Plummeting oil prices and continuing low interest rates present a unique opportunity for world and business leaders to spur economic growth while tackling dangerous climate change, said members of the "Global Commission on the Economy and Climate" during the 45th World Economic Forum (WEF) in Davos.
According to the Commission, chaired by former President of Mexico Felipe Calderon and Lord Nicholas Stern, low oil prices make it easier to phase out fossil fuel subsidies without increasing the prices faced by households.
These subsidies cost taxpayers some USD 600 billion a year. Additionally, a tax on carbon would now be more easily absorbed by businesses and households, driving greater economic efficiency and reducing emissions.
At the same time, low interest rates and low costs of capital in developed countries make this an ideal time to invest in low-carbon infrastructure. This includes creating more efficient energy systems and building new urban transport networks that would reduce pollution and generate savings of USD 3 trillion over the next 15 years, as the Commission found in its recent report Better Growth, Better Climate.
Renewable energy, which lies at the heart of low-carbon initiatives, does not suffer from volatile fuel prices. It can also play a crucial role in insulating economies against supply disruptions and long term uncertainty in the price of oil, especially because the fuel is free and the price of renewable components continues to drop.
Failing to take advantage of the historic combination of low oil prices and interest rates and huge technological advances in renewable energy sources would be a missed opportunity, warns the Commission. It would also needlessly perpetuate an economically and socially destructive high-carbon growth model.
"Climate change is very much on the agenda of economic decision-makers meeting in Davos. They must focus on ways to reduce climate risk while building more efficient, cleaner and lower-carbon economies, boosting growth at a time of growing economic uncertainty in many countries," said former President of Mexico Felipe Calderon, who chairs the Global Commission.
"Around USD 90 trillion will be invested globally in cities, land use and energy infrastructure between now and 2030. Whether we invest that money in a low-carbon or high-carbon pathway will shape future growth." A high-carbon growth pathway is already imposing significant costs, according to the Commission. In the 15 countries with the highest greenhouse gas emissions, for example, the damage to health from poor air quality costs over 4 per cent GDP on average, reaching 10 per cent in China.
Dominic Waughray, Head of Public Private Partnerships and Member of the Management Committee of the World Economic Forum, said "The work of the Global Commission on the Economy and Climate is extremely important in creating a clear and positive link between addressing climate change and addressing our economic growth prospects.
Discussions at Davos this year have been focused on how best we can bring the public and private sectors together to tackle some of the world's most pressing public good challenges such as climate change, and the Commission's work provides a vital and substantive economic backbone to these activities".