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The Economics of Climate ChangeA Case for Urgent Action

Pavan SukhdevFounder & Author, Corporation 2020

Study Leader, TEEBUNEP Goodwill Ambassador

Global Environment FacilityScientific and Technical Advisory Panel

20 March 2013

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The Greatest Challenge

Scientific Assessment for the GEF by STAP team: Climate change is “one of the single greatest challenges – perhaps the greatest challenge – facing humanity” (Nov 2012).

“We have it in our hands to overcome these problems through sound policy, collaborative behaviour, a more far-sighted approach to the consequences of our action, and the processes of discovery about technology, organisation and policy.” –Sir Nicholas Stern, in foreword to Corporation 2020

“[W]hat we do in the next 10 or 20 years can have a profound effect on the climate in the second half of this century and in the next.” –Stern Review of the Economics of Climate Change

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What will it cost?

Stern Review (2006): “If we don’t act, the overall costs and risks of climate change will be equivalent to losing at least 5% of global GDP each year, now and forever. If a wider range of risks and impacts is taken into account, the estimates of damage could rise to 20% of GDP or more.”

“In contrast, the costs of action – reducing greenhouse gas emissions to avoid the worst impacts of climate change [stabilizing between 500 and 550ppm CO2e] – can be limited to around 1% of global GDP each year.”• Range is: –1% (net gains) to +3.5% of GDP

In 2008, Stern revised his estimate up to 2% of global GDP. And earlier this year, he said that, in contrast to the 2006 report, which said that there is a 75% chance of 2-3 degree rise, he now believes we are “on track for something like four.”

We already see 400,000 premature deaths/year from climate change, costing $1.2 trillion, or 1.6% of global GDP.

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Summary: What will it cost?

•Stern: 2% of GDP = $1.4 trillion/year• International Energy Agency: $38 trillion over 25 years•World Economic Forum: $500 billion/year•UNEP: $1.05 to $2.59 trillion/year to meet MDGs and IEA “Blue Map

Scenario”. T-21 model scenario used = $1.3 trillion

•Reasonable estimate: $1.5 trillion/year

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How much money is available?

Millions of $. Cumulative since 2003. Pledged donations. Fund to Fund Transfers Excluded. Data from http://www.climatefundsupdate.org/global-trends/size-spending

Fund AmountJapan's Fast Start Finance $15,000

UK's International Climate Fund 4,640Clean Technology Fund (CTF) 2,849

Norway's International Climate and Forest Initiative 1,608Germany's International Climate Initiative 1,082

GEF Trust Fund (GEF 5) 1,077GEF Trust Fund (GEF 4) 754

Least Developed Countries Fund (LDCF) 540Pilot Program for Climate Resilience (PPCR) 525

Global Climate Change Alliance (GCCA) 385

Scaling Up Renewable Energy Program (SREP) 277Special Climate Change Fund (SCCF) 259

Australia's International Forest Carbon Initiative 216Forest Investment Program (FIP) 206

Forest Carbon Partnership Facility - Readiness Fund (FCPF-RF) 180

Global Energy Efficiency and Renewable Energy Fund (GEEREF) 170Adaptation Fund (AF) 136

Forest Carbon Partnership Facility - Carbon Fund (FCPF-CF) 122MDG Achievement Fund 90

Amazon Fund 33UN-REDD 27

Indonesia Climate Change Trust Fund (ICCTF) 21Green Climate Fund (GCF) 6

Total: $30,201

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74.9%

7.1%

5.5%

12.5%

U.S. Gross Value Added

Private Business

Households

Nonprofit institutions serv-ing households

Government

Total = GDP (US$14,526.5 billion)

From Macro to Micro: Why the transition to a “Green Economy”

needs evolution to “Corporation 2020”

2010 data. Source: U.S. Bureau of Economic Analysis

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Micro-Policy Reforms to Make Business Deliver

a Green Economy

Source: “Why Corporation 2020?”, Island Press, 2012

Resource Taxation : Taxing the “bads” more & taxing the “goods” less

Limiting Leverage : Introducing rules & limits to govern financial leverage

Accountable Advertising : Making advertising responsible & accountable via norms & standards

Disclosing Externalities : Measuring & disclosing all major corporate externalities (+ve & -ve)

Read more at: www.corp2020.com

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Thank You !

Pavan Sukhdevwww.Corp2020.com

Founder & Author, Corporation 2020Study Leader, TEEB

UNEP Goodwill Ambassador