Governments need to honour their climate pledges as risks grow

Three years on from the commitments made at COP21 in Paris, the overwhelming majority of governments have not taken the necessary action to contain growing risks to the climate. With emissions on the rise again, OECD governments need to get serious about shifting their economies to a low-carbon model and stop investing in carbon-intensive infrastructure. A preview of an OECD-UN Environment-World Bank Group report, Financing Climate Futures: Rethinking Infrastructure, to be presented today in New York, documents that only nine countries out of the 180 signatories to the 2015 Paris Agreement on Climate Change have submitted to the UNFCCC their long-term low-carbon strategies for 2050. Meanwhile, governments continue to spend half a trillion dollars a year subsidising oil, coal or gas, and most have not broken their budgetary dependence on revenues from fossil fuels. Governments are also failing to make enough use of public spending as a lever to decarbonise economies by investing in low-emissions infrastructure and innovation. “After all the promises made in Paris and despite having all the tools we need at hand to move forward, this inertia risks us losing the war on climate change,” said OECD Secretary-General Angel Gurría. “Governments need to implement their pledges in full and then scale up action if we are to keep the global temperature rise below 2 degrees. We would like to see OECD countries taking the lead and setting an example for others.” To achieve the Paris temperature goal, global CO₂ emissions need to peak as soon as possible and then rapidly decline to net zero or lower in the second half of the century. While there has been some progress on green financing – for example, the green bond market has ballooned by 1000% in the five years to 2017 and transparency around climate risk is improving – much more needs to be done. Financing Climate Futures says governments must adopt a more transformative agenda on financing for a low-carbon future. The report suggests ways to bring more public and private financial flows into line with the Paris goals, in particular in infrastructure finance. It says this should be done through better planning and foresight, by integrating climate concerns into all budgetary decisions and leveraging public procurement into low-emission infrastructure. OECD analysis has shown that shifting infrastructure investment into low-carbon options combined with structural reforms to support the transition could actually increase global GDP by as much as 5% by 2050, rather than posing a threat to economic growth. That includes the effects of lower risks of damage from extreme weather events. The cost of shifting from brown to green infrastructure would be more than offset by fuel savings. Yet little has been done by central governments to level the playing field between high and low-emission alternatives. As things stand, power plants currently under construction or in planning will lead to a near doubling of emissions from power generation. Incentives to shift to green energy and infrastructure, and disincentives to emit in all sectors, remain weak. OECD analysis of carbon prices based on taxes and tradeable emission permits in 42 countries finds that 46% of global emissions are still not priced at all, and only 12% of global emissions are priced above the lower-end estimate of real costs to the environment of EUR 30 per tonne of CO₂. At the current pace of incremental annual growth in pricing emissions, carbon prices will only meet real costs to the climate in 2095. Financing Climate Futures identifies six areas where governments should focus:

• Make all decisions compatible with a zero net emissions future
• Disentangle budgets from fossil fuels
• Enact systemic change in financial allocation to favour the low-carbon transition
• Actively encourage green innovation
• Make development finance compatible with the Paris goals
• Empower city and state-level governments to take green initiatives