Climate change will force us to redefine economic growth

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Author: Nicholas Stern, President, Royal Economic Society

Last Friday, Pope Francis called for nothing less than “a financial paradigm shift” in order to tackle climate change. His comments, made at a conference hosted by the Vatican and uniting business people, policy-makers of different stripes, indigenous leaders, academics and young people, could not be more timely: humanity is at a turning point. But when it comes to the economy, if handled sensibly and without delay, this turning point does not have to be a breaking point.

Over the past 70 years, the world has seen remarkable advances that are unprecedented in its history. These include an increase in average life expectancy around the world from around 40 to around 70 years, a rise in income per capita by a factor of around four, and huge declines in the number of people living in absolute poverty. One result of this has been a near trebling of the global population as fewer people die early deaths. These outcomes have in large measure been fostered by a spirit of internationalism, international collaboration and a functioning international economic order, all created after the second world war.

At the same time as this record growth in our numbers and wealth, we have seen fundamental changes in our natural capital, including the atmosphere, oceans, forests, glaciers, rivers and biodiversity. In 142 tropical countries, for instance, the overall area of natural forest declined by 11% between 1990 and 2015. Oceans have recorded a 30% increase in acidity since the start of the industrial revolution, and acidity is projected to increase to a pH level that the oceans have not experienced for more than 20 million years.

At the same time, indoor and outdoor air pollution were responsible for an estimated 6.5 million premature deaths in 2015. Air pollution is particularly threatening for children, and is especially prevalent in large, rapidly developing countries such as India and China.

The next two decades will be decisive. They will determine whether we suffer severe and irreversible damage to livelihoods and the natural world or whether, instead, we set off on a more attractive path of sustainable and inclusive economic development and growth.

It is clear from the science of climate change that we must cut emissions by at least 30% in the next two decades to avoid dangerous levels of warming. If we go on emitting greenhouse gases at current rates for the next two decades, then it is likely that we will far exceed a 3°C increase in average global surface temperature compared with the late 19th century – the usual benchmark.

A rise of 3°C would be extremely dangerous, taking us to a temperature we have not seen on this planet for around 3 million years. Remember that modern Homo sapiens has been here for only around a quarter of a million years. A warming of this magnitude could transform where we could live, severely damage livelihoods, displace billions of people and lead to severe and extended conflict. And we risk considerably higher temperatures than that if we do not radically change how we produce and consume. Delivery on the global agenda to curb emissions, at scale and with urgency, is now crucial.

We must do that during a period of two decades, during which the world economy is likely to roughly double, and infrastructure more than double. Given the need to cut emissions by 30%, it is clear that we must act now to change radically the relationship between our economic activity and the damage to the environment it causes.

The economics of that change is compelling. For instance, it is now cheaper in many countries to generate electricity from renewable sources than from fossil fuels. Since 2006, the costs for solar power modules has fallen by 79%, and since 2010 the prices of batteries for storage of power have fallen by 72%.

We can build a new form of growth and poverty reduction that is clean, sustainable and inclusive. It is an economic path that is much more attractive, robust and lasting. The world is starting to realise the attractiveness of the new growth model, as well as the risks of unmanaged climate change. We can see what needs to be done, that it can be done, and that it is very attractive. If we act wisely, we can create cities in which we can move and breathe, ecosystems that are robust and fruitful, and living standards that can continue to rise. The alternative route would lead to severe disruption and poverty for many.

There is no horse race between climate responsibility and economic development. But we must build the political will, and quickly, to take the strong decisions that are necessary.

His Holiness the Pope is showing extraordinary leadership in trying to bridge the gap between moral obligation and will to act. He leads us in recognizing the combination of urgency and opportunity in the crisis we now face. He serves as an outstanding and crucial example to those of us in the secular world. Only by combining political and moral leadership, together with social movements and sound economics, will the necessary decisions be taken with the urgency that is now required.

Professor Nicholas Stern is chairman of the Grantham Research Institute on Climate Change and the Environment at the London School of Economics