The immense opportunities to achieve a net-zero emissions global economy

The immense opportunities to achieve a net-zero emissions global economy

“Investing into investment” for sustainable infrastructures is the most urgent priority for the financial, political and climate sectors – said Felipe Calderón, former President of Mexico and Chair of the Global Commission on the Economy and Climate, in a Climate TV interview during the Business & Climate Summit, an international meeting convened by The Climate Group last June in London.

The Commission, chaired by Calderón, “has detected some problems, some obstacles that prevent financing sustainable projects for infrastructures,” he says, highlighting the social and environmental risks and opportunities for such plans. “One of them is a lack of viable and bankable projects,” so that “many countries are not able to deliver or to present the right projects to the investors.”

It is possible to drive “sustainable development through better infrastructure,” according to a recent report by Amar Bhattacharya, Jeremy Oppenheim and Lord Nicholas Stern, and in the aftermath of the historic Paris Agreement last December, the world has set a clear path towards a rapid decarbonization of the economy by the end of mid-century – which in turn offers immense opportunities to achieve a net-zero emissions global economy.

To realize the potential of these untapped opportunities, it is necessary “to create institutional capacity, to have a better planning, better delivering – in order to have better projects in the pipeline,” explains Calderón.

“We need to put money, to put very capable people to train and to strengthen the institutional capacity either of governments or private sector – especially in less developed and developing countries.”

Net-zero trajectory

The current trajectories indicated by the national pledges brought to Paris are not consistent with the ultimate goal of keeping global warming below 2 degrees Celsius, as stated in the agreement. Caught in a cycle of low investment and low growth, the global economy needs to transform its current infrastructure investment system, prioritizing the areas that will pave the way to a prosperous net-zero future.

“We need to remove fossil fuel subsidies, right now,” emphasizes Calderón. “Or, in other words, we need to establish the right economic incentives to move towards all the way sustainable projects in particular in infrastructure. That implies putting a price on carbon, everywhere.

“Secondly, we need to invest private – but in particular public – money in research and development. It is incredible that in the 80’s we were investing more than double public money than today in research and development for clean energy.”

Address the financial framework

To achieve the targets set out both in the Paris Agreement and the Sustainable Development Goals, upwards of US$6 trillion in global investment is required annually in sustainable infrastructure in the next 15 years – more than double the current level, a policy paper by Zia Qureshi indicates.

For this reason, “we need to rebound the financial framework in order to decide the most appropriated financial instruments, according with each circumstances,” continues Calderón. “For instance, it is clear that in developed countries private projects, private financing is the most important source for financing sustainable infrastructure. However, in developing countries it is clear that governments – public money, public budget – is the main instrument to do so.

By investing 1% GDP in infrastructure, advanced economies will achieve a 1.5% increase in GDP in four years, with even greater growth in developing countries, he said at the Business & Climate Summit.

“The highest potential is of course in less developed and developing countries, because they have not got the infrastructure yet, so almost everything is yet to be built. They have an incredible opportunity to make the right decisions today, and avoid all the mistakes we have made everywhere. But at the same time, paradoxically, they either have not money to do that, or they have not the institutional capacity and knowledge.”

Source: The Climate Group

Date: November 2016

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