World Bank Encourages Green Development to Boost Growth in Asia

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Asia stands to reap large economic rewards with investment into smart-climate practices, according to the World Bank and the ClimateWorks Foundation.

In a new report, “Climate-Smart Development: Adding Up the Benefits of Actions that Help Build Prosperity, End Poverty and Combat Climate Change,” analysts assessed the potential economic, environmental and health impacts of three government policies across six world regions.

“Climate inaction inflicts costs that escalate every day,” said Rachel Kyte, World Bank Group vice president and special envoy for climate change. “This study makes the case for actions that save lives, create jobs, grow economies and, at the same time, slow the rate of climate change.”

Using recent emissions modeling tools and an integrated macroeconomic model, the report quantifies holistically the benefits of climate change policies in terms of economic and productivity gains. It focuses on three scenarios – clean transportation, energy efficient industry and energy efficient buildings.

Together, these three policies could raise global gross domestic product by US$1.8 to US$2.6 trillion per year by 2030, prevent 94,000 premature deaths from pollution, reduce carbon dioxide emissions by 8.5 billion metric tons and save almost 16 billion kilowatt-hours of energy, equivalent to removing 2 billion cars from the road, all at the same time.

Of the six regions studied – Brazil, China, India, Mexico, the United States and the European Union – China and India are poised to reap some of the largest benefits in terms of cost savings and economic growth from the proposed policies, due to their large populations and agricultural sectors.

The harmful effects of climate change are well-documented – air pollutants such as black carbon and methane alone could potentially kill up to 2.4 million people and destroy 32 million tons of crops annually by 2020, according to the United Nations Environment Programme (UNEP).

Not only is climate change detrimental to the environment and human health, it also requires mitigation measures that are expensive.

Currently in India, air pollution costs more than US$40 billion a year, or more than 3 percent of India’s 2009 GDP, according to the World Bank estimates. In total, environmental degradation, including crop and water damage, brings the total cost of air pollution to almost 5.7 percent of the country’s GDP.

Investment into clean transportation, which involves a shift to hybrid and electric vehicles, greater public transportation and shifting freight from trucks to trains and ships, would bring substantial fuel savings to consumers and the economy, as well as lower oil prices for industries.

By 2030, mitigation measures will translate into 20,000 lives saved per year, saving the global economy US$87 billion dollars. Over 90 percent of these savings will go to China and India.

GDP growth from the increased expenditure will also translate into more employment opportunities, up to 2 percent by 2030 in India, for example.

Energy savings will also be substantial. In the transport industry, 4,700 kilowatt hours (Twh) of energy will be saved, equivalent to 12.5 percent of energy consumption by the industry. China alone will save more than 1,200 TWh of energy, equivalent to US$61.6 billion worth of savings.

Energy efficient factories will also lower energy consumption for industries, boosting the global competitiveness of emerging economies, including China and India. As production costs are lowered relative to developed economies, countries will gain higher market shares, bringing in new employment opportunities.

China, in particular, stands to benefit greatly from these savings. In total, China can save up to 6.2 gigawatt hours (GWh) of energy across its industries, the largest amount in the world. Fifty-nine percent of world energy savings and 320,000 metric tons of crop savings will go to China, enough to feed about 1.2 million people for a year.

The need for mitigation policies is urgent, particularly for Asia-Pacific, where large portions of the population continue to rely on agriculture for subsistence.

According to a China Daily report, South Asia will see the largest reductions in agricultural potential due to climate change, with up to 18 percent reduction in rice and 45 percent reduction in wheat productions.

Fortunately for India, full implementation of the three smart-climate policies analyzed will see increase in crop yields of almost 788,000 metric tons per year.

The report comes ahead of the world Climate Summit organized by the United Nations to be held in September this year.

China is currently the world’s leading carbon emitter, followed in third place by India. Climate change remains one of the largest challenges facing the world today and governments in Asia would do well to pay close attention to the report’s findings.

“Governments should take a close look at the evidence in this report,” Kyte said.  “It reinforces the economic case for action over inaction on climate change. The report shows that climate action does not require economic sacrifice or, put differently, good economic stewardship can reap huge climate rewards.”

Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email asia@dezshira.com or visit www.dezshira.com.

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