3 Steps to Decarbonizing Development for a Zero-Carbon Future

WASHINGTON, May 11, 2015— A new World Bank Group report lays out three steps countries can follow to reduce net emissions of greenhouse gases to zero and stabilize climate change: Plan for the end goal, not just the short-term; get prices right as part of a broad policy package that triggers changes in investment and behavior; and smooth the transition for those most affected.

The actions necessary to make the transition to zero net emissions are affordable if governments start today, the report Decarbonizing Development: Three Steps to a Zero Carbon Future says, but it warns that the costs will grow if action is delayed. Waiting until 2030 would increase the global cost by 50 percent.

“As science has indicated, the global economy needs to be overhauled to reach zero net emissions before the end of this century, so we at the World Bank Group are increasing our focus on the policy options governments and businesses have now. Our role is to help our country clients and others to make the shift to low-emissions development. Choices made today can lock in emissions trajectories for years to come and leave communities vulnerable to climate impacts. We will help support robust decisions when we can,” said World Bank Group Vice President and Special Envoy for Climate Change Rachel Kyte.

1.   Planning for the future

The report is designed to help policymakers in both developed and developing countries set priorities as they reduce greenhouse gas emissions on a path to zero net global emissions. That starts with planning for the future by investing today in the research and technology that will be needed decades from now and by avoiding decisions that can lock in high-carbon growth patterns and infrastructure investments that will become obsolete in a low-carbon future.

“The goal is to reach zero emission in 2100, not to reduce emissions at the margin in the next decades. It implies a very different set of measures, including structural and spatial transformations of our economies,” World Bank Group Chief Economist for Climate Change and lead author Marianne Fay.

The report describes how countries can reach zero net emissions by shifting from fossil fuels to clean energy as their source of electricity, and then scaling up electricity use. Improving energy efficiency is important to help lower demand, and keeping natural carbon sinks healthy through good forest and land management helps offset remaining emissions by absorbing and storing carbon.

At a technical level, the report says zero net emissions is achievable as part of well-planned, robust economic growth that emphasizes four areas:

• The work starts with a shift from relying on fossil fuels for electricity to using clean energy that decarbonizes electricity.
• With increasing amounts of clean energy following, a massive shift to electrification can then increase access to clean energy and displace polluting fuels.
• Improving energy efficiency helps lower the demand.
• Keeping natural carbon sinks healthy through better forest and land management helps offset emissions by absorbing and storing carbon.

Many of the steps governments can take now – such as developing public transportation and improving energy efficiency – also offer immediate and local benefits in improved access for residents and reduced pollution.

2.   Getting prices right as part of a broad policy package

A broad policy package, including a price on carbon, is also necessary to provide incentives to ensure low-carbon growth plans are implemented and projects financed.

The report explains how carbon pricing through a carbon tax or carbon market is an efficient way to raise revenue while encouraging lower emissions, and why it can be easier to administer and harder to evade than other taxes. Pricing carbon is a valid option for countries at all income levels, provided that the revenue raised is used to finance development and eradicate poverty.

But a larger policy package is needed to accompany carbon pricing or to pave the way to its introduction. The report discusses complementary policies that can encourage investment needed to get to zero net emissions such as performance standards for energy efficiency, rebates on fuel-efficient vehicles, reduced tariffs on low-carbon technologies, and renewable portfolio standards that require electricity providers to get a percentage of their power from renewable sources.

3.   Smooth the transition

The transition to low-carbon growth will have economic impacts. The report describes how governments can take steps to smooth the transition for those most affected and increase support for changes by protecting poor households from the impacts of higher prices and helping businesses reinvent themselves for a cleaner world.

“Data in 22 developing countries show that if fossil fuels subsidies were replaced by universal cash transfers, the bottom 60 percent would benefit from the reform,” said Stephane Hallegatte, Senior Economist Climate Change and a lead author of the report.

Removing fossil fuel subsidies, which primarily benefit the wealthy, and implementing carbon taxes or cap-and-trade systems are two ways to generate revenue needed for education, health and infrastructure, and reduce carbon emissions at the same time.