As world leaders gather in Berlin for the Petersberg Climate Dialogue, a new analysis from OECD and UNDP Development Programme highlights the economic case for acting on climate.
Rather than the commonly believed argument that action on climate is costly, this paper finds that stronger climate policies will lead to productivity gains, improved innovation, and a 0.2% increase in global GDP by 2040. This report is timely, with many countries finalizing their submissions on updating their national climate plans (NDCs) ahead of COP30 in Brazil later this year.
<< COP30 issues a grave warning: the cost of climate inaction is staggering, with climate disasters projected to tally USD 368 billion, displacing 6.6 million people by 2023. The Amazônia, coral reefs, and island nations stand at the forefront of the crisis, requiring urgent intervention and the active participation of the private sector in adaptation and mitigation efforts.>>
 |
| The Next COP 30 Climate Action: A Pathway to Global Prosperity |
The Economic Upside of Climate Action
The report emphasizes that financing clean energy, energy efficiency, and sustainable infrastructure can foster productive and innovative growth. Countries could generate additional economic output, equivalent to Sweden's $600 billion GDP, by having economies take a lower carbon path.
The report generates hope and optimism by suggesting that the possibility of new economic growth, driven by a transition to lower carbon systems, runs counter to the long-held belief that climate action comes at an economic cost.
It states that one of the ways governments could leverage carbon revenue to strengthen GDP gains, while also building support for climate action, is to reinvest carbon revenue. Recycling the revenue from carbon pricing into infrastructure and tax cuts can generate similar increases in GDP while deepening public acceptance for the climate policy. Policy change may bring prices up and change purchasing behavior, however, the long-term advantages, profitable and otherwise, support climate actions. The report encourages investments in sustainable systems for tackling climate risk, which creates jobs, accelerates technological innovation, and improves overall quality of life for people.
Risks of Delayed Action and Policy Uncertainty
Conversely, the report highlights the genuine economic dangers of weak or delayed climate action. In the absence of policymakers acting like global leaders, businesses will remain hesitant to invest; therefore, by 2030, it is projected that global GDP will decline by 0.75%.
Ignoring the temperature scenarios - if we do not achieve the temperature targets in the Paris Accord - the implications will see a greater than 7%-10% decline in GDP by 2050 based on current directions.
If there is no action, worldwide temperatures could be projected at 3.2 degrees by 2050, resulting in 18% decline in the global economy in the worst-exposed scenario.
 |
| The Next COP 30 Climate Action: A Pathway to Global Prosperity |
The evidence shows that there needs to be real action or momentum now, and the cost of acting and/or delaying action forward will be more costly than the measures and investment needed today. Predictable and ambitious NDCs matter, and as it stands at present, nations are required to report and account for their NDCs by September 2025. These will be signals to the market and will unlock private capital towards green investment.
Similar to the discussion at Petersberg Climate Dialogue, delegates from 40 Countries were presented with pitfalls which may arise from the US temporary withdrawal from the Paris Agreement under the Trump administration.
As discussions unfold in Berlin, the dialogue sets the stage for COP30 in Belém, Brazil, where the focus will be on phasing out fossil fuels and tripling renewable energy capacity by 2030—a goal established during the 2023 Dubai summit.
Lessons from Decoupling Emissions and Growth
In addition, the report notes promising signs of decoupling greenhouse gas (GHG) emissions from economic growth. OECD countries saw GDP per capita rise 57% from 1990 to 2022 on average, while GHG emissions per capita fell 26%.
Likewise, OECD partner countries saw strong GDP growth along with falling GHG emissions per unit of GDP. These findings illustrate that climate action and economic growth are not conflicting objectives, and indeed can thrive together with sufficient climate action.
This decoupling provides an important lesson for policymakers around the world, as it indicates that to achieve a low-carbon economy, it is not necessary to relinquish economic development. Instead, this shift requires investments in clean technology, energy efficiency, and sustainable economies. Developing economies may find a pathway to growth that satisfies both economic and environmental, by adopting practices similar to these.
The Financial Rewards of Climate Adaptation
 |
| The Next COP 30 Climate Action: A Pathway to Global Prosperity |
Another essential finding of the report is the opportunity for a return on investment of substantial economic benefit from climate adaptation.
The analysis estimates that, for example, an investment of USD 1.8 trillion globally in five significant climate adaptation categories from 2020-2030, offers a USD 7.1 trillion estimated total net benefit.
These climate adaptation categories are: early warning systems; resilient infrastructure; increased agricultural resilience; water resource management; and ecosystem restoration.
In this very targeted way, societies can invest money with a double benefit – to protect vulnerable communities from climate change impacts while enjoying a positive financial return.
Building flood defenses is one specific climate adaptation that prevents actual dollar losses from extreme weather events; increasing agricultural resilience protects food supply, rural economies, and improves local and national economies through reduced volatility of rising food prices; investments in renewable energy infrastructure reduce the vulnerability of societies dependent on fossil fuel markets, and, as one example of a growing economy, renewable energy infrastructure provides well-paying jobs for communities.
Together, these examples create a more stable, prosperous, and equitable economy.
A Call to Action: Aligning Ambition with Reality
German Foreign Minister Annalena Baerbock effectively expressed the challenge when she said that brushing aside climate action because it is expensive misses out on the enormous economic potential.
Climate impacts are already causing havoc around the world - wildfires, floods, and unprecedented climate impacts beset us. We have an urgent need to align our ambitions NDCs with the Paris Agreement, and particularly with the Paris Agreement’s 1.5°C target.
The upcoming COP30 summit in Brazil will assess whether countries can rise to this challenge, balancing ecological and economic challenges. To achieve this balance, countries need to support policies that encourage green innovation and exploit carbon pricing, and develop public-private partnerships. International cooperation is also needed, particularly with developing countries, to encourage their transition to low-carbon economies. By cooperating and sharing best practices, we can help the world make progress toward meeting climate challenges.
Conclusion: Seizing the Opportunity
In summary, the OECD-UN report argues that climate action should not be seen as a burden but as an opportunity.
- While the sources do not definitively state that climate actions currently enhance global GDP, they do indicate that inaction will substantially hurt the global economy.
- However, there is evidence to suggest that many countries have successfully decoupled GHG emissions from GDP growth, demonstrating that the global economy can enjoy continued growth while taking climate action.
- As we stand at the brink of important decisions that could catalyze change at COP30, the message is clear: the time for action is now. By implementing significant climate action strategies now and investing in sustainable, resilient infrastructure, we can enhance prosperity into a climate-resilient future.
Let’s call it an opportunity to reinvigorate our narrative, where climate action equates with productivity.
0 Comments