Economic growth and development with low-carbon energy

Produced as part of the Understanding green growth and climate-compatible development CCCEP research programme theme

Energy is needed for economic growth, and access to cheap, reliable energy is an essential development objective. However, in the future access to fossil fuel-based energy will need to be constrained because of climate change. This paper reviews the implications of a transition to low-carbon energy for economic growth and development in current low-income countries.

Historically, most incremental energy demand has been met through fossil fuels but in the future that energy will have to be low-carbon and ultimately zero-carbon. Decarbonisation thus needs to happen in all countries – albeit at varying speeds, depending on national circumstances.

The authors set out findings on trajectories for energy intensity and emissions intensity of economic growth, explore pathways to accelerate decarbonisation, review the theoretical and empirical literature on economic costs and co-benefits of energy decarbonisation, and assess analytical approaches.

Evidence from the literature, the authors find, suggests that it makes sense for developing countries to start decarbonising their energy systems early, and they discuss the opportunities that might arise in terms of a cleaner, more dynamic and more sustainable growth model, and the options for developing countries to implement a less carbon-intensive model of economic development.