Source: The Economic Times
By Vinod Thomas & Manish Bapna
The gap between our understanding of climate science and the practice of economic policy is one of the greatest mismatches of our time. The just-released report from the Intergovernmental Panel on Climate Change links more intense rainfall and more extreme temperatures with man-made climate change.
And yet, spurred by policy inaction, greenhouse gas emissions continue to climb at alarming rates and temperatures are breaking records around the globe. The dangers from climate change arguably pose the greatest concern for sustaining economic growth in the coming decades.
To bridge this divergence between knowledge and action, we first need to recognise climate impacts – in south Asia and elsewhere – as an immediate concern, not just a future one. The devastating floods in Australia, India, Pakistan and Thailand, wildfires in Russia and severe droughts in the US in recent years show the devastation that extreme events can bring. Major shifts in population growth, urbanisation and environmental degradation are making people more vulnerable when these extreme events strike.
Second, we need to realise that climate response is in a country’s own national interest, not just the global. Local benefits include reduced energy costs through efficiency gains in buildings and manufacturing, jobs from growth in solar and wind industry – and reduced air pollution from cleaner power plants. In the US, the country with the highest emissions per person, smarter buildings could save an estimated $20-25 billion in annual energy costs. Fossil fuel subsidies are a significant share of GDP, especially in China, India and Indonesia: they added up to over $400 billion worldwide in 2010. Special interests benefit from these subsidies and try to block reform, but the national gains from eliminating them are vast.
Third, economists and their clients need to recognise that climate action, not inaction, is the means to sustain economic growth. Steps to address rising sea levels that threaten coastlines, to protect urban areas from flooding and to prevent declining farm yields due to changing trends are ways of containing climate costs. Last year’s disastrous floods are estimated to cost Thailand’s economy $46 billion in economic damage. In the US, there were more than 14 climate- and weather-related disasters in 2011, each exceeding $1 billion in costs.
There are signs that the economic opportunities of tackling climate are not being totally ignored in Asia and around the world. In China, the country with the largest annual greenhouse gas emissions, the 12th Five-Year Plan envisages renewable energy generation to account for 20% of energy consumption by 2020. Meanwhile, private investment in China’s clean energy sector increased to over $50 billion in 2010, almost 40% above 2009 levels.
Some of the world’s largest private companies are also adopting climate strategies. General Electric’s Ecomagination programme produced $85 billion in revenues in its first five years, doubling the pace of the rest of General Electric’s portfolio. Kingfisher, the European home improvement group, generated revenue from eco-products at £1.1 billion in 2010-11, 10.5% of its total retail sales.
But can the vast gap between climate knowledge and economic policies be bridged in time, in large and small economies? There are sacrifices involved in combating climate change both with respect to mitigation, such as cutting down on energy emissions, and adaptation, such as locational decisions. But science and economics tell us that the gains from taking these steps surpass the costs considerably.
Most importantly, mitigating climate change today will likely be far less costly than waiting to face even greater adverse impacts. Similar to dieting, it is better to lose weight today than to delay action that risks bringing onlife-threatening illnesses, like heart disease.
Yet, for these lessons to be taken to heart, the public needs to recognise the vital link between climate response and economic success, and political leaders need to take note. Economists and the economic ministers they advise must then factor in the reality that dealing with climate change is pro-growth and not anti-growth. Time is running out to bring about this change in our mindset, but it is still not too late.
(V Thomas is director general for independent evaluation at Asian Development Bank and M Bapna interim president at World Resources Institute)
