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New Climate Economy 2013

One of the greatest obstacles to large-scale action to mitigate climate change has been concern about the costs – both in industrialized nations that would have to decarbonize their economies, and in developing nations where rapid economic growth is lifting millions out of poverty.

But what if the two goals are not incompatible? A new international research project will explore that question, analysing both the costs and the benefits of acting on climate change – at the global level and in individual sectors – and gauging the potential for aligning climate and development interests.

The project, called the New Climate Economy, is an independent initiative established by a group of seven countries: Colombia, Ethiopia, Indonesia, Korea, Norway, Sweden and the United Kingdom. It will be led by the Global Commission on the Economy and Climate, composed of leaders from government, finance and business and chaired by former President of Mexico Felipe Calderón.

“Climate impacts are rising and the evidence of warming is increasingly clear, but most economic analysis still does not properly factor in the increasing risks of climate change or the potential benefits of acting on it,” says Calderón. “We need urgently to identify how we can achieve economic growth and job creation while also reducing emissions and tackling climate change.”

Informing a global debate

The project brings together some of the world’s foremost economic experts to examine how stronger economic performance can be supported by good climate policy. The goal is to contribute to the global debate about economic policy, and to inform government, business and investment decisions.

“Many see climate action as too costly and against their national or business interests, and this has eroded the political will to reduce greenhouse gas emissions,” says SEI Research Director Måns Nilsson. “However, economic studies tend to oversimplify and fail to take into account factors such as the dynamics of innovation, energy security, quality of life, and other potential benefits of low-carbon transitions. This research project aims to fill those critical knowledge gaps.”

The project will engage directly with finance ministries and major businesses and investors, including leading economic organizations such as the World Bank and International Monetary Fund. It will also invite contributions from academic, business and other institutions. The plan is to publish a comprehensive analysis in September 2014. An Advisory Panel of world-leading economists, including Nobel Prize winner Daniel Kahneman, will carry out an expert review of the work.

A multifaceted inquiry

SEI’s role in the project will be coordinated by Senior Project Manager Per Klevnäs, an economist, who will be part of the core team that shapes the overall analysis. SEI will lead a work stream on the power sector, and will contribute expertise on cities, air pollution and China.

“This initiative will explore the options available to governments, cities, business leaders, and investors to achieve their current aims, while also reducing GHG emissions,” says Klevnäs. “There is considerable divergence of opinion on the prospect for ‘green growth’, and the need for an independent analysis of the evidence has never been greater.”

Along with SEI, the research partners include the Climate Policy Initiative, Ethiopian Development Research Institute, Global Green Growth Institute, Indian Council for Research on International Economic Relations, Tsinghua University, and World Resources Institute.

Leaders from 14 countries

In addition to President Calderón, members of the Commission (all serving in a personal capacity) include: Ingrid Bonde, CFO and Deputy CEO of Vattenfall; Sharan Burrow, General Secretary of the International Trade Union Confederation; Helen Clark, head of the UN Development Programme and former Prime Minister of New Zealand; Luísa Diogo, former Prime Minister of Mozambique; S. (Kris) Gopalakrishnan, Executive Vice-Chairman of Infosys and President of the Confederation of Indian Industry; Chad Holliday, Chairman of Bank of America; Sri Mulyani Indrawati, Managing Director and Chief Operating Officer of the World Bank and former Finance Minister of Indonesia; Ricardo Lagos, former President of Chile; Trevor Manuel, Minister and Chair of the Planning Commission and former Finance Minister of South Africa; Takehiko Nakao, President of the Asian Development Bank; Paul Polman, CEO of Unilever; Nemat (Minouche) Shafik, Deputy Managing Director of the IMF (Adviser); Lord Nicholas Stern, Professor at the London School of Economics; and Zhu Levin, President and CEO of the China International Capital Corporation.

“At a time when governments throughout the world are struggling to boost growth, increase access to energy, and improve food security, it is essential that the full costs and benefits of climate policies are more clearly understood,” says Lord Stern, who is Vice-Chair of the Commission and authored the landmark Stern Review in 2006. “It cannot be a case of either achieving growth or tackling global warming. It must be both.”

Once the analysis is completed, the Commission will take the findings and recommendations directly to heads of government, finance and economic ministers, business leaders and investors around the world.

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