Tagging the growth and climate agenda together, rather than treating climate as a separate issue, could lift 2050 economic output by up to 2.8 percent, the Organisation for Economic Cooperation and Development (OECD) said on Tuesday. If the economic benefits of avoiding climate change impacts — such as flooding or storms — are factored in, the net increase to the 2050 GDP would be nearly five per cent, it said in a report ‘Investing in Climate, Investing in Growth’ released at the Petersberg Climate Dialogue in Germany’s capital.
The report — especially on the benefits of early action and the risks involved with delays — was commissioned by the German government as a contribution to the G20 process which Germany is chairing this year.
German Minister for Environment Barbara Hendricks said: “The OECD study proves that climate action pays off.”
“An ambitious climate policy paired with adequate measures for economic growth will increase the economic performance of G20 countries by an average of five per cent per year by 2050. If we start early and design it well, climate policy can reap economic benefits for everyone. This is our message to the G20,” a statement quoting Hendricks said.
The report says G20 countries, which account for 85 per cent of global GDP and 80 per cent of CO2 emissions, should adopt a combination of pro-growth and pro-environment policies in developing their overall growth and development strategies.
This means combining climate policies such as carbon pricing with supportive economic policies to drive growth centred on investment in low-emission, climate-resilient infrastructure.
“Far from being a dampener on growth, integrating climate action into growth policies can have a positive economic impact,” OECD Secretary-General Angel Gurría said while presenting the report in Berlin.
“There is no economic excuse for not acting on climate change and the urgency to act is high.”
Infrastructure investments made over the next 10-15 years will determine whether the 2015 Paris Agreement’s objective to stabilise the global climate can be achieved, and delaying action will end up being more costly.
The report shows taking action only after 2025 would lead to an average output loss for G20 economies of 2 per cent after 10 years relative to taking action now.
The delay would mean that, eventually, even more stringent climate policies would have to be introduced more urgently, risking greater environmental and economic disruption and leaving more fossil fuel assets as economically unviable.