A new OECD report considers how governments can achieve growth through actions that also meet climate change targets. The report, Investing in Climate, Investing in Growth, finds that countries will need to step up their ambition and take immediate action if they are to achieve the aim of the Paris Agreement to limit the rise in global temperatures to well below 2 °C. Under existing climate commitments, global warming is expected to be limited to 3°C. The report advises that “stringent mitigation action to limit temperature increases would moderate the physical climate impacts that countries would otherwise need to adapt to”. The 2050 pathways platform was launched last year to support countries building on their existing commitments and devise long-term decarbonisation strategies. The thinking behind this is that a long-term approach can ensure that the actions taken are to the benefit of businesses and the economy. The positive effects of avoiding climate change also add to GDP growth.
To meet a 2 °C scenario, the IEA estimate that the energy intensity of the G20 economies would need to fall by more than 60% between 2014 and 2050. Although this is a challenge, it is in line with historic achievements. However, at the same time, the CO2 intensity of energy is required to fall by 75% by 2050, which will be much more difficult to achieve. Climate policies will need to reflect that carbon prices are currently too low and their effect is reduced by a low oil price. Analysis shows that a meaningful carbon price needs to be applied across the economy and that fossil fuel subsidies should be reformed. It is encouraging that there is currently a shift towards renewable technologies, which makes up two-thirds of new build in the G20 countries. However, the pipeline for new coal generation is too high, making up 22% of capacity under construction. The report is a reminder that, if the Paris Agreement is upheld, we are likely to see a shift towards more widely applied carbon pricing and an increased focus on clean innovation. Read the full report to learn more about the interaction of emission reduction plans with areas such as economic policy and infrastructure development.