Stabilizing climate change requires ambitious action, but starting earlier will keep the price tag down.
When I ask during presentations whether the audience thinks we will ever stabilize climate change, most people say “yes.” But when I ask if they can imagine a zero-emissions world — a fully decarbonized economy — very few, if any, raise a hand.
Yet the fact is that stabilizing climate change means getting net emissions of carbon dioxide to zero. As long as we emit more CO2 than natural carbon sinks can absorb, the climate will keep changing. The issue is not whether we decarbonize the economy, but when and how we do so.
When depends on how much warming we are willing to accept. To have any chance of rising no more than 2°C above pre-industrial times, we must have fully decarbonized before 2100.
As to how, the Intergovernmental Panel on Climate Change (IPCC) has provided a pretty clear road map for ambitious action on four fronts:
- Decarbonization of electricity through renewable energy and/or the use of carbon capture and storage
- Massive electrification (to clean electricity) and/or a switch to cleaner fuels
- Improved efficiency and reduced waste
- Expansion of natural carbon sinks, such as forests
Scientists believe full decarbonization is possible. But to achieve sufficient progress on all four fronts, we argue in a recent report that three broad sets of policies are needed:
1. Plan with an eye on the end goal.
We will not get to zero emissions by setting short-term, disconnected targets based on what is easiest and cheapest. While there are plenty of carbon-reducing policies that carry immediate co-benefits (such as reduced pollution), it is critical to start now on high-potential and time-consuming measures — such as transformative carbon capture and storage, or smart city planning.
Timing is critical to keep costs down. If mitigation is postponed until 2030, costs would rise an average of 50 percent for the 2030-50 period and 40 percent thereafter, the IPCC found. If emissions peak in 2015, the rate of annual emissions reduction needed to stay close to 2°C is around 3.5 to 4 percent — that rate would be at least 8 percent if we delay until 2030.
The fastest decarbonization ever achieved outside of an economic collapse was 4.5 percent, and this for only five years, at the height of the France’s nuclear energy deployment in the 1980s.
2. Get prices and complementary policies right.
Putting in place carbon prices and eliminating fossil fuel subsidies is not just good environmental policy, it is very good fiscal policy. Why tax the good (jobs, investments) rather than the bad (pollution)?
Carbon prices are easy to administer and hard to evade — making them particularly attractive for developing countries that struggle to put in place fair and efficient tax systems.
But prices are not enough. Complementary policies are often needed to trigger long-term investments and address coordination challenges, such as when switching to electric cars. People may not be sufficiently responsive. In addition, sometimes raising prices is simply not politically feasible.
We recommend a number of complementary policies, such as: public support for green R&D, including targeted subsidies to technologies deemed to have greater potential to become more affordable through economies of scale and address low-carbon needs; performance standards, mandates or fiscal incentives to ensure the deployment of these low-carbon technologies; and policies to ensure that financing is available for green investments. These policies include banking and financial sector reforms, along the lines of those recommended by China’s central bank.
3. Manage the transition.
Tackling climate change requires a massive transformation of our economy, creating winners and losers. Success will require making the transition attractive to a majority of the population, possibly taking lessons from trade reforms.
The goal is not to reduce emissions — it is to decarbonize development. So it is critical that the transition benefit the poor. Fortunately, carbon pricing and the elimination of fossil fuel subsidies (which primarily benefit the rich) generate new opportunities and resources that can be used for development purposes and to improve equity.
In the end, the climate challenge is not a technical or economic one — it is a political one. Whether that makes it easier or harder is an open question.
(Top image: Courtesy of Chris New)
Marianne Fay is Chief Economist for Climate Change at the World Bank Group.