Lord Stern calls on development banks to urgently increase investment in low-carbon infrastructure for decades of opportunity
A critical climate change conference in Paris this December should be seen as the first step in an effort to unlock the enormous opportunities associated with low-carbon economic growth, and development banks must play a central role in supporting this growth, Professor Lord Nicholas Stern today (Wednesday 7 October 2015) told audiences in Lima, Peru.
Meeting with Christine Lagarde (IMF, Managing Director), Jim Kim (World Bank, President) and Christiana Figueres (UNFCCC, Executive Secretary) ahead of the Annual Meetings of the International Monetary Fund and the World Bank Group, Lord Stern outlined the urgent need for development banks to encourage increased investment in sustainable infrastructure.
Lord Stern said: “The global economy is undergoing a transformation and the next two decades will be of fundamental importance to the world. Changing existing patterns of high-carbon infrastructure investment is a major challenge and the later it is left the more difficult it becomes. We must focus attention on the scale, quality and urgency of investments required to accelerate the low-carbon transition.”
Lord Stern outlined the need for development banks to play an increased role in encouraging low-carbon infrastructure investment, particularly in developing and emerging economy countries.
For instance, multilateral development banks will need to increase infrastructure lending five-fold over the next decade from around $30-40 billion per year to over $200 billion.
“Done well this could leverage much larger sums from the private sector and could make a crucial contribution to sustainable growth and the low-carbon transition,” Lord Stern said.
Multilateral development banks can also help in shaping the clear and credible policies which are necessary to generate the confidence necessary for private investors. The banks should focus on mobilising private finance, simplifying application procedures to speed up project approval, and help with policies to phase out fossil fuel subsidies.
Lord Stern said: “National and international development banks can play a much stronger role in helping to meet the considerable infrastructure needs we are now faced with as emerging markets and developing economies grow and urbanise and build their energy systems in a sustainable way. The capacities of development banks must be expanded to meet these needs. The scale and urgency of action cannot be underestimated.”
Speaking at an event at the Peruvian Ministry of Environment earlier in the day with Manuel Pulgar-Vidal (Peru, Minister of the Environment), Lord Stern further emphasised the importance of the next two decades in determining how quickly a low-carbon transition takes place.
Around US$90 trillion of global investments will be needed for infrastructure, particularly in cities and energy systems, over the next 15 years. Lord Stern pointed out that these ‘massive investments’ provide an opportunity to promote sustainable development.
Lord Stern said: “It is vital that we unlock the enormous opportunities that lie in the low-carbon transition. We will lose many or most of these opportunities if we hesitate now. Concentrations [of greenhouse gases in the atmosphere] would go on rising strongly for many years and the shape of our cities could be locked into damaging, congested and polluted structures.”
Lord Stern outlined three areas that have seen important progress in our understanding since a major climate change conference in Copenhagen in 2009: “First, we have a greater understanding of how economic growth, development and climate responsibility are intertwined…Second, we have a more intense understanding of the dangers of delay… Third, we have learned since Copenhagen that the damages caused by fossil fuels, beyond climate change, are immense, and are becoming more apparent.”
Lord Stern concluded that the climate change conference in Paris this December presents an opportunity to “enter a new period of extraordinary creativity, innovation, investment and growth.” However, he recognised the need to increase significantly countries’ ambitions to cut greenhouse gas emissions if we are to limit global warming to no more than 2°C.
He said: “The Paris summit must not be regarded as a one-off opportunity to fix targets. Instead, it must be the first step of many, based on regular reviews of how close we are to meeting the goal of avoiding dangerous global warming.”
NOTES FOR EDITORS
- Lord Stern is chair of the Grantham Research Institute on Climate Change and the Environment and the ESRC Centre for Climate Change Economics and Policy, as well as I.G. Patel Professor of Economics and Government, at the London School of Economics and Political Science. Since July 2013, Lord Stern has been President of the British Academy for the humanities and social sciences. Lord Stern was with HM Treasury between October 2003 and May 2007. He served as Second Permanent Secretary and Head of the Government Economic Service, head of the review of the economics of climate change (the results of which were published in ‘The Economics of Climate Change: The Stern Review’ in October 2006), and director of policy and research for the Commission for Africa. His previous posts included Senior Vice-President and Chief Economist at the World Bank, and Chief Economist and Special Counsellor to the President at the European Bank for Reconstruction and Development. Baron Stern of Brentford was introduced in December 2007 to the House of Lords, where he sits on the independent cross-benches. He was recommended as a non-party-political life peer by the UK House of Lords Appointments Commission in October 2007.
- The ESRC Centre for Climate Change Economics and Policy (http://www.cccep.ac.uk/) is hosted by the University of Leeds and the London School of Economics and Political Science. It is funded by the UK Economic and Social Research Council (http://www.esrc.ac.uk/). The Centre’s mission is to advance public and private action on climate change through rigorous, innovative research.
- The Grantham Research Institute on Climate Change and the Environment (http://www.lse.ac.uk/grantham) was launched at the London School of Economics and Political Science in October 2008. It is funded by The Grantham Foundation for the Protection of the Environment (http://www.granthamfoundation.org/).
- The British Academy is the UK’s national academy for the humanities and social sciences. Its purpose is to inspire, recognise and support excellence in these disciplines throughout the UK and internationally, and to champion their role and value. More information about the Academy’s work is available atbritac.ac.uk. Follow the British Academy on Twitter at http://twitter.com/britac_news.