8 Pa Partner er Research Institut utes Colombia Climate Policy Initiative (USA) Ethiopian Development and Research Institute Ethiopia Indian Centre for Research on Economic Relations Indonesia Global Green Growth Institute (South Korea) Norway Overseas Development Institute (UK) Sweden Stockholm Environment Institute (Sweden) South Korea Tsinghua University (China) United Kingdom World Resources Institute (USA) Economic mic Adviso sory y Pa Panel Global Commi missi ssion on 14 world leading economists, chaired by Professor Lord 24 global leaders : ex-Presidents and Finance Ministers, Nicholas Stern major CEOs, heads of the main international economic Organisations Includes: Chaired by former President of Mexico Two Nobel prize winners: Felipe Calderón Daniel Kahneman and Michael Spence 1
Main findings of the Commission: • The next fifteen years will see the global economy undergo a deep structural transformation. Whatever choices are made business, along with the rest of society, there is no “business as usual”: • The global economy may grow by more than half • A billion people are likely to come to live in cities • Technology will continue to transform business and lives • Around US$90 trillion will be invested in key economic infrastructure • There are major opportunities in three key economic systems: cities, land use and energy. The private sector is fundamental to all three of these economic systems, and will be involved in and transformed by the drivers of change. • Economic growth and action on climate change can be achieved together. We do not need to choose. 2
Summary of Implications for Business There are key opportunities for business in: • Cities, land use and energy sectors, especially for infrastructure and growth markets in developing countries; • Energy and resource efficiency markets, including companies investing in circular economy and remanufacturing; • Innovative, low -carbon business models. There are key risks for business: • In high-carbon sectors with exposure to potential stranded assets, particularly coal. 3
Key drivers of growth and climate performance LAND CITIES ENERGY USE RESOURCE EFFICIENCY WIDER ECONOMY INFRASTRUCTURE INVESTMENT INNOVATION HIGH QUALITY, RESILIENT, INCLUSIVE = BETTER GROWTH 4
CITIES: 70% of the global population is expected to be urban by 2050 Billions 10 70% 0% Urba ban Glob obal al populat pulation ion 8 Urba ban n popu pulat lation ion 6 4 Ru Rural al 50% 0% Urba ban popu pulat lation ion 2 30% 0% Urba ban 0 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 The 200 00 larges gest t metrop opolit olitan an econo nomi mies es accoun unt t for 20% 0% of globa bal l pop opulat lation ion ye yet generat ate e 46% 6% of glob obal l GDP. . The urban anisat isatio ion trend nd presen sents ts signif nifica icant nt oppo portu tunitie ities s for busine sinesse sses. s. SOURCE: LSE Cities based on United Nations World Urbanization Prospects, 2007 Revision) 5
LAND USE: Business and Government international cooperation is already occurring based on self-interest Certif tified ied sustain ainab able le palm lm oil supp pply ly over r time Millions of tonnes Tropical Forest Alliance 2020 was started by The Consumer Goods 8.0 7.4 Forum (CGF) and the US 6.7 7.0 Government with the aim to help +114% pa pa achieve zero net deforestation by 6.0 2020 – one of its focus areas is 4.8 5.0 encouraging sustainability of palm oil Indonesia and Malaysia produce 4.0 around 85% of the world’s palm oil 2.8 3.0 and are the largest exporters 2.0 1.4 Companies such as Tesco, Carrefour, Nestle, Unilever, IKEA, L’Oreal have 1.0 0.2 committed to purchasing only - sustainable palm oil 2008 2009 2010 2011 2012 2013 Countries such as The Netherlands, Belgium and the UK have all pledged to import 100% Pe Percen cent t of total l palm lm oil that is certified palm oil by 2015 ~10% ~15% certif tified ied by by Ro Roundt undtab able le on Sustain ainab able le Pa Palm lm Oil l (RSP SPO) 1 1 RSPO is the main body that certifies whether palm oil is sustainably produced or not. Its criteria include that no primary forest was cleared for plantation Source: http://www.rspo.org/file/CSPOUptake&Production-Charts-MAR.pdf, Guardian, epoil.co.uk, wwf.org for proportion of total market figures ( http://wwf.panda.org/what_we_do/footprint/agriculture/palm_oil/solutions/roundtable_on_sustainable_palm_oil/) 6
ENERGY: Wind and solar power have become cost-competitive in several markets, even without subsidies Wind also reported competitive with Rooftop solar cheaper than coal in Australia , Chile , Mexico , electricity retail rates in at least 11 New Zealand , Turkey . countries U.S. Wind at 5-8 ¢/kWh, cheaper than new U.S. coal southwest: Parts of India: Solar plant at ~8 ¢/kWh, Wind at 6-10 ¢/kWh, competitive close to coal at 5-8 with coal ¢/kWh Chile: South Africa: First solar plant Brazil: with no govt. 7 ¢/kWh wind, 4.5 ¢/kWh wind, support 30% cheaper than cheaper than new coal any other source Source: REN21 Renewables 2014 Global Status Report; Deutsche Bank Markets Research; IEA 2013 Wind Roadmap. 7
RESOURCE PRODUCTIVITY: There are ~$3.7 trillion worth of resource productivity gains to be made globally Total al resour urce ce benef nefit it $ billion (2010 dollars) Energy Land Building energy efficiency 696 Water Steel Large scale farm yields 266 Food waste 252 Municipal water leakage 167 Urban densification 155 Iron and steel energy efficiency 145 Smallholder farm yields 143 Transport efficiency 138 Electric and hybrid vehicles 138 Land degradation 134 End-use steel efficiency 132 Oil and coal recovery 115 Irrigation techniques 115 Road freight shift 108 Power plant efficiency 106 Other 892 SOURCE: Resource Revolution, McKinsey Global Institute 8
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. 9
INNOVATION: Digital capabilities and new materials are transforming sectors Sect ctor or Digit ital al impa pact ct New materi erials als impa pact ct ▪ Online booking ▪ Carbon fiber fuselage ▪ 3D printing of engine parts ▪ Biofuels as jet fuel ▪ Advanced global GPS systems & ▪ More efficient geared turbo-fan engines Aviat iation ion navigation that save 20% of fuel ▪ Autopilot ▪ Online entertainment streaming through ▪ Optical fiber broadband ▪ MEMS chips allow for motion detection Netflix, Youtube ▪ Group online gaming such as World of Media dia (e.g. Wii Fit) ▪ Touchscreen Warfare ▪ Online communities ▪ Remote software updates ▪ Battery cost being driven down, making ▪ Vehicle-to-Vehicle communications EVs competitive ▪ Advanced image recognition ▪ Carbon fiber to make cars a fraction of ▪ Control system Auto-mot Auto otiv ive the weight and higher performance ▪ Navigation & online access ▪ Safer LED tail-lights and headlights ▪ Car sharing ▪ Over 1 million apps for Apple products ▪ Touchscreens ▪ High-speed mobile internet ▪ OLED and LED screens ▪ Virtualization of many services (alarm ▪ Sapphire glass for cameras, fingerprint Tele- clocks, payments) sensors and unbreakable surfaces comm mm ▪ Batteries 10
POLICIES: A number of countries have or are developing emissions trading schemes at a national or regional level Existing, emerging and potential emissions trading schemes SOURCE: Partnership for Market Readiness, Carbon Finance at the World Bank, EcoFys 11
A different growth pathway Good NEW CLIMATE TE RISKY ECONOM OMY BUSINESS Growth th performa rmanc nce LIMITS S TO GROW ROWTH TH TODAY Bad Bad Good Climat ate performa rmanc nce 12
The Global Commission recommends 10 transformative actions Next steps Integrate climate risk into strategic decisions 1 Secure a strong international climate agreement 2 End perverse subsidies 3 Price carbon to send a clear market signal 4 5 Scale-up low-carbon innovation Reduce the cost of capital for low-carbon investment 6 7 Move toward connected and compact cities 8 End deforestation 9 Restore degraded lands 10 10 Phase out unabated coal fast Source: NCE. For details please see the NCE Global Action Plan (2014) 13
The Global Commission's recommendations for businesses Next steps Integrate climate risk and carbon reduction into core business strategy 1 Provide public integrated financial and environmental reporting 2 Adopt shadow carbon pricing 3 Work to increase energy and wider resource efficiency 4 5 Strengthen collaborative sectoral initiatives, particularly in areas with high emissions and high international trade flows 6 Align advocacy and lobbying efforts behind better climate regulation Source: NCE. For details please see the NCE Global Action Plan (2014) 14
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