A year from now, climate negotiators representing countries worldwide will be in Paris finalizing an international agreement to reduce greenhouse gas emissions and begin slowing the impacts of climate change. Their success will depend heavily on how leaders over the next year shape their economic policies to respond to the risks.
To stabilize warming at under 2 degrees Celsius, as the international community agreed in 2009, the world will have to cut greenhouse gas emissions to net zero before 2100. Economic policy will be the key to mobilizing that global response, World Bank President Jim Yong Kim said in a speech today to the Council on Foreign Relations in Washington, D.C., that outlined steps ahead.
“Paris must be where we make the rallying cry for effective management of local, national and global economies,” Kim said. “Unlike treaties of the past, the Paris agreement needs to speak as loudly of economic transformation as it does of carbon emissions targets.”
Transforming the economy
Over the next year, countries will be developing their national commitments and contributions for the Paris agreement for lowering emissions and building resilience to climate change. To decarbonize economies on a trajectory necessary to reach net zero emissions before 2100, their commitments for mitigation and adaptation efforts will have to be ambitious.
“We understand that many of our clients still face huge development challenges and many countries will reach their own peak emissions at different moments,” Kim said.
“Managing their economies to ensure that they can, for example, decarbonize their energy sectors over time, while having the energy they need for development constitutes a challenge no developed country had to face in its history. Nevertheless, every country no matter its stage of development can strive to effectively manage their economies, to decarbonize while ending poverty and boosting shared prosperity.”
All countries should commit to put a price on carbon, the president said. Carbon pricing, whether through emissions caps and market trading mechanisms like those being developed in China, carbon taxes like British Columbia uses, or through regulations, provides the economic signal to businesses to help drive innovation and investments in clean energy technology.
Other instruments are also needed to redirect investments toward clean technology: energy efficiency and renewable energy targets; performance standards for buildings, vehicles and appliances; and a price on carbon can all provide investors and businesses with the policy certainty to invest in clean development.
Phasing out harmful fossil fuel subsidies, which are typically captured far more by the wealthy than the poor, is also overdue, the president said. That spending can be redirected to provide targeted support for the poor.
Effective management of the economy also means finding ways to invest in resilience. With science showing that about 1.5 degrees Celsius of warming is already locked, adaptation and mainstreaming disaster risk management become essential. The World Bank Group will use its track record for financial innovation to raise a one-time injection of funds, strengthen insurance coverage for those most at risk and build resilience immediately, Kim said.