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A Challenge of Scale and Speed

In recent years, an increasing number of governments have focused on adopting new policies favouring a shift towards low-carbon and resource-efficient growth. Similarly, an increasing number of private-sector companies have transformed their business models and processes to favour the decarbonization of production and consumption. These and a myriad of other initiatives championed by specialist international organizations, NGOs and civil society organizations are important steps in helping to achieve the transformation necessary for building successful and prosperous low-carbon economies.

However, the continual increase in global carbon emissions indicates that these efforts are insufficient to effectively cut carbon emissions at the required speed and scale to avoid the irreversible negative impacts of climate change. Never in history has the world emitted as many tons of carbon within one year as in 2010. Significant transformation needs to happen across economic sectors at a pace and scale not seen before to achieve what climate science says is a requirement. Solving this low-carbon growth stimulus conundrum is a challenge that needs coordination and practical approaches. Embracing emerging technologies and technological disruption will stimulate growth, generate economic wealth and employment, and sustain productive assets.

The environment within which these changes must happen is particularly challenging in the early 2010s. Many governments, challenged by the worst recession in the past 40 years, are in short-term crisis-management mode. They are facing a “new economic normal” where the economic and financial crisis has resulted in constrained budgets, growing unemployment rates and more pessimistic growth projections. Meanwhile, the current international political chessboard allows only slow progress in multilateral climate negotiations.

Arguably, fresh thinking and new approaches are needed to realize low-carbon growth at scale in this challenging environment.

The Focus of the Global Agenda Council on Climate Change

In August 2011, the 2011-2012 Global Agenda Council on Climate Change held its first virtual meeting, with over a dozen distinguished Members representing governments, businesses, civil society and academia. Subsequently, the Council held a series of monthly virtual meetings and met for a three-day meeting at the Summit on the Global Agenda in Abu Dhabi (UAE) in October 2011, and at the World Economic Forum Annual Meeting 2012, in Davos-Klosters in January 2012.

From the start, the Council recognized that, in the current context, developing another set of recommendations or analytics is not what is needed to effectively stimulate low-carbon growth action plans. Instead, practical and scalable implementation agendas are required. Hence, the Members of the Council agreed to use their limited time as a group to work on identifying the framework for action and prompting the action needed. The two guiding questions for the Council’s work were:

  1. What is the “narrative” for successful low-carbon and resource-efficient growth, taking into account the current economic and political landscape, and the key enabling elements for action at scale and at speed?
  2. What are the new models for effective action and what kind of practical contributions can the Council make to catalyse action in key areas?

This report reflects the result of the Council’s various interactions. The remainder of this paper is structured in two main parts. It starts with the framework for action put forward by the Council, including the enabling elements for achieving scale. Second, it describes the specific initiatives proposed by the Council, focusing on those that the Council turned into action during the 2011-2012 Council term.

For further reading on the Council’s work, please refer to the following two documents:

  • A blog post based on a briefing call on the outcomes of the COP17 negotiations. The call was an opportunity for several dozen Partners, Members and constituents of the World Economic Forum to learn from select Members of the Council on Climate Change about the decisions taken at COP17 and to ask questions about the implications for businesses.
  • An informal discussion paper written for distribution during the World Economic Forum Annual Meeting 2012 in Davos-Klosters. The paper includes five proposals for actionable initiatives to scale low-carbon growth in key areas (climate finance, climate-smart agriculture, low-carbon electricity, sustainable transport, and natural disasters and climate risk management).

A Framework for Comprehensive and Effective Action

 Focus on long-term growth strategies that meet short-term needs

Green growth strategies that address the short-term worries of governments, corporations and civil society are a response to the new economic normal and to the increasing pressure on scarce natural resources. They offer a sustainable growth proposition for a low-carbon future in a more prosperous and populated world, and sustain productive natural resources instead of depleting them.

Recognize and honour mutually reinforcing bottom-up and top-down approaches

The UN climate negotiations in December 2011 in Durban, South Africa, brought certain important advances. They include reaching agreements on the Green Climate Fund, on the continuation of the Kyoto Protocol until 2017, and on the principle for negotiating a new universally binding agreement to enter into force by 2020. However, although the agreements reached in Durban show that the process remains an important way for all countries to engage, the pace of the climate negotiations is not quick enough for a timely global solution to climate change.

Meanwhile, some governments have demonstrated remarkable leadership within their own jurisdiction, embracing low-carbon growth opportunities. Some emerging markets are investing heavily in green growth infrastructure as a means of making their economies cleaner and more efficient, resilient and competitive, reacting to increased resource scarcity as a result of growing populations and economies, rising living standards and rapid urbanization.1 These “bottom-up” movements, often driven by public-private collaboration on the national, sub-national and regional levels, will help create a more favourable environment for a “top-down” approach to climate change. The international process should honour these commitments and create trust among governments.

Implement domestic policies that work

A relatively small number of public policies have proven to cut carbon emissions while saving money, boosting the economy and preserving the environment. For example, performance standards – such as fuel efficiency standards for cars and stringent building codes – have saved trillions of dollars while slashing CO2 emissions. Using sound fiscal instruments to de-subsidize fossil fuels can lower the costs of clean technologies. Smart policies for price externalities (such as a carbon cap or tax) will add momentum to these transformations. Using a fraction of the revenues from a carbon control system to jump-start innovation could build an outstanding new set of technologies and options for the energy system. By adopting such policies in a coordinated way, government leaders can reduce greenhouse gas emissions, foster innovation and economic growth, bolster national security, improve public health and put the world on the path to a liveable climate future.

Develop and scale integrated risk-management capabilities

Climate extremes, exposure and vulnerability materially affect both the demand and supply sides of resource systems such as water, food and energy. In some places, these resources encounter regional and local constraints, creating increased uncertainty in how best to deal with the trade-offs and risks across different resource classes. Against this backdrop, risk-management capabilities and a spatial characterization of the risks associated with critical energy, water and food systems, as well as critical logistics and supply-chain infrastructures, are a must for public authorities, businesses and communities alike.

Expand informational public goods for green growth and enhanced resilience

Effective low-carbon and resource-efficient growth strategies require trade-offs among scarce yet interdependent natural resources, such as land, water, materials, energy and food, and an understanding of climate risk. Actionable and dynamically updated information on the demand and supply of natural resources, including their associated supply chains and infrastructures, and on the impact of weather extremes are an integral part of resource and risk-management decision-making (e.g. appropriate data, analytics and metrics, and user interfaces, including standard-setting for comparability).

Information technology, open innovation vehicles, business-model innovation and public-private partnerships enable the development of such information, gathered on platforms designed and managed as global informational public goods. At scale, such management decision-support capabilities will become a key part of risk-resilient growth strategies. A better understanding of public goods will lead to the development of new incentive structures for the delivery of public goods by corporations and public institutions. Rewarding private enterprises for delivering public goods is an integral part of a sustainable growth ecosystem.

Focus on resource efficiency and productivity for effective climate adaptation

Comprehensive green growth agendas build upon the interrelations of energy, food, water, land and climate security, and acknowledge the complex trade-offs and synergies between them. They value the benefits of ecosystem health, resilience to environmental change and enhanced access to power and nutrition, and highlight initiatives that have the potential to produce a step change in scaling innovations for wide regional and global impact. Incorporating integrated resource management as part of an economic model reduces systemic risk and opens up large-scale opportunities for investment and innovation in energy, water, food and land infrastructures. They offer a way out of our current economic crisis.

Mobilize leadership champions to scale transformative agendas

A timely and adequate response to the economic, fiscal and currency crisis is a top priority for many governments. Notwithstanding, the climate and resource challenges dictate that change must happen now. In this context, strong leadership is needed for effective low-carbon and resilient growth strategies that offer a response to the short-term crisis. The need for strong country leadership to catalyse action is even greater as international climate negotiations struggle to set a strong framework for the short term.

New Models and Initiatives for Low-carbon Growth

In the second phase of the Council’s work programme, Members focused on developing initiatives in a number of key areas. The Council prioritized three main engagements: 1) contributing to the creation of shared low-carbon growth agendas that focus on the nexus of water, energy, food and climate; 2) mobilizing leadership and private-sector input to the Green Climate Fund’s private-sector facility, and 3) developing a new initiative for open-data capabilities to measure environmental progress.

Low-carbon growth and natural resource productivity – Creating shared agendas across the Global Agenda Council Network

In Abu Dhabi in October 2011, the Councils on Climate Change, Water Security, Food Security and Energy Security met for a series of informal consultations to create a shared understanding of the water-energy-food-climate nexus. Together with the Global Agenda Councils on Water Security, Energy Security and Food Security, the Council on Climate Change shares an understanding of the essential interconnectedness of their problematics. More significantly, they are able to present to a wider audience a compelling model for finding prosperity in the different economic environments by focusing on quality growth with resource productivity.

Innovative models of integrated resource management will reduce systemic risk and create large-scale opportunities for investment in infrastructure and innovation in energy, water, food and land to deal with the challenge of resource scarcity.

The Councils identified four specific enabling elements that will help develop innovative models for integrated and resource-efficient growth strategies:

  • Actionable and dynamically updated information for actors to understand and manage the resource trade-offs and risks involved (including appropriate data, analytics and metrics, and standard-setting for comparability)
  • Reconsideration of the analysis of risk, the pricing of externalities and open participatory processes
  • Improved governance at different spatial resolutions
  • Incentives for innovation in technology and business, specifically to design new enterprise structures for delivering public goods.

Building upon the insights developed in Abu Dhabi, Members and Chairs of the Councils on Climate Change, Water Security and Food Security hosted a follow-up nexus lunch at the World Economic Forum Annual Meeting 2012 in Davos-Klosters. Participants included 60 stakeholders, including government representatives from emerging as well as industrialized economies, representatives of key industries and leading academics in the field of natural resource scarcity. Concrete recommendations for action made at the meeting include:

  • The development of international climate negotiations shows the difficulty in effectively telling the green growth story with regard to adaptation (as opposed to mitigation, which is more successful). The water-energy-food nexus is all about adaptation and is a compelling, actionable framework to tell the green growth story. Recommendation: collect the most compelling, successful or impactful nexus stories to feed into COP18.
  • It is necessary to support this with a more strategic nexus roadmap (a global heat map), to produce a set of solutions that includes hard factors such as new insurance models, investment plans and technologies, and soft factors such as governance and institutional models.

A practical example supporting the adoption of an integrated approach linked to economic growth imperatives is illustrated by the Grow Africa partnership, catalysed by the New Vision for Agriculture initiative in collaboration with the African Union and the New Partnership for African Development (NEPAD) Commission, as well as a number of African governments and companies. Although at an early stage of development, the lessons from these and similar initiatives will help develop effective climate-smart growth strategies that can be replicated in other geographies. Through its Network and connections with other Global Agenda Councils, the Council on Climate Change will continue to help mobilize support for such integrated and resource-efficient economic growth strategies.

Green Climate Fund – Mobilizing private-sector leadership

Over US$ 500 billion a year will be required by 2020 to deliver sustainable energy systems; today, investments in clean-energy markets represent less than half of that amount. With public finance being constrained, new models are needed to catalyse private investment for green growth. The development of effective climate finance structures and carbon regulations that can help set a price for carbon are essential parts of a viable enabling environment for low-carbon growth.

At the Durban climate talks in December 2011, governments agreed on the creation of a Green Climate Fund (GCF) to mobilize US$ 100 billion public funding per year to support mitigation and adaptation actions in developing countries. The GCF will be equipped with a private-sector facility (PSF) to incorporate private money in GCF funds.

However, no details have been agreed on how the PSF will be structured, what activities it will fund or how it will do so. While several ideas have been put forward by some governments, banks and other stakeholders, the design of the facility must be based on a workable business model that will make sense from the private sector’s perspective and provide clear avenues for mobilizing private capital to finance low-carbon development. Leading business coalitions like the 2012 B20 Task Force on Green Growth have expressed support in designing the necessary mechanisms.

For this reason, the Chairs of the Global Agenda Councils on Climate Change and on Insurance, Yvo de Boer (KPMG) and Joachim Faber (Allianz), respectively, are co-hosting a high-level workshop among the key players in the private sector, including commercial banks, asset managers and multilateral and regional development banks, to design and present joint recommendations for how the PSF under the GCF should be structured and receive potential conditional pledges, and how the structure can meet the needs of potential investors. The GCF board members and representatives of the interim secretariat are invited to participate in the event, which will take place in early summer 2012. The focus and participation in the event will guarantee alignment with key international processes, the United Nations Framework Convention on Climate Change (UNFCCC) and the B20/G20 in particular.

Environmental data – Designing new kinds of public good data capabilities

The kind of risk-resilient and resource-efficient economic growth described by the Global Agenda Council on Climate Change requires new decision-support capabilities for geospatial risk and integrated resource management at several spatial scales (local, regional, national and global) as a global public good. Over the 2011-2012 Council term, the Council mobilized leadership champions from government, science, business and civil society to engage in an initiative aimed at co-developing such capabilities and bundling them onto a new open platform.

The aim is for the open platform to enable “critical decision flows” with respect to resources and risk management at the country level for a range of stakeholders (for example central and regional government planners, forest managers, farmers, others active on the ground, water regulators, etc.) and would do so in the form of “whole ecosystem delivery” and not single institution delivery. An important co-benefit of this will be the development of new incentive structures for the delivery of public goods by corporations and public institutions.

Going forward, the Network of Global Agenda Councils will act as an important convener and incubator for developing this type of platform and decision-support capabilities.2

Outlook

In 2015, the parties to the UNFCCC will prepare a new legally binding climate deal that will replace the Kyoto Protocol and take effect by 2020. The negotiations in the run-up to 2015 will present a major opportunity to design a new kind of multilateral climate treaty, possibly one that recognizes the important role of non-traditional actors, such as sub-national authorities, public-private partnerships and multistakeholder coalitions. Fresh models from leading thinkers will help inform the process to drive this transformation.

A second emerging issue is the question of effective action for climate adaptation. Financing models and coordinated public policies will need to develop integrated solutions to adapt to the local impacts of climate change.

The 2012-2014 Global Agenda Council on Climate Change will follow these and other high-priority themes to develop actionable agendas for realizing low-carbon growth at scale and at speed.

 Disclaimer

The opinions expressed here are those of the individual members of the Council and not of the World Economic Forum or any institutions to which they are affiliated.