The Economics of Climate Change

The economics of Climate Change. www.BusinessManagement.News

Climate negotiators are meeting in Bonn. Beyond the intricacies of the negotiations, here is one key thing to remember instead: about $1tn is already being invested in climate solutions, ranging from renewables and energy efficiency to public transport.

To put it simply: for those that act on climate now, the size of the economic prize will be immense.

What is especially exciting is not just the unprecedented coming together of almost every single country in the world around the Paris Agreement, it is that others –cities, states, regions and businesses– are all stepping up to the challenge ahead.

Nearly 7,500 cities worldwide have already come together to promote and support climate action. They know that sustainable cities are successful cities. In fact, investing in low-carbon cities could be a $17tn opportunity worldwide by 2050, based on energy savings alone.

We should be watching what actions cities will be announcing: in particular, efforts that enhance coordination between local and national governments, significant moves to capitalise on mobility innovations, and on promoting solutions that have already proven to work.

States and regions have also stepped up their efforts. In the US, for instance, a broad coalition of actors representing more than half the US economy, including a number of state governments, declared efforts on green infrastructure investments, renewable energy targets, and efforts to reduce carbon pollution.

State action can also be key to drive efforts around carbon pricing. Today, 42 national and 25 sub-national jurisdictions are covered by carbon pricing initiatives that are either already in place or imminent: a fourfold increase over the past decade. This includes my own country, Mexico.

Even in the US, despite the current administration’s step away from the Paris Agreement, more and more states are actively exploring carbon pricing, building on existing schemes in California and the north-eastern US. We should demand – and welcome – more efforts from state governments.

Regional efforts, coordinating across national borders, to accelerate action on climate change are also gathering speed. Take for instance the International Solar Alliance launched two years ago at the Paris climate negotiations, bringing together more than 121 countries –most of them sunshine countries – to work together on solar energy, thereby reducing dependence on fossil fuels.

Earlier this month, in record time, less than two years since its launch, it became a full-fledged international legal body. It is also the first such international intergovernmental treaty-based organization based in India, an important signal that developing countries are taking climate action seriously and will continue to do so.

Where business is concerned, it is good to remind ourselves of the role that they played in supporting – and in continuing to support – the Paris Agreement. What is the extent of the benefits for them? An estimated $12tn by 2030 in savings and revenues by pursuing sustainable, low-carbon business models.

Now 300 companies representing $6.5tn in market value have set or committed to setting science-based climate targets, and more than 100 companies have committed to running their global operations with 100% renewable power.

How does this work in practice? Take a leaf out of Unilever’s book: in 2010 it set out the Unilever Sustainable Living Plan, which is fully proving that there is no trade-off between sustainability and profitable growth, with these brands growing 30% faster than the rest of the company.

Much has changed since the Paris Agreement was struck, and despite all the positive momentum the new political landscape is far from ideal. From those who are gathered in Bonn – representatives from businesses, states, cities, and civil society – not only do we need real leadership, we also need them to carve out a new vision for climate action in a politically divided world.

Acting on climate can certainly be driven by pure pragmatism: the economics of it are clear.