HONG KONG, CHINA – Developing Asia stands to gain far more than it will need to pay to shift to low-carbon growth, says a new Asian Development Bank (ADB) report.
Keeping global temperature increases below 2 degrees Celsius, as agreed at the 2015 Paris climate summit, will require developing Asia to spend an additional net $300 billion per year on clean-energy infrastructure alone through 2050. The finding is set forth in a special theme chapter, “Meeting the Low-Carbon Growth Challenge” in an update to its flagship annual economic publication, Asian Development Outlook 2016.
“This is a substantial sum but the economic returns from adopting low-carbon policies needed to mitigate the increasingly devastating impacts of climate change far outweigh the costs,” said Juzhong Zhuang, Deputy Chief Economist. “ADB estimates that the region can generate more than $2 in gains for each $1 of cost it bears to reach the Paris goal—if the right steps are taken.”
Developing Asia has joined the global fight to contain climate change. Around 90% of the region’s economies have made pledges to mitigate their greenhouse gas emissions under the Paris agreement. The consequence of inaction could be devastating. If left uncontrolled, the report estimates that climate change could cut the region’s GDP by more than 10% by 2100, eating away its hard-won socioeconomic gains.
Climate mitigation not only helps avoid such GDP losses, it brings many other benefits. The report notes that actions to keep global warming below 2 degrees Celsius can lead to improved air quality that helps to avoid nearly 600,000 premature deaths a year in the region than under business-as-usual. Those same actions would preserve over 45 million more hectares of forest.
As the world’s fastest growing source of carbon emissions, Asia’s engagement is crucial for the world to have any chance of meeting the Paris temperature goal. The region’s success will require a quantum shift in energy use since fossil fuels currently contribute over two thirds of Asia’s total emissions. The report estimates that half of the region’s emissions reduction through 2050 can come from low-carbon energy production and another third from energy efficiency measures, with the rest achieved by curtailing emissions from forest deforestation, land degradation, and other non-energy sources.
Sharply scaling up new investments in renewable power, smart grids, energy efficiency measures, and carbon capture and storage technologies are all essential to developing Asia’s low-carbon transition. Resources freed up by eliminating costly fossil fuel subsidies can be redirected to clean energy investments.
Because developing Asia’s mitigation costs are lower than in other parts of the world, the region can benefit from the development of a market to buy and sell carbon credits. According to the report, such a carbon market can reduce the region’s mitigation costs by 50%, compared with countries acting alone. Further, bringing ambitious actions to cut emissions forward by 10 years is found to increase benefit-cost ratios by more than 30% and lower long-run costs by more than a quarter.
ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, ADB in December 2016 will mark 50 years of development partnership in the region. It is owned by 67 members – 48 from the region. In 2015, ADB assistance totaled $27.2 billion, including cofinancing of $10.7 billion.