Two phase funding plan using research from the UNEP Towards a Green Economy Finance Initiative
The economy will need to be completely transformed in order to be environmentally as well as economically sustainable. This proposal outlines a path using the current economic framework. According to the UNEP paper Towards a Green Economy: Finance Initiative, 2% of global GDP is needed to reduce emissions across all economic sectors such as buildings, transport, energy, and agriculture. I propose that this level of annual investment is needed throughout 2100, and that there are two stages of funding sources.
Phase I: Funding primarily from public funds in the Developing countries and private funds in the Developed countries.
Phase II: After there is more consensus amongst the global public, a global climate treaty is signed and funding comes from a mix of public, private, and a GHG emissions tax.
I am a master's student at UC Berkeley's Goldman School of Public Policy. I am primarily interested in environmental and economic policy. I have an electrical engineering background.
Why: Rationale for the proposal
Significant investment is needed for the transition to a green economy.
Without concensus about climate change in developed countries, especially the US, it is not possible to commit significant amounts of public funds for mitigating climate change. However, there are large pools of assets in the private sector that can be diverted towards mitigatin and adapting to climate change.
In developing countries, especially BRIC countries, there are already significant amounts of government funds being used for mitigating climate change. Most developing countries do not have as much money in the private sector.
These investments will develop a knowledge base of new technology, new business models, and new policies that will benefit everyone. This phase should be expected to take 20-50 years.
As best practices are developed and become mainstream, consensus amongst the global public grows about climate change mitigation and adaptation. New policy tools will help policymakers set goals that are parameterized over time rather than being a point goal (eg. emissions profile rather than x% reduction by 20xx). Then it will be possible to have a global climate treaty.
Investments will be from private and public sector. Integration of ESG (environment, social, governance) policies in finance, banking, and insurance will make it harder to distinguish green investments from standard practices.
According to the UNEP Finance Initiative paper, this would halve emissions from the energy sector by 2050. I have put in the CLEARN model the emissions target for 2100 starting 2012 that halves 2011 emissions by 2050 and then continues to reduce emissions.
It results in less than 2 degree increase in temperature. However, according to the integrated assessment models, it results in high mitigation costs.
Future Work for the Proposal
There are many questions for future work to finalize this plan.
1. How much investment is really necessary and how can green investment be distinguished from BAU investments?
2. What are the private vs public sector asset resources in developed vs developing countries?
3. What is a fair amount of investment in developed vs developing countries in Phase I?
4. What programs or policies or business practices will drive investments toward green development at the desired magnitude in Phase I?
5. What will Phase II look like and how long will it last?
6. What will the technology mix be? What will be the energy consumption per sector?