CLIMATE CHANGE
image

CNBC

Paris climate goals will cost Asia US$300B a year, but rewards are huge, says ADB

Bank insists the gains will double the investment put in

PUBLISHED : Tuesday, 27 September, 2016, 11:17am
UPDATED : Tuesday, 27 September, 2016, 11:17am

Developing Asia will mean forking out US$300 billion per year until 2050 if governments intend to uphold their 2015 Paris climate summit goals, the Asian Development Bank (ADB) warned in a new report on Tuesday.

But as the ADB pointed out, no pain, no gain.

“This is a substantial sum but the economic returns from adopting low-carbon policies far outweigh the costs,” Juzhong Zhuang, ADB’s deputy chief economist, said. “The region can generate more than US$2 in gains for each US$1 of cost it bears to reach the Paris goal—if the right steps are taken.”

Reduced investment in fossil fuel extraction could also help offset 20 per cent of the total costs, the report said.

In December, global governments pledged to mitigate greenhouse gas emissions in order to keep average temperature increases below 2 degrees Celsius .

The ADB’s developing member countries—which include the bulk of Asia, with the exception of Japan—are among the main players in global climate change. Three of the region’s most populous economies, China, India and Indonesia, ranked among the top five greenhouse gas emitters in 2015, according to the World Resources Institute.

“If uncontrolled, climate change may lead to economic losses equivalent to 10 per cent of gross domestic product (GDP) in 2100, reversing many hard-won socioeconomic gains in the region,” the ADB report cautioned.

But it was not just GDP losses at stake, according to the report.

The US$300 billion spent annually on green infrastructure, including renewable power, smart grids and energy storage, could lead to improved air quality and preserve more than 45 million hectares of forest, the ADB said.

Air pollution is the fourth-highest risk factor for deaths worldwide, according to the World Bank. And Southeast Asia boasts a higher deforestation rate than any other major tropical region, the ADB noted.

In order to meet the Paris objectives, governments will need do more than make technology investments.

Putting a price on carbon emissions, instituting appropriate regulations, and fostering international action were also required, the report warned.

Eliminating fossil fuel subsidies in particular was a critical first step, as not only would it set the right incentives for resource use, it would also free up public funds, the ADB said.

Among other helpful measures outlined were the implementation of carbon taxes and emissions trading. The development of a market to buy and sell carbon credits could reduce the region’s mitigation costs by 50 per cent, compared to countries acting alone, the report said.

Separately, the ADB kept its 2016 and 2017 GDP growth forecasts for developing Asia steady at 5.7 per cent for each year, unchanged from its March estimates.

“Strong growth in the People’s Republic of China and India is helping the region maintain its growth momentum,” said Zhuang.

“Still, policymakers need to watch for downside risks including potential capital reversals that could be triggered by monetary policy changes in advanced economies, especially the US.”

—Follow CNBC International on Twitter and Facebook.