Thursday, July 2, 2009

The massive cost of addressing climate change

It’s a staggering figure. The International Energy Agency estimates that $1.3 trillion will be required just to halve greenhouse gas emissions from the global energy sector by 2050.

In a new green paper, the United Nations Environment Programme's (UNEP) Finance Initiative concedes that addressing climate change on a global scale will require an “unprecedented mobilization of financial resources.”

“Only a joint effort of public and private forces will achieve such a mobilization,” the paper adds, noting that the lion’s share of climate change investment is expected to come from the private sector. A range of public policy measures will also be required, including carbon markets and taxes, regulations and standards.

The paper calls for an agreement of ambitious emission reduction targets over the short, medium and long term, as well as “accelerated action to manage the unavoidable impact of climate change, particularly on poor communities.”

As well as the capital expenditure required to “decarbonize” and adapt the global economy, particular attention must be focused on how to expand the flow of public and private financing to the developing world, the paper states.

The UNEP’s proposals are based on six areas to enhance financial sector involvement:

1) Reducing the risk of low carbon investments in developing countries
2) Improving the operation of flexible mechanisms
3) Establishing funding for low carbon technology development and deployment in developing countries
4) Creating an international carbon insurance vehicle
5) Enabling enhanced investment in low carbon buildings
6) Expanding the application of insurance mechanisms for adaptation

“Climate science demands an ambitious climate agreement in Copenhagen,” the report notes, including emission reductions of 25% to 40% by 2020 from 1990 levels. The UNEP Finance Initiative is a partnership between the UNEP and 180 financial institutions from around the world. For more, read the UNEP’s latest green paper, Financing a Global Deal on Climate Change.

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