Can rapid global growth be reconciled with moving to a low carbon economy? |
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We first looked at this issue in a September 2006 report, which suggested that halting and eventually reversing the growth of global carbon emissions, although challenging, should be both technologically feasible and economically affordable.
Our updated analysis in Section IV below re-emphasises the scale of the challenge posed by global warming, which actually now seems even greater than at the time of our original report two years ago, due in particular to higher projected economic growth in China and India. The other key development has been the sharp rise in oil and gas prices, which has raised questions as to whether the current global energy model will be sustainable in the long term.
Specifically we conclude that global carbon emissions from energy use in a ‘business as usual’ scenario would more than double by 2050, whereas what is required to reduce the risks of adverse climate change to acceptable levels is a reduction in global carbon emissions to only around half of current levels by that date. For the advanced G7 economies, this requires a reduction in carbon emissions by around 80% relative to current levels by 2050 (see Figure 1.3). For the E7 emerging economies, it involves mitigating the growth of emissions up to around 2020 and then aiming for reductions in emissions after that date, initially at a gradual rate but ultimately at a more rapid rate as lower cost green technologies are introduced in these countries.
Figure 1.3 - G7 & E7 carbon emissions projections in Greener Growth
+ CCS scenario
Our analysis continues to reject the pessimistic ‘Malthusian’ conclusion that resource constraints and environmental concerns will derail global economic growth in a major way. We have outlined a ‘Greener Growth + Carbon Capture & Storage (CCS)’ scenario that we consider to be highly challenging politically, but which appears to be technologically feasible without excessive economic costs, provided that action is taken early enough across a broad range of fronts. This needs to encompass increased energy efficiency, greater use of renewables and nuclear power, carbon capture and storage and other low carbon technologies and techniques, as well as reducing deforestation. Higher oil and gas prices should help to incentivise the move to greater energy efficiency and use of renewables and nuclear power, although it has also highlighted other issues such as the trade-off between increased biofuels production and affordable food.
All sectors of the economy need to achieve major emissions reductions as part of this process. We estimate that the costs of achieving the emission reductions indicated in the chart above would be broadly equivalent to sacrificing only around one year of global GDP growth between now and 2050 (i.e. reaching the same level of GDP in 2051 as might otherwise have happened in 2050).
The key requirement now is for governments in all the major economies to demonstrate their joint political will to establish a policy framework that aims to put a global price on carbon emissions and so send the economic signals to private sector investors and consumers needed to deliver the new technologies and changes in behaviour required to combat global warming. Progress on this agenda has been relatively slow over the two years since we wrote our first report: it needs to speed up considerably if the challenge of global warming is to be met.
© 2008 PricewaterhouseCoopers. All rights reserved. PricewaterhouseCoopers refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.
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