The old view of climate policy as an economic burden is giving way to a new vision of a dynamic, prosperous green economy. Climate policy stimulates investment in innovative, advanced technologies such as solar photovoltaic panels, electric vehicles, fuel cells and smart grids. There tend to be more jobs per unit of investment in low-carbon sectors such as renewable energy, recycling and energy efficiency than in the sectors they are displacing such as coal-fired power generation or waste disposal.2
Economic co-benefits include:
a probable net increase in jobs compared to business-as-usual;
resource cost savings for businesses and households;
increased productivity and competitiveness;
more innovation and new business opportunities;
a secure and stable economy, protected from resource shortages and price shocks.
The transition to a low-carbon economy will require considerable investment in green energy, transport and buildings, as well as payment for eco-system services (for example through forest protection schemes). The UN Green Economy Report estimates that investing 2% of GDP in green objectives - enabling climate change to be limited to 2oC - will lead to slightly lower growth and employment in the short term, but that both will be higher in the long term (compared to a business-as-usual scenario, or to investing the 2% of GDP according to current investment patterns).
If some regions adopt stricter carbon reduction targets than others, there could be some 'carbon leakage' as firms relocate to countries with lower standards, or firms have to compete with cheaper imports from countries with lower standards. Studies show that this effect is likely to be small, but real.3
- Although climate policy should lead to lower energy prices in the long term, there could be price rises in the short term. This could increase fuel poverty. The best way to combat this is through government programmes to upgrade the homes of those on low incomes with better insulation and more efficient heating and lighting.
A low-carbon economy needs strong government support including a clear regulatory and cost framework, ambitious long term targets, and investment in education, research and infrastructure.
Resource use and carbon emissions need to be kept within sustainable limits through caps and/or taxes. This will prevent increased consumption from wiping out resource efficiency savings.
Governments need to take action to protect vulnerable sectors of society from the impacts of a low-carbon transition: re-training workers who lose their jobs; helping businesses to introduce low-carbon technologies; funding home efficiency improvements for low income households; and helping developing countries to ‘leapfrog’ to sustainability.
In the long term, we need to restructure our economies away from a dependence on continuous growth in material consumption, so that we can achieve well-being for ten billion people in a world of finite resources
Links to other co-benefits pages
- Cleaner air: reduced pollution from fossil fuels
- Sustainable forests, food and farming
- Safer and more secure energy supplies
- Less waste:a resource-efficient economy
- Health and well-being: benefits of a low-carbon lifestyle
- Summary table
- Comparison of policy options
- A tale of two strategies
- Policy recommendations