E3G

Delivering a Sustainable Low Carbon Recovery

By Nick Mabey

The world is facing an unprecedented economic crisis.  Bold action is needed to stimulate the economy, generate jobs and lay the foundations of a sustainable recovery. 

The urgency of the economic crisis is matched by the imperative to tackle climate change.  Stimulus packages could help kick-start low carbon industries and markets to drive the structural transformation needed to put the world on the path to a near zero carbon economy by 2050. 

The economic pattern of the next decade will be set in the coming months.  Major economies have already committed to spend $3.1 trillion on fiscal stimulus and financial guarantees over the coming years.  So far, however, at most 23% has been allocated to low carbon investment, broadly defined, with Europe trailing well behind the global average.

In his report entitled “Delivering a Sustainable Low Carbon Recovery”, Nick Mabey lays out proposals for the G20 London Summit on delivering a sustainable low carbon recovery.  Below is the executive summary; the full report can be downloaded above. The executive summary is also available in German to download above.

Executive Summary

Low carbon stimulus is the most effective way to drive economic recovery

As the world faces its worst economic crisis in two generations, policymakers’ attention is focused on delivering short term economic stimulus and future financial stability. However, a sustainable economic recovery must manage the immediate crisis of weak demand as well as lay the foundations for stable growth. Rapid recovery will be threatened by a lack of consumer and business confidence in developed countries, and resurgent oil prices. A return to 2008 levels of $140/bbl would pull $800bn per year out of the US, EU and Japan - half of their current total stimulus packages.

A focus on driving growth in low carbon markets can help tackle both these risks. Concerted G20 investment in energy efficiency and new energy sources will reduce oil price rises and save money in every country. Spending on low carbon infrastructure leads to a stronger short term impact on demand than tax cuts, generates high levels of jobs, and will kick-start markets with strong growth potential.

Low carbon markets are driven in the medium term by government regulation and incentives. They are partially insulated from general falls in market confidence. Governments can use their power as “public consumers” to give confidence to businesses through immediate fiscal measures and by committing to future incentives based on carbon pricing and consumer charges. A successful Copenhagen climate change agreement in December 2009 can also help build confidence in a growing demand for low carbon goods and services. Aggressive growth in low carbon markets could account for 2-3 percentage points of sustained global growth from 2011-2015.