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THE GLOBAL COMMISSION ON THE ECONOMY AND CLIMATE

14 April 2015

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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)

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Members of the Global Commission

Jean Pascal TricoireCEO, Schneider

Electric

Felipe Calderón (Chair)Former President,

Mexico

Ingrid BondeCFO and Deputy CEO, Vattenfall

Sharan BurrowGeneral Secretary, International Trade

Union Confederation

Chen YuanFormer Chairman,

Chinese Development Bank

Helen ClarkAdministrator, UNDP

Luísa DiogoFormer Prime

Minister, Mozambique

Dan DoctoroffFormer CEO, Bloomberg

S. (Kris) GopalakrishnanCo-founder, Infosys

Angel GurríaSecretary General,

OECD

Chad HollidayChairman-designate,

Shell

Sri Mulyani IndrawatiManaging Director and

COO, World Bank

Caio Koch WeserVice Chairman, Deutsche Bank

Ricardo LagosFormer President,

Chile

Michel LièsCEO, Swiss Re

Trevor ManuelFormer Finance

Minister, South Africa

Takehiko NakaoPresident, Asian

Development Bank

Eduardo PaesMayor, Rio de

Janeiro

Annise ParkerMayor, Houston

Paul PolmanCEO, Unilever

Nicholas Stern (Vice-Chair)IG Patel Professor at the

London School of Economics and Political Science

Zhu LevinFormer CEO, China International Capital

Corporation

Jens StoltenbergFormer Prime

Minister, Norway

Maria van der HoevenExecutive Director,

International Energy Agency

Ngozi Okonjo-IwealaMinister of Finance,

Nigeria

Naina Lal KidwaiChairman, HSBC

India

Suma ChakrabartiPresident, EBRD

Kristin Skogen LundDirector General, Confederation of

Norwegian Enterprise

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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.

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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 reducingcarbon 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

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Key drivers of growth and climate performance

RESOURCEEFFICIENCY

INNOVATION

INFRASTRUCTURE INVESTMENT

HIGH QUALITY, RESILIENT, INCLUSIVE = BETTER GROWTH

ENERGYLAND USE

CITIES

WIDER ECONOMY

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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 GDP70% of energy consumption

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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 millionTotal area: 16,605 km2

Urban area: 7692 km2

Transport carbon emissions: 6.9 tonnes CO2 p.c.

Population: 5 millionTotal 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.

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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

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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

Cap

ital

co

st

(US

$ m

illi

on

/km

)

0

20

40

60

80

350

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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

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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

Def

ore

stat

ion

are

a (k

m2

/ yea

r) 2

000-

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.

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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

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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.

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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

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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.

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ENERGY: Growth in energy use has shifted to fast-growing Asian countries

Source: BP Statistical Review of World Energy 2013

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ENERGY: Economic value of premature deaths from PM2.5 air pollution

Source: NCE estimate, based on WHO mortality data

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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

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1995 201020001990 20142005

USD/MWh

Current fossil fuelrange, indicative

Solar PV, historical

Best utility-scaleproject, 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

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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

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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

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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

1.9100%

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

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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

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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.

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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/

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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

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INNOVATION: Google is becoming one of the biggest “clean tech” companies on the planet

Source: Google, Greentech Media

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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

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POLICIES: There are significant subsidies to the high-carbon economy

$82 bn Renewables subsidies globally $544 bn

Fossil fuel consumption

subsidies, developing & emerging economies

Over $30 bn Company

car & parking tax benefits

in developed countries $55-90 bnFossil fuel support,

developed countries

Sources: OECD (2013), Inventory of Estimated Budgetary Support and Tax Expenditures for Fossil Fuels; IEA (2013), World Energy Outlook; IEA (2013), OECD (2014, forthcoming)

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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.

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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

1974 1980 1985 1990 1995 2000 2005 20110.00%

0.02%

0.04%

0.06%

0.08%

0.10%

0.12%

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

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Climate performance off track: next 15 years critical

Source: IPCC

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A different growth pathway

CARBON BUBBLE

TODAY

LIMITS TOGROWTH

Growth performance

Good

Bad

Bad GoodClimate performance

NEW CLIMATE ECONOMY

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Next stepsThe 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

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1. Integrate climate risk into strategic decisions

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2. Secure a strong international agreement

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3. End perverse subsidies

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4. Price carbon to send a clear market signal

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5. Scale-up low carbon innovation

41

6. Reduce the cost of capital for low-carbon investment

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7. Move toward connected and compact cities

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8. End deforestation

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9. Restore degraded lands

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10. Phase out unabated coal fast