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Global Economy

Why finance ministers may hold the keys to climate action

Marcello Estevão's picture
People watch the rescue process in the flooded area on August 17,2018 in Pathanamthitta, Kerala, India. Kerala was badly affected by the floods during the monsoon season. Source: AJP, Shutterstock.


Without urgent action, the impact of climate change could push an additional 100 million people into poverty by 2030. Meeting global climate goals requires ambitious, transformational and systemic action. Sustainable infrastructure is at the heart of this opportunity and can deliver cities where we can move, breathe and be productive; resilient systems for power, water and housing that withstand increasingly frequent and severe climate extremes; and ecosystems that are more productive and robust. Mobilizing public and private resources is an essential part of generating the trillions of dollars needed for this sustainable infrastructure.

Climate change is not simply an “environmental” problem. Rising temperatures pose potentially catastrophic risks to people, their livelihoods, and entire cities. Climate change puts every aspect of society at risk and has become a serious financial and economic problem. 

A fair data marketplace for all

Siddhartha Raja's picture
Credit: Kentoh/Shutterstock
Billions of people around the world are barely aware of their participation in a trillion-dollar data market. Its growth and impact has been accelerated by the easier flow, storage, and analysis of data—thanks to rapid advances in digital technology combined with falling costs of computing. The global data economy is estimated to be worth more than US$3 trillion; the European Commission believes that personalized data was worth over EUR 300 billion by 2016. The application of personal data for online advertising is also skyrocketing with the internet surpassing television as the leading advertising channel. Two internet giants—Facebook and Google—have combined digital advertising revenues on par with the gross domestic product (GDP) of Morocco.
 
This marketplace is reshaping how people interact with and use information, leading to new opportunities. Yet, it confronts these people and policymakers alike with new questions of the trade-offs between privacy, convenience, and access to information.
 
In chapter 4 of our latest Information and Communications for Development report, we started to frame what this marketplace (or places) might look like. We sought to understand what the costs and benefits were for people—the producers of much the data, the most valued commodity in this new economy. We tried to abstract from the now almost (worryingly regular) news of leaks and hacks to get a better sense of what might be ways to think about public policies that lead to a more balanced and fair data marketplace. We thought about the opportunities and the risks that are emerging, but also about what might be ways to make data marketplaces fairer in their functioning.

Revolutionizing mobility through blockchain

Photo: Plamenj/Flickr

As digital technology continues to transform and reshape the transportation industry over the last few years, blockchain as a decentralized distributed technology has been embraced by other fields through various applications. It has found varied applications across banking, financial services, healthcare, e-governance, and voting.

Blockchain has immense potential to solve the most pressing problems of mobility where it can be used by private & public sector to securely share and integrate data across modes of transport. It paves  the path for transforming Mobility as a Service (or MaaS), where a user may access different modes of transport (three-wheelers, bus, metro, train etc.) on a single platform with seamless connectivity. It makes a paradigm shift in redefining the customer needs in terms of service, rather than the mode of transport.

The applications of blockchain in reducing the cost of financial transactions have been implemented across sectors. In India, 80% of our travel is for distances less than 5 km and most of this is through non-motorized modes of transport which may largely be served by walking, bicycle, and cycle rickshaws. In these modes the, transaction size for every ride is small (or nil). Also, people in urban and semi-urban areas tend to use multiple modes of transport to reach their destinations. In this case, it makes sense for using digital payments that are integrated across all modes of transport. But the payment systems of today charge a transaction fee of between 0.5% to 5%. This hampers the faster uptake of digital payments, especially for smaller transactions. Blockchain greatly reduces the cost per transaction as there are no intermediaries involved in the payment system, thus making small transactions of even 1 or 2 Indian rupees ($0.014 to $0.028) digitally feasible.

Sustainable Mobility for All: Changing the mindset, changing policies

Nancy Vandycke's picture
Photo: Photoviriya/Shutterstock
The global conversation on transport and mobility has evolved significantly over the past five years. Take transport and climate, for instance: although data on the carbon footprint of major transport modes had been available for a long time, it was not until COP21 in 2015 that mobility became a central part of the climate agenda. The good news is that, during that same period, the space of solutions expanded as well.  For example, data sharing is now viewed as an obvious way to promote better integration between urban transport modes in cities.

In that context, the task at hand for the Sustainable Mobility for All initiative (SuM4All) was clear: How can we work with decision-makers and the international community to transform the conversation, harness the full potential of these emerging solutions, and take on the world’s most pressing mobility issues?

To tackle these challenges, the initiative decided to focus on three essential steps.

Investing in resource efficiency – the economics and politics of financing the resource transition

Jun Erik Rentschler's picture
Photo by Tom Fisk from Pexels
Photo by Tom Fisk from Pexels

“Moving towards a more responsible and efficient use of natural resources is key, not only to address resource scarcity, wastage, and the associated environmental effects, but also for incentivising innovation and modernisation towards a circular economy. Resource efficiency essentially means doing more with less, as it allows us to create more value using fewer natural resources. This transition can contribute to sustainable economic growth that generates welfare, while limiting harmful impacts on the environment and hence future generations.” Ángel Gurría, Secretary General, OECD (from Preface, Flachenecker & Rentschler, 2018)


The need for more resource efficient and circular economies

High and volatile resource prices, uncertain supply prospects, rising demand, and environmental impacts – various factors are putting increasing pressure on policy makers, researchers, firms, and investors to explore pathways towards sustainable and efficient resource management. 

Moreover, rapid technological transitions that are changing our lives for the better are also adding to the challenge. The significant increase in renewable energy technologies such as solar power, the increasing proliferation of electric vehicles, and the rapid increase in smart-phone use are some of the trends that are improving people’s lives. Yet, while these developments are in line with the Sustainable Development Goals, they are also driving up demand for critical natural resources.

Resource efficiency could offer one solution to these challenges, yielding substantial benefits, both economically and environmentally.

And yet, while resource efficiency investments could yield both economic and environmental benefits, global resource efficiency has increased by a mere 1% per year over the past three decades. This is insufficient to counterbalance ever increasing resource demand. Even declared champions of the resource efficiency agenda, including the European Union, have yet to deliver on their ambitious goals. Overall, despite high-level attempts to mainstream the resource efficiency agenda, policy measures still lack a coherent, systematic approach and large-scale implementation.

Is inflation really gone for good?

Jongrim Ha's picture
Emerging market and developing economies have achieved a remarkable decline in inflation since the mid-1970s. In addition, inflation movement up or down has become increasing synchronized across the countries of the world. These developments have been supported by long-term trends such as countries’ widespread adoption of robust monetary policy frameworks and the strengthening of global trade and financial integration.

However, continuation of low and stable emerging market and developing economy inflation is by no means guaranteed. If the wave of structural and policy-related factors that have driven declines in inflation loses momentum, elevated inflation could re-emerge.

Furthermore, if the global inflation cycle turns up, emerging market and developing economy policymakers may find that keeping inflation low and stable may become as a great a challenge as getting there in the first place. To insulate economies from the impact of global shocks, options include strengthening institutions, including central bank independence, and establishing complementary fiscal policy frameworks.

Read more on the topic in the January 2019 Global Economic Prospects.
 
Emerging market and developing economies have achieved a significant decline in inflation since the mid-1970s, with median annual national consumer price inflation down from a peak of 17.3 percent in 1974 to about 3.5 percent in 2018. Declines in inflation over recent decades have been broad-based across regions and country groups.
 
Median Consumer Price Index (CPI), by country group

Digital technologies allow people to take on risks and explore new opportunities

Xubei Luo's picture

In the era of digital technology, the structure of production as well as the interaction between humans and machines is being redefined. The diffusion and application of digital technology can increase productivity in an unprecedented manner, with potential to reshape the role of humans in the function of production. Jobs are the drivers of development and pillars of resilience for people. Five years ago, the World Development Report (WDR 2014),  Risk and Opportunity – Managing Risk for Development, highlighted the role of enterprises in supporting people’s risk management by absorbing shocks and exploiting the opportunity side of risk. There have been heated debates on how technology may lead to risks, such as job loss and structural changes of employment. While the risks are real, the estimates of the impact of digital technology on employment vary widely, from substantial job loss for both skilled and the unskilled workers, to potential job gains thanks to the complementarity of humans and machines, as well as the income and wealth effect derived from higher productivity.

Smart regulation is key for creating a new digital economy in MENA

Andrea Barone's picture

The call for the transformation of the role of the state contained in the latest MENA Economic Monitor (MEM) cannot be overemphasized. For the "moonshot approach" to the new digital economy to succeed in generating equitable growth and creating millions of jobs, public authorities in the region must become effective regulators. Indeed, digitization poses a set of unique economic, political, and social challenges that require defining clear "rules of the game".

On risk and black swans in developing countries

Carlos Végh's picture

In 2014, the World Bank issued a highly relevant and timely report titled Risk and Opportunity:  Managing Risk for Development. This report analyzed the growing number of heterogenous risks and opportunities affecting developing countries.  A clear challenge in finding a consistent risk management strategy stems from the sharp differences in the risks faced by developing countries; for example, commodity price shocks, financial crises, and natural disasters have all different defining characteristics.  While we could tailor risk management strategies to each one of these types of risks, not having the benefit of a unifying framework can lead to mistakes and mismanagement of the scarce resources available to developing nations to deal with these potentially disastrous events.  Five years after the publication of the report, in a time of growing macroeconomic headwinds for emerging markets and higher exposure to natural disasters, understanding the risks faced by these economies and how to effectively manage them continues to be a key policy challenge.


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