Climate change is fundamentally a development issue. It threatens to exacerbate poverty and hurt economic growth. At the same time, how countries grow and the investments they make to meet the energy, food and water needs of an expanding population can fuel climate change, raising risks worldwide, or contribute to solutions.
In a lecture to students at Georgetown University in Washington, D.C., on March 18, World Bank Group President Jim Yong Kim laid out five key areas where policies and growth choices can help reduce the drivers of climate change.
“We have to keep the economy growing – there is no turning back on growth,” President Kim told the student audience. “What we have to do is decouple growth from carbon emissions.”
Put a price on carbon
Cutting emissions starts with clear policy signals.
Carbon pricing systems – such as emissions trading systems that cap emissions or carbon taxes that charge per ton – send a long-term signal to companies by creating an incentive to reduce polluting behaviors and to invest in cleaner energy choices and low-carbon innovation.
Close to 40 countries and more than 20 cities, states and provinces now have or are preparing to implement carbon pricing through emissions trading systems or carbon taxes, and their numbers are growing. Korea launched the newest carbon market in January. China, with seven pilot carbon markets in cities and provinces, saw its emissions drop last year and plans to launch a national emissions trading system as early as 2016.
“A price on carbon is the single most important thing we have to get out of a Paris agreement. It will unleash market forces,” President Kim said when asked about expectations for the international climate agreement expected in December 2015 in Paris.
End fossil fuel subsidies
Fossil fuel subsidies send a different signal – one that can encourage waste and discourage low-carbon growth. By phasing out harmful fossil fuel subsidies, countries can reallocate their spending to where it is most needed and most effective, including proving targeted support for the poor.
Nearly $550 billion went into direct fossil fuel subsidies worldwide in 2013, taking up large percentages of some countries’ GDP to artificially lower energy prices. Yet, “the evidence shows that fossil fuel subsidies are not at all about protecting the poor,” President Kim said. Studies show the wealthiest 20 percent of the population captures six times the benefit from fossil fuel subsidies as the poorest 20 percent.
Reforming subsidies is never easy. Often, the population is unaware of the true costs of energy, and support for the poor must be phased in as the subsidies are phased out. The World Bank is providing support for fossil fuel subsidies reform through a $20 million facility that will help countries design and implement subsidy reform and accompanying social protection systems.
Build low-carbon, resilient cities
Getting prices right is one part of the equation. Another piece is building a sustainable future, because all development happens in the context of climate change.
There will be more infrastructure built in the next 20 years than in the past 6,000, the president told the audience. Cities are growing fast, particularly in the developing world. Just over half the global population is urban today; by 2050, cities are expected to hold two-thirds of the world population.
With careful planning of transportation and land use, and the establishment of energy efficiency standards, cities can build in ways that avoid locking in unsustainable patterns. They can open up access to jobs and opportunity for the poor and reduce damaging air pollution.
Financing that growth to be sustainable can be a challenge, though. Data show that only about 4 percent of the 500 largest developing countries cities are deemed creditworthy in international markets. The World Bank Group is helping cities improve their strategic planning and fix the financial fundamentals that can prevent them from accessing finance.
Increase energy efficiency and use of renewable energy
When we talk about energy, we have to talk about access. Worldwide, about 1.2 billion people lack access to electricity and 2.8 billion rely on solid fuels for cooking, such as wood, charcoal, and coal, which cause harmful indoor air pollution.
Through the Sustainable Energy for All initiative, the World Bank Group supports three goals for 2030: to achieve universal access to modern energy, double the rate of improvement in energy efficiency, and double the share of renewable energy in the global energy mix.
Energy efficiency improvements are crucial. Every gigawatt saved is a gigawatt that didn’t have to be produced. Globally, energy use is about one-third lower today than it would have been without the past 20 years of energy efficiency improvements.
Renewable energy, meanwhile, is becoming increasingly affordable as prices fall. In many countries, developing utility-scale renewable energy is now cheaper than or on par with fossil fuel plants.
Implement climate-smart agriculture and nurture forest landscapes
The fifth area for action takes in both mitigation and adaptation. Climate-smart agriculture techniques help farmers increase their farms’ productivity and resilience to the impacts of climate change, such as droughts, while also creating carbon sinks that help reduce net emissions. Forests, too, are valuable carbon sinks that absorb carbon and store it in soils, trees, and foliage.