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The New Climate Economy Report: Does it go far enough?

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The report of the Global Commission on the Economy and Climate is measured, well-researched and optimistic: technically rich and politically astute. But what is new? And what are the implications for developing countries? – asks Simon Maxwell of the Climate and Development Knowledge Network (CDKN).

The report consists of an Overview, seven substantive chapters and a Global Action Plan. The substantive chapters cover three ‘economic systems’ described by the report as ‘critical’, viz cities, land use and energy; and then deal with the economics of change, finance, innovation and international cooperation. Country cases and working papers are promised on the website, but are not yet available. It helps that there is an extended Overview and a separate 70-page (and very well-written) synthesis report (SR).

Much of the story is familiar. Climate change will have high and rising costs, affecting especially the poorest. There is a strong case for early action. Government policies need to change. That needs leadership. A global deal is essential.

On the other hand, there are innovative elements. Prime among these is the argument that the economics of climate action have been transformed, first by technical change, and second by better understanding of the co-benefits associated with different growth trajectories.

As far as technical change is concerned, the best example is solar, where costs have fallen by nearly 90% in twenty-five years, to a point where solar is close to competing with coal and natural gas. As to co-benefits, the report points particularly to the health benefits of reduced air pollution, which is said to cost an average of 4% of GDP in the fifteen largest emitters, with the figure in China being 11% and that in India over 6%. Put these together and we are offered a strong conclusion:

‘There is a perception that strong economic growth and climate action are not, in fact, compatible. . . . The evidence presented in this report suggests that the low-carbon growth path can lead to as much prosperity as the high-carbon one, especially when account is taken of its multiple other benefits: from greater energy security, to cleaner air and improved health.’ (SR: 15-16).

In turning these key ideas into action, the report focuses on the three critical sectors and on three key drivers of change, viz. resource efficiency, infrastructure investment and innovation. It also deals with financing, arguing that a green growth path might actually be cheaper than the alternative – perhaps $1tn cheaper to 2030. This is because of savings by virtue of higher energy efficiency, reduced distribution costs, and reduced operating expenditure.

Of course, not everything is straightforward. A key point is that losers need to be supported in order to achieve a ‘just’ transition.

This brief summary cannot do justice to the report. However, it triggers six quick thoughts.

First, it is true that the ‘new economics’ is not that new. However, the new Climate Economy Report gives new prominence to these issues, is systematic in its treatment, and, sometimes bravely, makes quantitative estimates. This is useful. It is interesting, however, that saving on adaptation or relief costs do not feature in the report as a quantified benefit.

Second, I really like the emphasis in the report on deep structural changes that will take place in the world economy over the next generation, with or without climate change – not surprisingly, perhaps, since this is a core theme of CDKN’s model of climate compatible development.

Third, and another theme of my own work, I of course like the idea of a ‘just transition’ which compensates losers in this process of deep, structural transformation. This was point 3 of my five-point plan on ‘How to Win the Argument on Climate Change’. As I pointed out, there is a literature on this, which yields many useful insights. However, it is in the realm of political science, so perhaps was not thought to count.

Fourth, I find myself unsure about the focus on cities, land use and energy as the three ways to cut the sectoral cake. There are some semantic and category issues to worry about. Is ‘land use’ an economic system, for example? Do cities not use energy? I wonder why the Commission didn’t focus on ‘industry’ for example, or transport? One reason for doing that might have been to speak more directly to sectoral ministers who hold sway in national governments.  Now they have to dip in an out to find relevant material that applies to them.

Fifth, and now we are getting more serious, there is very little in the Synthesis Report about what any of this might mean for particular categories of developing countries. There are general references to the fact that emerging economies ‘fear getting stuck in an outdated model of economic development’ to the fact that the poorest people are likely to bear the highest costs of climate change, and to the need for additional finance.

In practice, different developing countries could be expected not just to have different growth paths, but to be affected very differently by the structural changes taking place in the world economy, by how technical or policy change elsewhere in the world might affect their own comparative or competitive advantage, and of course by the location-specific co-benefits that might arise.

Finally, and as so often with this kind of report, it would be so much better if the politics were brought out of the shadows. Frankly, stirring calls to cut fuel subsidies don’t really carry much weight without more political analysis, even when reports, as this one does, mention the importance of compensation to poor consumers and the need for safety nets. I did not see much here, for example, about stranded assets and the power of the large oil and gas companies or oil-dependent countries. I haven’t checked, but I don’t suppose Naomi Klein is referenced. Nor, because it came too late, is there mention of the Rockefeller family’s decision to disinvest from fossil fuels.

Does it matter that there are these gaps? Up to a point, I think. On the one hand, an optimistic report with a fairly broad brush approach is politically astute and probably appropriate in terms of the global negotiations. On the other hand, the devil for individual countries is in the detail, and it does not help them to over-promise win-win options. I don’t know whether climate change ‘changes everything’, as Naomi Klein alleges, but it certainly changes enough to make it hard – just like development, in fact.

Simon Maxwell is the executive chair of the Climate and Development Knowledge Network (CDKN), an initiative that aims to support decision-makers in developing countries design and deliver climate compatible development.

Photo: CIAT via Flickr

Further reading:

$310bn energy efficiency market saved a continent’s worth of energy

Campaigners call for climate refugee protection as migrant deaths reach record high

France pledges $1bn to Green Climate Fund

Sustainable Development Goals need to consider poverty and climate change

Development banks pledge to increase finance for climate change action

Economy

Report: Green, Ethical and Socially Responsible Finance

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“The level of influence that ethical considerations have over consumer selection of financial services products and services is minimal, however, this is beginning to change. Younger consumers are more willing to pay extra for products provided by socially responsible companies.” Jessica Morley, Mintel’s Financial Services Analyst.

Consumer awareness of the impact consumerism has on society and the planet is increasing. In addition, the link between doing good and feeling good has never been clearer. Just 19% of people claim to not participate in any socially responsible activities.

As a result, the level of attention that people pay to the green and ethical claims made by products and providers is also increasing, meaning that such considerations play a greater role in the purchasing decision making process.

However, this is less true in the context of financial services, where people are much more concerned about the performance of a product rather than green and ethical factors. This is not to say, however, that they are not interested in the behaviour of financial service providers or in gaining more information about how firms behave responsibly.

This report focuses on why these consumer attitudes towards financial services providers exist and how they are changing. This includes examination of the wider economy and the current structure of the financial services sector.

Mintel’s exclusive consumer research looks at consumer participation in socially responsible activities, trust in the behaviour of financial services companies and attitudes towards green, ethical and socially responsible financial services products and providers. The report also considers consumer attitudes towards the social responsibilities of financial services firms and the green, ethical and socially responsible nature of new entrants.

There are some elements missing from this report, such as conducting socially responsible finance with OTC trading. We will cover these other topics in more detail in the future. You can research about Ameritrade if you want to know more ..

By this report today: call: 0203 416 4502 | email: iainooson[at]mintel.com

Report contents:

OVERVIEW
What you need to know
Report definition
EXECUTIVE SUMMARY
The market
Ethical financial services providers: A question of culture
Investment power
Consumers need convincing
The transformative potential of innovation
Consumers can demand change
The consumer
For financial products, performance is more important than principle
Competition from technology companies
Financial services firms perceived to be some of the least socially responsible
Repaying the social debt
Consumer trust is built on evidence
What we think
ISSUES AND INSIGHTS
Creating a more inclusive economy
The facts
The implications
Payments innovation helps fundraising go digital
The facts
The implications
The social debt of the financial crisis
The facts
The implications
THE MARKET – WHAT YOU NEED TO KNOW
Ethical financial services providers: A question of culture
Investment power
Consumers need convincing
The transformative potential of innovation
Consumers can demand change
PUTTING FINANCIAL SERVICES IN AN ETHICAL CONTEXT
An ethical economy
An ethical financial sector
Ethical financial services providers
GREEN, ETHICAL AND SOCIALLY RESPONSIBLE ISSUES IN FINANCIAL SERVICES
The role of investing
Divestment
The change potential of pensions
The role of trust
Greater transparency informs decisions
Learning from past mistakes
The role of innovation
Payments innovation: Improving financial inclusion
Competition from new entrants
The power of new money
The role of the consumer
Consumers empowered to make a change
Aligning products with self
THE CONSUMER – WHAT YOU NEED TO KNOW
For financial products, performance is more important than ethics
Financial services firms perceived to be some of the least socially responsible
Competition from technology companies
Repaying the social debt
Consumer trust is built on evidence
Overall trust levels are high
THE ETHICAL CONSUMER – SOCIALLY RESPONSIBLE ACTIVITIES
Payments innovation can boost charitable donations
Consumer engagement in socially responsible activities is high
Healthier finances make it easier to go green
SOCIALLY RESPONSIBLE COMPANIES
37% unable to identify socially responsible companies
Building societies seen to be more responsible than banks….
….whilst short-term loan companies are at the bottom of the pile
CONSUMER TRUST IN THE BEHAVIOUR OF FINANCIAL SERVICES COMPANIES
Overall trust levels are high
Tax avoidance remains a major concern
The divestment movement
Nationwide significantly more trusted
Trust levels remain high
CONSUMER ATTITUDES TOWARDS GREEN AND ETHICAL FINANCIAL PRODUCTS
For financial products, performance is more important than principle
Socially conscious consumers are more concerned
CONSUMER ATTITUDES TOWARDS TRANSPARENCY
Strategy reports provide little insight for consumers
Lack of clarity regarding corporate culture causes concern
Consumers want more information
THE ROLE OF FINANCIAL SERVICES FIRMS IN SOCIETY
The social debt of the financial crisis
THE SOCIAL RESPONSIBILITIES OF FINANCIAL SERVICES FIRMS
For consumers, financial services firms play larger economic role
Promoting financial responsibility
CHALLENGER COMPANIES AND SOCIAL RESPONSIBILITY
Consumer trust is built on evidence
The alternative opportunity
The target customer

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Economy

A Good Look At How Homes Will Become More Energy Efficient Soon

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energy efficient homes

Everyone always talks about ways they can save energy at home, but the tactics are old school. They’re only tweaking the way they do things at the moment. Sealing holes in your home isn’t exactly the next scientific breakthrough we’ve been waiting for.

There is some good news because technology is progressing quickly. Some tactics might not be brand new, but they’re becoming more popular. Here are a few things you should expect to see in homes all around the country within a few years.

1. The Rise Of Smart Windows

When you look at a window right now it’s just a pane of glass. In the future they’ll be controlled by microprocessors and sensors. They’ll change depending on the specific weather conditions directly outside.

If the sun disappears the shade will automatically adjust to let in more light. The exact opposite will happen when it’s sunny. These energy efficient windows will save everyone a huge amount of money.

2. A Better Way To Cool Roofs

If you wanted to cool a roof down today you would coat it with a material full of specialized pigments. This would allow roofs to deflect the sun and they’d absorb less heat in the process too.

Soon we’ll see the same thing being done, but it will be four times more effective. Roofs will never get too hot again. Anyone with a large roof is going to see a sharp decrease in their energy bills.

3. Low-E Windows Taking Over

It’s a mystery why these aren’t already extremely popular, but things are starting to change. Read low-E window replacement reviews and you’ll see everyone loves them because they’re extremely effective.

They’ll keep heat outside in summer or inside in winter. People don’t even have to buy new windows to enjoy the technology. All they’ll need is a low-E film to place over their current ones.

4. Magnets Will Cool Fridges

Refrigerators haven’t changed much in a very long time. They’re still using a vapor compression process that wastes energy while harming the environment. It won’t be long until they’ll be cooled using magnets instead.

The magnetocaloric effect is going to revolutionize cold food storage. The fluid these fridges are going to use will be water-based, which means the environment can rest easy and energy bills will drop.

5. Improving Our Current LEDs

Everyone who spent a lot of money on energy must have been very happy when LEDs became mainstream. Incandescent light bulbs belong in museums today because the new tech cut costs by up to 85 percent.

That doesn’t mean someone isn’t always trying to improve on an already great invention. The amount of lumens LEDs produce per watt isn’t great, but we’ve already found a way to increase it by 25 percent.

Maybe Homes Will Look Different Too

Do you think we’ll come up with new styles of homes that will take off? Surely it’s not out of the question. Everything inside homes seems to be changing for the better with each passing year. It’s going to continue doing so thanks to amazing inventors.

ShutterStock – Stock photo ID: 613912244

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