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Climate Action Doesn't Have To Come At A Cost To Economic Growth

Trump, are you listening?

16/06/2017 9:09 AM IST | Updated 20/06/2017 9:29 AM IST
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President Trump pulled the US out of the Paris climate agreement, reminding the world yet again that climate action is always vulnerable to jolts. Thus, making climate action resilient to the politics of the day is just as important as making humanity itself resilient to climate change. Fortunately, China and India have reaffirmed their commitment to the Paris agreement.

When it comes to the imperative of climate action one can never forget about the desperate toil of the developing countries to raise their own standards of living. And one can always quibble about the environmental impact of economic growth or the cost of climate action to economic growth. But are the two mutually exclusive? A new report by the Organisation of Economic Cooperation and Development (OECD) provides some pathways to ensure that the two are not a zero-sum game. The OECD is a Paris-based forum of democracies with over 30 members and more than 70 non-members who remain active in various committees. India is a member of various sectoral committees but not a full member.

Metrics must be developed to constantly demonstrate that low-emission growth enhances climate resilience of exposed industries, businesses and communities while reducing climate and security risks to the country...

The crux of the OECD's message is that all governments on the planet are facing a trifecta of seemingly contradictory demands—tackling climate change, accelerating their economic growth and improving the standards of living for their citizens. Synergistic targets are also outlined under the UN program on Sustainable Development Goals focused on important issues such as poverty alleviation, education, food security, water and energy access, etc. But how easy is it to push the pedal to the floor on economic growth without taking our eyes off the speedometer on emissions?

The OECD report envisions economic growth to be resilient and yet sustainable, increasing productivity and providing employment and healthcare while also reducing inequities. A GDP growth rate of about 5% by 2050 is argued to be achievable with intelligent growth strategies that are compatible with the Paris agreement. This may sound like a low-growth rate for countries like China and India which are disappointed when the growth rate falls below 10%. However, one must remember that both countries have paid a price in terms of air and water quality degradation and a lack of inclusiveness or equity in their impressive growth to date. The economic policies have also not paid sufficient attention thus far to fiscal reforms needed to address the climate imperatives. The OECD report can help these countries identify the pathways that deliver the quality of growth and not just the rate of growth.

The report emphasises the need for fiscal and structural reforms that are well aligned with climate goals and also address the infrastructure deficiencies that exist around the world, especially in developing countries. There is a direct correlation between the quality of the infrastructure in a country and its growth and Human Development Index. A synergistic reform-oriented alignment of short-term investments and long-term goals is needed with policy prescriptions that holistically combine public-private financing with pro-business strategies aimed to address the chronic low investments in infrastructure for water, energy, transport, telecom and so on. All without losing sight of a future that is resilient and yet low-carbon. The lower growth rates that may result as a consequence must be balanced against avoided cost of climate damage and the cost of delayed action on climate adaptation and mitigation.

Smart, modern and clean infrastructure can be made climate compatible at very small additional cost—and that additional cost can easily be offset by health benefits and low-emissions.

The low-hanging fruit on modernising economies for climate-friendly growth include aligning climate policies with reforms of inefficient or ineffective fossil-fuel subsidies, free-electricity for groundwater pumping, unregulated land use practices that promote development by deforestation or urbanisation of agricultural land, etc. More complicated issues are driven by the fact that developing countries typically have a low per capita GDP—which is typically associated with low government effectiveness. Government effectiveness is measured by World Bank indices such as institutional efficiencies, allocation and spending of public resources, quality of public services, infrastructure, and education.

Public-private financing of climate-friendly infrastructure will have be national and international and should be corruption-free, account for climate risks and offer green funds to incentivise industries and institutions including the military-industrial complexes to innovate low-emission infrastructure and maximise greenhouse gas mitigation in their core activities. Metrics must be developed to constantly demonstrate that low-emission growth enhances climate resilience of exposed industries, businesses and communities while reducing climate and security risks to the country as well as to the industries, businesses and communities. One can hardly forget that climate impacts are an important stressor in civil and armed conflicts around the world.

Smart, modern and clean infrastructure can be made climate compatible at very small additional cost—and that additional cost can easily be offset by health benefits and low-emissions. Policy tools to augment the infrastructure investments must include carbon taxes, green bonds, and direct foreign investments. Routine approaches must not be abandoned in search of silver bullets—such as maintenance of forest covers for carbon stock and uptake, research and technology development and deployment for agricultural efficiencies, crop resilience, reduced energy intensity of the GDP and reduced carbon intensity of energy production, and ultimately reduction or elimination of emissions from energy, transport and industries.

The OECD report targets a decisive transition to a high-growth, low-emission, resilient future. It is attainable with effective governance and fiscal reforms that ensure proper alignment of climate, fiscal and investment policies.

More specifically, long-term goals must be accomplished with strategies for each sector. For example, the goal of low-carbon transport will need air, water, and land infrastructure for modern low-emission modes of transportation such as charging stations for electric cars, solar-driven boats and public transportation, and bike lanes in megacities. Each strategy must match long-term climate mitigation and adaptation goals. For example, renewable energy infrastructure will be a positive for mitigation and adaptation but desalination, air-conditioning, and irrigation can be positives for adaptation but negatives for mitigation unless low-emission, clean technologies are developed and deployed. Well-tested geo-engineering approaches may become available and necessary for carbon capture and reduction. Smart investment strategies must be malleable to adopting new technologies.

The OECD report targets a decisive transition to a high-growth, low-emission, resilient future. It is attainable with effective governance and fiscal reforms that ensure proper alignment of climate, fiscal and investment policies. While the entire planet committed to voluntary emission reductions under the Paris agreement, the temperature target of 2 degrees above pre-Industrial-Revolution may be exceeded with these Intended Nationally Determined Contributions (INDCs). International cooperation will be quintessential to adaptively up the INDCs to keep the temperature rise from becoming dangerous. India must continue to be a global player in this goal but also begin to become a regional leader in inclusive economic growth for its own national security.

Finally, this decisive transition must be inclusive and fair for workers, households and communities. Public sectors have tended to be high-emission and retirement funds have not always been compatible with low emissions either. But reinvestments away from carbon-intensive economic growth to a high-growth, low-carbon and resilient future must address all these issues equitably. Cleaning up the environment will make us clearly see all the obstacles in our way to a high-growth, low-emission, resilient future. As the song says, it's gonna be a bright bright sunshiny day.

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