the economics of climate change · ipcc special report on global warming of 1.5°c (sr15) human...
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The Economics of Climate Change
Laura AltingerSenior Advisor, Climate Change
IPCC Special Report on Global Warming
of 1.5°C (SR15)
Human activities have caused 1°C of global warming above pre-industrial levels
Warming will persist for centuries/millennia and will continue to cause long-term
changes in the climate system with associated impacts
Climate-related risks to health, livelihoods, food security, water supply, human security,
and economic growth will increase
Pathways limiting warming to 1.5°C require rapid and far-reaching transitions in
energy, land, urban and infrastructure (including transport and buildings), and
industrial systems
They imply deep emissions reductions in all sectors and
Significant upscaling of adaptation and mitigation investments
Policy instruments, the acceleration of technological innovation and behavioural
changes are all part of the solution
Economics of Climate Change
Climate change damages the economy
Stern Report (2006) finds that without any action the world would lose at least 5 per cent of GDP per year
Taking into account human health (induced mortality) and environmental losses (rapid erosion of biodiversity), cost rises to 11 per cent
Since damage concentrated in poorest areas, taking account of indirect contingent effects – economic, demographic and political (e.g. migrations, conflicts) raises cost to 20 per cent
Yet, tackling climate change is affordable
Cost of reducing emissions would be the equivalent of 1 per cent global GDP per year
Delaying action on climate change will increase the price tag
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Share of historical World cumulative CO2 emissions (1910-2014)
China Australia, India, Japan, Kazakhstan, Russian and Vietnam USA EU28 Rest of the world
GHG Emissions by Sector in Asia-Pacific
(million tons of CO2 eq)
0
5000
10000
15000
20000
25000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Million
Transport Industry Energy Waste Households Land use change Other
Investment needs in Asia-Pacific
Infrastructure gap in developing Asia has been assessed by the Asian
Development Bank to amount to USD 26.2 trillion between 2016 and 2030 or
USD 1.7 trillion annually (ADB 2017)
USD 3.6 trillion are specifically required for climate change mitigation and
adaption costs
56% of the investment is needed for power, 32% for transportation, 9% for
telecommunications and 3% for sanitation
Estimated climate-adjusted investment needs in
the Asia-Pacific by 2030 (in $USDtr)
$26tn
$14.7tn
0 5 10 15 20 25 30
Whole economy
Power sector
Trillion USD
Cumulative investment (2016-2030)
$1.7tn
$0.96tn
0 0.5 1 1.5 2
Whole economy
Power sector
Trillion USD
Annual investment
Some key challenges
How to approach inter-generational equity issue that climate change poses
How to approach international equity issue of differential impact?
Who should pay for mitigation, adaptation, loss and damage?
How to split the carbon budget across countries
How much to spend on mitigation vs adaptation?
How to prioritise spending for mitigation, for adaptation?
How to deal with changing price of technologies?
How to factor in co-benefits, such as beneficial health impacts of less air pollution
How to make the best of limited finance?
Solutions
Sectoral mitigation and adaptation, policy instruments, the acceleration of finance, technological innovation and behavioural changes are all part of the solution
Economic tool box includes market based instruments, regulatory policy and information-based instruments
Carbon price
Fossil-fuel subsidy reform
Energy auctions
Accelerating finance
TCFD recommendations/ESG revolution
Blended finance
