Paris Climate Agreement could be accomplished with the world economy gaining $19 trillion, says report

A new report is out this week examining the feasibility of the Paris Climate Agreement, with recommendations to policymakers as to how it might be accomplished and what effects its adoption would have on the world economy. The study concludes that, in a conservative case, the world could gain .8% GDP in 2050, or $19 trillion cumulatively between now and then. In a more optimistic scenario, the agreement could actually add 2% to global GDP by 2030. In fact, according to the report, “reducing the impact on human health and mitigating climate change would save between two- and six- times more than the costs of decarbonisation.”

The report was commissioned by the German government and released by the International Energy Agency (IEA) and International Renewable Energy Agency (IRENA).

Not everything in the report is completely rosy, though. It suggests that global carbon output needs to peak in 2020, which is a very close deadline.  This is not to say it isn’t achievable, but this means we need to start working now, we can’t wait for years in the hope that future policymakers will solve the problem for us. And current policymakers have a chance to own these eventual GDP increases by starting programs encouraging our shared clean future.

The report actually states that additional investment in energy supply would not need to significantly exceed current planned levels in order to meet climate targets – but that planned investment would need to go into clean sources, rather than dirty ones.  The additional net total investment required is just .3% of global GDP, as long as there is a balanced decline of fossil fuel investment and increase of low-carbon investment.

Private investment into energy efficiency for businesses and households will have to increase significantly, though. This could be accomplished through policy incentives encouraging efficiency, whether they be through carbon pricing or direct purchase incentives for energy-efficient devices, perhaps even buyback programs to replace inefficient appliances or do efficiency retrofits on buildings.

Decarbonization of transportation will, of course, require a rapid shift to electric vehicles, needing to account for a dominant share of passenger and freight transport by 2050. Electric vehicle technology is already heading in the right direction, but a transition to electric trucks would also be necessary to further decarbonize road transport.

Some new technologies will be required to decarbonize certain sectors, like petrochemicals and heat supply. Bioenergy could help with the latter, while replacing petrochemicals will likely require a combination of new materials advances and less waste from consumers.

Overall, what this study and others which look into the long-term effects of environmental programs show us is that environmental progress does not need to come at the cost of economic progress.  This myth has been pushed too long by dirty industries – they’re worried about how much environmental regulation will negatively affect them, even if the regulation will affect the rest of us in a positive manner. Intelligent regulation doesn’t harm business or the economy, it merely harms businesses which are causing harm already.  This boosts the economy by removing sources of harm. And pollution is indeed a great source of harm, causing 7 million deaths per year according to the WHO, and representing a global subsidy of $5.3 trillion yearly according to IMF policy heads.  The IMF post also states that merely by pricing carbon, the world economy would see a boost of 3.5% through the economic incentivization of efficiency improvements.

You can read more in the report’s executive summary or the full report. They are both pretty dense, but seem optimistic – as long as governments take up the challenge and work in a concerted effort for a better world, and soon.