Low-carbon growth: the only sustainable way to overcome world poverty

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The two great challenges of the 21st century are the battle against poverty and the management of climate change.  On both we must act strongly now and expect to continue that action over the coming decades.  Our response to climate change and poverty reduction will define our generation.  If we fail on either one of them, we will fail on the other. The current crisis in the financial markets and the economic downturn is new and immediate, although some years in the making. All three challenges require urgent and decisive action, and all three can be overcome together through determined and concerted efforts across the world. But whilst recognising that we must respond, and respond strongly, to all three challenges, we should also recognise the opportunities: a well-constructed response to one can provide great direct advantages and opportunities for the other.

Some may argue that the global financial crisis and economic downturn means that we should delay our efforts to tackle poverty and climate change. But delaying on poverty would condemn millions of people to many more years of hardship. And delaying on climate change would mean the stock of GHGs in the atmosphere grows, making the task of dealing with the problem more costly and difficult in the future. We cannot afford to delay. We can and must face up to all three challenges together.

So what do we need to do to combat the threat of climate change whilst boosting efforts to reduce poverty and tackling the global economic downturn?

We know what actions we need to take to cut emissions. They fall broadly into three categories: energy efficiency, low-carbon technologies, and a halt to deforestation. We also know what policies are necessary to drive these actions: tax, carbon trading and regulation; increased technology support; and measures that halt deforestation.

The G8 nations at recent summits have endorsed the goal of reducing global emissions by at least 50% by 2050 (which should be relative to 1990). Such cuts are broadly in line with a path could hold greenhouse gas levels below 500ppm CO2e and then start to reduce them. This could reduce the probability of a 5ºC increase in global temperature from around 50% to 3% or less. The target 50% reduction means halving global emissions from 40 Gt CO2ea year to 20, or little more than 2 t per capita with around 9 billion people in 2050; it also means little scope for deviation of actual emissions from the mean for any major country, developed or developing (note that similar per capita actual emissions does not mean similar per capita quotas).

Developing countries should ultimately want to go low-carbon.  Not only is it the future, but it brings huge benefits beyond climate change. Renewable energy sources can free countries from a dependence on imported fossil fuels.  Cleaner transport and cooling mean less pollution and better health.  Halting deforestation protects water supplies, controls flooding and provides bio-diversity.  The transition to a low-carbon future can bring major economic gains which appear soon.  Energy efficiency can help boost incomes. Low-carbon technologies can open up new sources of growth and jobs.  They can help even the poorest countries leap-frog old approaches – they can avoid some of the cost of large grids in the way cell phones helped cut the need for telephone wires.  And smarter grids can both enhance energy efficiency and enable new technologies whilst cutting transmission costs.  New sources of low-carbon energy – hydro, solar – could help create a comparative advantage for some of the poorest countries.

But the fact remains that no matter how successful we are with mitigation, we are now committed over the next few decades to some degree of climate change due to the levels of GHGs already in the atmosphere and those which will be emitted in the coming years. That means all countries will have to adapt. The challenge is particularly urgent for developing countries as they are earliest and hardest hit. Adaptation is essentially development in a more hostile climate. It is disruptive, and practically and conceptually confusing, to attempt a rigid and comprehensive separation of elements of investments in physical or human capital which are marked for ‘development’ or ‘adaptation’.

Many of the poorest people in the world will be the most exposed and vulnerable to the impacts of climate change that will occur over the next few decades. These are also the people who are least able to afford the costs of adaptation, and who have contributed much less than those in the rich world to the current levels of GHGs in the atmosphere. There is a fundamental inequity here and a strong imperative for the rich countries to provide more funds to developing countries, in addition to current development commitments, to fund the extra costs created by climate change. This is in the rich countries’ direct interest as well: as Archbishop Desmond Tutu argued ‘the problems of the poor will arrive at the doorstep of the wealthy, as the climate crisis gives way to despair, anger and collective security threats.'

Adaptation will increase the burden on developing governments and compensatory funding for this must be additional to current commitments on ODA. As we look forward to the challenges the developing world faces beyond 2015, and we must soon be examining and formulating the successors to the MDGs beyond 2015, I think that our targets for support from the public budgets of rich countries are likely to be closer to 1.0% of GDP than 0.7% for the coming 2 decades.

Since adaptation is basically development in a hostile climate, there is no sense in separating out funds and thereby distorting our efforts.  Some aspects of the ways in which the funds should be allocated will differ from our usual methods for development assistance, for example, where ‘compensation’ for direct climate effects such as rising sea levels are involved, but even this does not imply that we need new institutions to manage them.  One option would be a window alongside IDA. The same would apply for mitigation funding. With the private flows that could come with them and the growth and poverty reduction they could help foster, I think that these flows would constitute very wise investments for the world as a whole as well as being our duty as citizens of the world.

I have focused so far on the two big global challenges of this century. Let me now say something about the current financial and economic crisis; it is the most serious such crisis for 80 years. This crisis is having a deeply damaging effect on the developing world. We should learn two lessons from what has happened. First, the longer risks are ignored and allowed to grow, the bigger the consequences when the crash occurs – and we have seen this unfolding in the financial sector now. We know the scale of risk on the climate change front is altogether of a different and greater magnitude, and so will be the consequences of mismanaging or ignoring it.

Second, the financial and economic crisis brings the critical opportunity to find a driver of long-term sustainable economic growth to lead us out of this crisis: we do not want again to sow the seeds of the next bubble as we emerge from the crash of the last.  The globally declared US$2 trillion global fiscal stimulus for 2009/10, if implemented with a long-term vision, offers the chance to invest in new technologies and investments for low-carbon growth.  This could enable us to grow out of this recession in a way that both reduces the risks for our planet and sparks off a wave of new technologies which will create 2 or 3 decades of strong growth and a more secure, cleaner and more attractive economy for all of us.

We can and must, now and simultaneously, handle the short-term crisis, foster sound development and economic growth in the medium term, and protect the planet from devastating climate change in the long term.  To try to set the three tasks against each other as a three-horse race is as confused analytically as it is dangerous economically and environmentally. In particular, the developed world must demonstrate for all, especially the developing world, that low-carbon growth is not only possible, but that it can be a productive, efficient and attractive route to overcome world poverty. It is indeed the only sustainable route.


Nicholas Stern

IG Patel Professor of Economics and Government and Chair of the Grantham Research Institute on Climate and the Enviroment, LSE

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