#ParisAgreement: The Economic Ripples

cop21With negotiators from 195 countries with very different agendas and interests involved, a perfect agreement that ushered in a 100 percent clean energy economy on January 1 was never a possibility. What we needed was an agreement that – as Coral Davenport writes in the New York Times –sends a clear signal to markets and investors that the future of energy is in renewables like wind and solar.

The Paris agreement passes that test. With this agreement, nations signed on to a goal of keeping warming below 2 degrees Celsius, while pursuing actions to stay under 1.5 degrees and, in not so many words,
reaching net zero greenhouse gas emissions in the second half of the century. The implication couldn’t be much clearer: with governments taking increasingly serious steps to move away from oil, gas, and coal in the years ahead, demand will slowly decline. Renewable sources will grow as nations fill in the gap. Already, we’ve seen the price of solar, wind, and battery technologies plummet in recent years. These new commitments can only accelerate this trend right when we need it most. Which means there’s a lot of money to be made in the clean energy sector. If you’re an investor and you happen to like making money, you’re going to take this seriously.

 

Meanwhile, demand for energy from clean, renewable sources will grow as nations fill in the gap. Which means there’s a lot of money to be made in the clean energy sector. If you’re an investor and you happen to like making money, again, keep an eye out.

 

Looking at the bigger picture, Sustainable growth and climate responsibility are mutually supportive and intertwined. First, as the report of the Global Commission on the Economy and Climate, ‘Better Growth, Better Climate’, clearly showed last year, there is now much greater understanding of how economic growth and climate responsibility can come together and, indeed, how their complementarity can help drive both forward.

paris

Picture of the GreenPeace operation at the Arc de Triomphe (more here)

A promise to invest US$90 trillion worldwide in infrastructure over the next 15 years has also been concurred upon. Most of this investment will be in emerging and developing economies. Much, but far from all, of it will happen somehow, but we need both better quality and greater scale. Investments in infrastructure are a means to an end. Those ends are embodied in the Sustainable Development Goals.
The scarcity of infrastructure is one of the most pervasive impediments to growth and sustainable development. Going by the fact that the number of city-dwellers will double in the next three decades, infrastructure investment seems like the best way forward. First, they help us to understand the enormous opportunities that we now have in reducing poverty and raising living standards worldwide from the transition to the low-carbon economy. Good infrastructure unshackles and removes constraints to growth and inclusion, while also fostering education and health.

Government-induced policy risk worldwide is, by far, the most important of these impediments, particularly for infrastructure because of the longevity of investments and their inevitable and intimate links to government policy. We should therefore simultaneously fix both the failures in government policy around infrastructure and the financial system.

Remember, this is all about development and growth. This is about the two defining challenges of our century: overcoming poverty and managing climate change.
If we fail on one, we will fail on the other.
References:

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