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The Longer World Waits to Address Climate Change, the Higher the Cost

Rachel Kyte's picture
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Climate change ministerial, IMF/World Bank Spring Meetings 2014In September, the world’s top scientists said the human influence on climate was clear. Last month, they warned of increased risks of a rapidly warming planet to our economies, environment, food supply, and global security. Today, the latest report from the UN Intergovernmental Panel on Climate Change (IPCC) describes what we need to do about it.

The report, focused on mitigation, says that global greenhouse gas emissions were rising faster in the last decade than in the previously three, despite reduction efforts.  Without additional mitigation efforts, we could see a temperature rise of 3.7 to 4.8 degrees Celsius above pre-industrial times by the end of this century. The IPCC says we can still limit that increase to 2 degrees, but that will require substantial technological, economic, institutional, and behavioral change.

Let’s translate the numbers. For every degree rise, that equates to more risk, especially for the poor and most vulnerable.

The IPCC makes crystal clear that time is of the essence. The sooner we start to tackle the problem, the better our chances of fixing it and, importantly, the lower the cost.

That sense of urgency was shared by finance ministers who met with the leaders of the World Bank Group, International Monetary Fund, and United Nations at the World Bank on Friday. The ministers didn’t quibble about the science – they talked about risks to economic and financial stability, policy tools they could use to ramp up their low-carbon growth, and the help they need investing in their resilience.

They talked about the message. Often, policies that bring emissions reduction benefits also bring other more tangible benefits. Framing policies their way may expand support. Take transportation: Improving vehicle standards and investing in and increasing the use of public transportation reduces outdoor air pollution that contributes to asthma, heart disease, lung cancer, and 3.7 million deaths a year – and it reduces greenhouse gas emissions. We’ll have a report out looking at some of these “co-benefits” in greater detail soon.

As we head to the UN Climate Summit in September, finance ministers know they must lead action at home that secures resilient growth, delivers jobs, and drives low-carbon growth. 

Together, we talked about several actions that can begin to match climate action to the magnitude of the challenge.

• Carbon pricing. This is critical to turning energy use around and driving investment toward low-carbon growth. We are encouraging countries and companies to join a growing coalition of first movers to support putting a price on carbon.

• We are urging policy makers and regulators to drive energy efficiency on a large scale through standards for buildings, lighting and vehicles and to encourage markets for energy efficient solutions. There are jobs to be created here.

• We are advocating for critical investment in low-carbon, resilient, livable cities. The IPCC points out that most of the world’s urban areas that will exist in 2030 aren’t urban today. There is an important for national government in ensuring fiscal policies allow cities access to investment funds as well as ensuring smooth flow of fiscal transfers to city governments. In tandem, we can help with city creditworthiness.

• We are asking countries to follow Africa’s lead and join us to work on goals for enhancing agricultural productivity and nutrition, bolstering farmers’ resilience and reducing greenhouse gas emissions in the way we farm, goals that will make agriculture climate smart.

• We are challenging governments and oil companies, national and independent, to join industry leaders and commit to zero gas flaring globally by 2030.

If public policy can send clear, predictable signals like these and build regulatory certainty, investors will follow. This is critical. For example, the lift-off of the green bond market is impressive. In January, President Kim called for doubling the green bond market to $20 billion by the summit and setting bigger targets for the climate meetings in Lima late this year and Paris in 2015. We’re already moving fast in the right direction, and credit goes especially to the corporate green bond issuers who are expanding the investor base for green assets.

That’s just a start, but it can have material impact – and it is doable.

The latest IPCC report also tells us that the later you start to address the climate challenge, the more you must rely on untested technology, and costs go up.

That’s not good economics.

 
Rachel Kyte
World Bank Group Vice President and Special Envoy, Climate Change
Twitter: @rkyte365

Photo: Government ministers meet with the heads of the World Bank Group, IMF, and United Nations to discuss the challenges climate change is posing for their countries and policy tools they could use to respond. World Bank Photo.

Comments

Submitted by Caterina Lindman on

Rachel, thanks for the blog post. I agree with all you have said. As for carbon pricing, I think that a carbon-fee-and-dividend approach to carbon pricing is the best, as advocated by James Hansen, Citizens' Climate Lobby, and many others.

This approach puts a steadily rising price on carbon, and is levied upstream, at the well-head, mine or port-of-entry. The money that is collected is then returned to the public as a dividend on a per-capita basis. This approach gives people a financial incentive to reduce their carbon emissions. Per-capita carbon emissions tend to grow with income. A carbon-fee-and-dividend protects the poor, because in most cases, they will get more in dividends than they pay in carbon fees. The people with more income will tend to pay more in fees than they receive in dividends. Everyone will have the incentive to lower their carbon footprint, and will demand more efficient energy. It will spark innovation, and give clean technology a boost to become more available, of better quality, and for a lower price. It's a market-based solution, which does not enlarge government. It is far simpler to implement than cap-and-trade. As an illustration of its simplicity, a cap-and-trade bill can run over 1,000 pages, while carbon-fee-and-dividend can be written with less than ten pages!

Without carbon pricing, business can make money by creating carbon pollution, and that is a problem. We need to reward people financially for preserving a safe climate, and that is what carbon-fee-and-dividend will achieve.

Perhaps we should replace the approach of having each country commit to emission reductions, and instead, have countries agree to participate in carbon-fee-and-dividend across the globe, with each countries' fees distributed to that countries' citizens. Then we can leave a much better legacy to young people, future generations, and indeed, all of creation.

Submitted by Schlomo Wahl on

You do of course realise that there hasn't.been any global warming for 17 years now. Right ?
And of course, carbon dioxide is not pollution. Plants need it to live. Without CO2 there would be no life on Earth

Submitted by Caterina Lindman on

My understanding is that there has been global warming - one could make the argument that there hasn't been much change in global warming over land over the last 17 years, but the last 17 years have been significantly warmer than the period from 1850 to 1997.

While I agree that plants need carbon dioxide to live, wht makes carbon dioxide a pollutant is the increased concentrations of carbon dioxide in the atmosphere. The concentration was 279 parts per million (ppm) in pre-industrial times, and it has now reached 400 ppm. James Hansen's studies indicate that we should be aiming for 350 ppm in order to preserve a safe climate for humanity and all other life on earth.

Submitted by Caterina Lindman on

Rachel Kyte’s closing comments on the blog are: “The latest IPCC report also tells us that the later you start to address the climate challenge, the more you must rely on untested technology, and costs go up. That’s not good economics.”

The argument that taking action to address climate change is good economics is persuasive, and therefore, good to use. However, we should keep in mind that the role of economics is to serve humanity and our environment, and not the other way around.

This concept is illustrated in the gospels concerning the sabbath. Jesus and his disciples were going through the grainfields on the sabbath, and the disciples began to pluck heads of grain. The Pharisees said to Jesus, “Look, why are they doing what is not lawful on the sabbath?” Jesus said, “Have you never heard what David did when he and his companions were hungry and in need of food? He entered the House of God, when Abiathar was high priest, and ate the bread of the Presence, which is not lawful for any but the priests to eat, and he gave some to his companions. The sabbath was made for humankind, and not humankind for the sabbath.”

Today, Economics is as revered an institution as the Sabbath was in Jesus’ day. When that institution does not serve the needs of humanity, it needs to change so that it does serve the needs of humanity.

Earlier this week, TD released a report on natural disasters in Canada. Craig Alexander, TD Bank Chief Economist noted that, “You end up with a perverse situation where we have a terrible flood in Calgary that actually comes with a very high toll in terms of economic, social and personal fallout, and the economic numbers actually mean we have to upgrade our growth forecast for Alberta. It leads to an underappreciation of how disruptive severe weather is.”

In other words, sometimes economic growth is not a good thing. In this case, growth comes from an economic system that rewards carbon emissions (by not pricing for it), and secondly, grows as a result of rebuilding after the disaster that was made more likely because of increased greenhouse gas emissions.

We need to adopt a carbon fee-and-dividend system, so that our economic indicators are better aligned with what is best for humanity and all life on earth.

Submitted by Rita Lim on

There seems to be such a lack of urgency on the parts of leaders who make the decisions about buildings, energy choices, and education for the public. Climate change needs to be a daily topic of conversation and to be factored in for a more mindful world.

Submitted by Trevor marr on

I am from Canada and we have had very normal cyclical weather for my entire life on this planet. I disagree with blaming 300 - 300 parts per MILLION as driving the worlds climate? It is like blaming global warming on bottled water bottles? Water bottles have increased over this century, are they to blame? We all need to move about, we all need to use the best source of energy to get the job done efficiently and effectively, we all need to be responsible BUT we all need to live, all emissions should be regulated, THAT should be our focus. It can be done responsibly and I actually see a carbon tax as a tax grab. Why not just work towards a cleaner environment and work towards REDUCING ALL EMISSIONS. Blaming carbon is just a witch hunt and doesn't really do what is needed to actually improve air quality.

Submitted by Joyce Coffee on

Perhaps you have come across some true corporate adaptation leadership. You might let them know about the ND-GAIN Corporate Adaptation Prize, http://gain.org/nd-gain-prize, which recognizes companies that have made measurable contributions to resilience or adaptation. Both multi-national corporations and local corporations based in lower income countries are encouraged to apply.

Winning projects will demonstrate meaningful impacts in a country ranked below 60 on the ND-GAIN Index working with local partners to decrease climate-related vulnerabilities and increase readiness to accept adaptation investments by enhancing food security, water access, coastal protection, ecosystem services, human habitats, infrastructure resiliency, and human health or by improving government, social and economic function.

The prize application is due in August and the winner(s) will be announced at Climate Week New York in September.

Spread the word!

Submitted by Schlomo Wahl on

It is very sad and increasingly alarming to see young people taking up a personal crusade of 'fighting climate change' as a vehicle to define her purpose in life.
It would be harmless and one could shrug their shoulders were it not for the fact that this insidious movement has gathered so much momentum and is beginning to cause harm to society.

This Global warming/Climate change new religion is inflicting on the world an ever grimmer policy of energy starvation through their push for outrageously inefficient windmills and solar panels which don't supply any energy when needed. This does not merely inconvenience the prosperous living in the first world, but condemns hundreds of millions of the very poorest to poverty forever, for the want of light and heat - things we have taken for granted thanks to the bounty of fossil fuels.

Even more alarmingly, every claim to justify the Global Warming agenda, if examined even perfunctorily, is the exact opposite of what is claimed.
Exact opposite.
From Al Gore's polar bears facing extinction to his climbing on a cherry picker to add drama to his gigantic and fraudulent graph purporting to show that Co2 drives temperature increase.
Never mind that polar bear population has increased five-fold in the las fifty years and some colonies are so big that Alaskan and Canadian authorities have to cull them.
Never mind that his giant graph actually shows the inconvenient truth that the temperature increase leads the CO2 increase by hundreds of years.
That's right, the relationship is the exact opposite of what he has won an Oscar for.

Young activists, don't forget that global temperatures have not increased for nearly 18 years.
97% of climate models predicted that temperature should be 0.3 degrees higher due to us naughty humans.
Should we trust them to predict the weather in 100 years ? It certainly looks like the 3% were right.
Oh yeah, and if you have a look at the NOAA (National Oceanic and Atmospheric Administration) or NASA website you will discover that very inconveniently, the Antarctic ice has been increasing since satellite records began. Antarctic also contains 90% of all ice on the planet.
Maldives will never be swamped by rising seas because it is a coral atoll. Coral grows upwards towards the light as it requires.

Climate activists are a bunch of totalitarian bullies who in their zeal, are working to force the society to adopt oxymoronic, anti-prosperity, immoral policies that will shut down our economy and destroy our way of life.

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