Attaining the goals outlined in the Paris Climate Agreement would not only have the effect of slowing global warming but also boost the global economy by US$19 trillion.
According to a report published by the International Renewable Energy Agency on Monday, achieving the landmark goal of limiting global temperature rise to less than 2 C, as stated in the deal, would increase the world’s economy by 0.8 per cent by 2050.
“Rapid technological advancements in renewables are indeed taking place, and in many circumstances renewables are becoming the cheapest source of energy, a trend that is likely to continue in the future,” said the authors of the report, which was produced for the German government in anticipation of upcoming G20 climate talks over the coming months. The first of these discussions is set to take place this week.
“Such changes can be a driver for the economic impacts of decarbonization to become positive.”
The intergovernmental organization said that the surge can mainly be attributed to the large investment necessary for the high capital requirements of renewables and other energy efficiencies.
The research estimated that this phasing out of fossil fuels from the global energy sector would require $29 trillion in stimulus.
IRENA said that spending amounts to about an average of $830 billion per year globally.
“These investments more than offset the reduced investment in conventional energy sectors, increasing overall investment in the energy sector,” said the report, noting that this boost will mainly go towards the electric power industry.
The study also predicted that the bump to the world’s GDP will be propelled by an increase in household spending.
It projects that people will have more money in their wallets as governments shift taxes from income to carbon pricing, and their energy expenses drop as electricity prices fall in countries where renewables are more cost-competitive than fossil fuels.
“Overall, this analysis suggests that it is possible to carry out a fundamental transition in the energy sector without slowing GDP growth,” said the report.
“In fact, the rates of GDP growth may increase.”
However, the report doesn’t paint a rosy picture for countries whose fossil fuels industry makes up a large part of their GDP.
It said these nations could face “declines in economic activity” if they do not implement policies that will help diversify their industries.
“Continued policy interventions, including towards economic diversification, could help mitigate the negative economic impacts in fossil fuel exporting countries.
According to Statistics Canada data from 2010, the oil and gas extraction industry in Canada accounted for nearly half of the energy sector’s 6.8 per cent share of the country’s GDP.
From December 2015 to the following year, mining, quarrying and oil and gas extraction amounted to four per cent of the economy.
The report also said a drive towards the Paris Agreement’s goal would create 26 million jobs around the world in the renewable energy sector by 2050, more than enough to offset the loss of eight million related to fossil fuels. The research indicated that millions of additional jobs will be created from increased rates of energy efficiency.
IRENA found that renewable energy would need to account for 80 per cent of the world’s power generation and 65 per cent of its electricity by 2050. It currently accounts for 24 per cent and 16 per cent respectively.
This drastic transformation of the global economy would also require the energy sector to leave an additional $10 trillion in fossil fuel-related assets underground.
However, IRENA Director-General Adnan Z. Amin emphasized that the deal could prove to be a financial boon.
“Critically, the economic case for the energy transition has never been stronger. Today around the world, new renewable power plants are being built that will generate electricity for less cost than fossil-fuel power plants. And through 2050, the decarbonisation can fuel sustainable economic growth and create more new jobs in renewables,” Amin said in a press release.
“We are in a good position to transform the global energy system but success will depend on urgent action, as delays will raise the costs of decarbonization.”