FEEM-ICCG-CMCC policy session on “Policy Climate policy co-benefits for public revenues and economic growth”
08:30 - 10:30
As a result of the global economic downturn, national budget deficits have been growing as a percent of GDP and public spending for infrastructure development has been reduced. Some economists argue that public investment in new energy technologies might be part of the solution to support economic growth. It could help support innovation, develop more advanced technologies and provide competitive and first mover advantages. On the other hand, O. Blanchard indicates that, even if the transformation of the energy sector might favor economic activity, the amount involved is small compared to what is needed to restore growth in Europe.
The impact assessment of the 2030 climate and energy framework suggests that the EU climate and energy objectives for 2030 may have positive impacts on GDP and employment if carbon auction revenues are used to lower labor costs or invest in energy efficiency and renewable energies. According to IEA, global energy supply investment need by 2035 is US$40 trillion, of which US$6 trillion in renewable energy. In Europe the investment need is US$2.2 trillion in the electricity transition to replace ageing infrastructure and meet decarbonisation goals. Half of this investment is foreseen in the renewable energy sector (IEA, 2014).
Beyond mitigation, adaptation may raise similar discussions. Global estimates of adaptation investment needs through 2050 across various sectors (agriculture, forestry and fisheries, water supply, human health, coastal zones, infrastructure, and extreme events) are in the range of US$70-100 billion annually (World Bank, 2010). While adaptation expenditures in 2012 are estimated to be around US$395 million (Schalatek et al., 2012), there is evidence of under-investment in adaptation. According to CPI 2014 global landscape of climate finance, the final uses of global climate finance in 2013 mainly target mitigation actions (91%). Only a small fraction (7%) addresses adaptation measures. As the countries that are likely to be the most impacted by climate change are developing countries, this imbalance may increase economic inequalities between richer and poorer countries.
Comparing the impacts of climate change and the costs of investment to prepare to it would allow making decisions on how to best reconcile current public budget constraints and needs to invest and prepare our economies towards more resilient and low carbon paths, in an equitable manner. The objective of this parallel session is to demonstrate that climate policy can be beneficial to economic growth, and to define an optimal climate policy able to transform climate change from a burden into an opportunity for promoting sustainable development.