How meeting the Paris Agreement will improve global economic growth
A new report has outlined that meeting the 2C target established as part of the Paris Agreement will improve global GDP and boost investment. Here, edie explores how nations can make this vision a reality.
Published on Tuesday (12 February) by European Union (EU) agency Eurofound, the report outlines that both the EU’s and global GDP would benefit if nations can deliver the collective emissions reductions needed to limit global warming to 2C, as envisioned by the Paris Agreement.
While global GDP will improve by 0.1% by 2030, EU nations will benefit from a 1.1% rise in average GDP, while China will see growth of up to 4.7%. During this time, global employment is estimated to increase by 0.5% (China will experience a 2.3% boost in employment).
The modelling of the report is based on data from Cambridge Econometrics and Eurofound’s European Jobs Monitor. The baseline scenario for the report is based on emissions reductions that would have a 66% chance of limiting global temperature increase to 2C, based on IPCC methodologies. The energy scenario expects global CO2 emissions to fall to a level of nearly 35% by 2030.
Current Nationally Determined Contributions (NDCs) aren’t ambitious enough to reach the 2C pathway of the Paris Agreement; the EU’s submitted target is a 40% reduction in emissions, for example, but other NDCs are far less ambitious.
In order to deliver this collective reduction in emissions, the report outlines numerous legislative processes that would need to be introduced, which would also impact job growth across certain sectors.
The report states that a global carbon price averaging at around $155 per tonne will need to be applied, although prices will vary through national cap-and-trade systems and carbon taxes.
Governments will need to introduce policies that subsidise and incentivise uptake in clean energy solutions, the report notes. Feed-in Tariffs will need to become a global norm to spur the renewables markets. Elsewhere, direct subsidies covering between 10-60% of investment costs for clean technologies should be introduced to incentivise the market. These subsidies would gradually decrease over time, the report states.
Public funding programmes should be introduced that encourage households to implement energy efficiency improvements. The report also looks at the future of the transport sector – the UK’s largest greenhouse gas (GHG) emitting sector last year, accounting for 28% of national emissions.
Under the scenario, local authorities would need to create legislative frameworks that ensure electric vehicles (EVs) are introduced by 2020, with an aim of making them a mainstream mode of transport. A proportional tax on vehicle registration related to their carbon emissions per kilometre would also need to be introduced immediately.
For aviation, a global biofuel mandate ensuring that 18% of fuel is derived from renewable sources would need to be implemented by 2050.
If nations were able to create and deliver these policies, it would impact various job markets.
Jobs are inevitably lost in the fossil fuel industry, but are offset by an increase in construction and manufacturing jobs for renewable and energy efficiency equipment. This transition will likely create more jobs for any associated supply chains.
The mining sector is anticipated to see “a substantial loss” of employment as energy extraction becomes a lower priority for nations. The utilities sector will also see a decrease in employment, as lower energy and gas demand and increased automation begin to shape the sector.
However, distribution, retail, hotels, catering, agriculture and business services sectors will all see job numbers grow by between 0.5-0.7% in the EU alone. The report outlines job changes across notable sectors.
While this scenario is generally positive for most nations, it appears Donald Trump’s decision to withdraw from the Paris Agreement could benefit the US economy in the long run.
The report notes that in the 2C scenario, the US would experience a GDP drop of 3.4%, with employment also falling by 1.6%.