Climate science has made it clear that the world faces the risk of severe impacts as greenhouse gas emissions continue to rise, leading to higher global temperatures and increased turbulence in climatic patterns.
Over the last few years, both governments and businesses have begun to take action to reduce greenhouse gas emissions and to adapt to the changes in climate already being experienced. But the scientific evidence indicates that if the worst impacts are to be averted, considerably more needs to be done.
Yet it is evident why this is not happening. Many politicians believe that acting more strongly on climate change will cost more than their economies – and therefore their public support – can bear. Addressing climate change has immediate and direct costs while its benefits are perceived to be diffuse, both globally and over time. Political leaders find it difficult to articulate a credible economic growth story associated with taking action on climate: they fear higher costs and loss of competitiveness in key industries at a time when many economies are already facing major challenges.
Some are attracted to the argument that climate action now risks slowing down growth, when faster growth today could create the wealth needed to adapt to climate change and to develop technologies able to deal with the problem in the future. Others are worried about the industries that are likely to lose out in a low-carbon transition, many of them powerfully opposed to stronger action.
The result is that in most countries, government policies give only weak incentives to firms and investors to reduce their emissions and shift to low-carbon technologies. At the same time, for many private investors, uncertainty over the future direction of policy, combined with the demand for short term returns, make investment in resource efficiency and low-carbon assets hard to justify.
It is clear that if the world is to move towards a significantly more carbon-efficient and climate-resilient pathway of economic growth, a much more compelling economic case for action has to be made.
Such a case cannot simply claim that action on climate change is always ‘win-win’. It must address the inevitable trade-offs between different sectors of the economy and across different time-horizons. It must show how the consequent policy choices differ in low-income, medium-income and advanced economies. It must recognise the high level of uncertainty inherent in the timing and incidence of climate impact, and the challenge that this poses both to policy-makers (who face certain, immediate challenges) and to private investors. Rigorous evidence needs to be presented not just about the medium and long term, but around the economic policy and investment decisions which are being taken today.
The New Climate Economy project aims to meet this need. By engaging directly with economic decision makers in both public and private sectors, by bringing together existing knowledge and experience, and through new research and analysis, its aims are to:
- Examine the relationship between core economic goals, such as growth, investment, employment, poverty reduction and income distribution, and policies towards climate risk and mitigation
- Create a common, rigorous and unbiased understanding of the relative risks and opportunities of low- and high-carbon economic trajectories
- Explore the possible pathways to a lower-carbon, more climate-resilient economy, and the choices and trade-offs involved in such a transition, including the speed of change
- Analyse how such trade-offs can best be managed, both through public policy, and through the private actions of businesses and investors
- Examine the implications for both core economic objectives and wider social outcomes such as improved health, energy security and food security, especially in the poorest countries
After publication of its report in September 2014, the Commission will take its findings and recommendations directly to heads of government, finance and economic ministers, business leaders and investors throughout the world in a systematic outreach strategy. The results will be communicated to the wider economic community and civil society through a variety of global and national media channels. The aim is to contribute to global debate about economic policy, and to inform the policies pursued by governments and the investment decisions of the business and finance sectors.