July 22, 2015

Caio Koch-Weser presents New Climate Economy report findings in Israel

The governments of Israel and Germany recently held a conference on sustainable development and innovation to celebrate the 50th anniversary of diplomatic relations between the two countries. Vice Chairman Caio Koch-Weser was invited to address the conference in his capacity as a member of the Global Commission on the Economy and Climate.

Bewältigung des Klimawandels

At the conference, German Federal Environment Minister Barbara Hendricks underlined the economic opportunities that go hand in hand with climate action, particularly in an innovative country like Israel. She noted that Germany has reduced its greenhouse gas emissions by 27 percent since 1990, while in the same period the German economy grew by 39 percent. "This shows that economic growth can be decoupled from emissions. In fact, in the 21st century, climate action is a prerequisite for competitive and forward-looking economic activity – and hence for sustainable prosperity."

In his speech, Caio Koch-Weser addressed this topic as well and reviewed the findings of the New Climate Economy report “Better Growth, Better Climate” published in 2014: Over the next 15 years, USD 90 trillion will be invested globally in energy systems, cities and land use sectors. The nature of these investments will affect the strength of economic growth and society’s ability to avoid dangerous climate change. The Vice Chairman said that “sustainability and innovation are essential ingredients for future prosperity and the wellbeing of society”.

Economic growth and reducing carbon emissions go hand in hand

Koch-Weser’s remarks also focused on the emerging trends which are showing that economic growth and reducing carbon emissions can be achieved together. First, the rapid growth and technological progress of clean energy technologies such as solar PV is increasingly cost competitive with fossil fuels, as Deutsche Bank research has confirmed. Second, countries like Mexico, Indonesia and India are reforming their fossil fuel subsidy systems and more countries and jurisdictions are adopting carbon pricing policies. Third, there is growing interest in infrastructure investment and finance to address the tremendous deficit in infrastructure spending and to create investment opportunities. Fourth, China’s efforts to structurally transform their economy towards an ‘ecological civilization’ has profound implications for the rest of the world and as an example to other developing countries. Fifth, companies are increasingly integrating sustainability into their business and investment strategies and this has helped the global market for low-carbon and environmental goods and services to reach USD 5.5 trillion in 2012. Finally, central banks, financial regulators and financial institutions are increasingly examining the risks and opportunities of the low carbon economic transition. For instance, some regulators are starting to examine potential fossil fuel asset stranding risk, are encouraging disclosure of sustainability data and requiring environmental risk assessment of transactions and growing numbers of investors are examining sustainability risks and responsible investment opportunities. The G20 request to the Financial Stability Board to examine climate change is particularly notable.

Key recommendations from the New Climate Economy report 2015

The New Climate Economy initiative recently published another New Climate Economy report called “Seizing the Global Opportunity” on these trends and suggested key international actions to accelerate the low-carbon transformation and to achieve a credible inter-governmental agreement on climate change at the Paris Summit in December. The recommendations would bring significant economic benefits and help achieve 59-96% of the needed emission reductions by 2030.

New Climate Economy

Seizing the Global Opportunity – Partnerships for better growth and a better Climate” (Report 2015)

“Economic growth can be decoupled from emissions. In fact, in the 21st century, climate action is a prerequisite for competitive and forward-looking economic activity – and hence for sustainable prosperity.”

Barbara Hendricks German Federal Environment Minister

“Sustainability and innovation are essential ingredients for future prosperity and the wellbeing of society”

Caio Koch-Weser Vice Chairman Deutsche Bank

The 10 recommendations from the 2015 report

1. Accelerate low-carbon development in the world’s cities

All cities should commit to developing and implementing low-carbon urban development strategies by 2020, prioritizing policies and investments in public, non-motorised and low-emission transport, building efficiency, renewable energy and efficient waste management.

2. Restore and protect agricultural and forest landscapes, and increase agricultural productivity

Governments, multilateral and bilateral finance institutions, the private sector and willing investors should work together to scale up sustainable land use financing, towards a global target of halting deforestation and putting into restoration at least 500 million ha of degraded farmlands and forests by 2030. Developed economies and forested developing countries should enter into partnerships that scale up international flows for REDD+, focused increasingly on mechanisms that generate verified emission reductions, with the aim of financing a further 1 Gt CO2e per year from 2020 and beyond. The private sector should commit to extending deforestation-free supply chain commitments for key commodities and enhanced financing to support this.

3. Invest at least USD 1 trillion a year in clean energy

To bring down the costs of financing clean energy and catalyse private investment, multilateral and national development banks should scale up their collaboration with governments and the private sector, and their own capital commitments, with the aim of reaching a global total of at least USD 1 trillion of investment per year in low-carbon power supply and (non-transport) energy efficiency by 2030.

4. Raise energy efficiency standards to the global best

G20 and other countries should converge their energy efficiency standards in key sectors and product fields to the global best by 2025, and the G20 should establish a global platform for greater alignment and continuous improvement of standards.

5. Implement effective carbon pricing

All developed and emerging economies, and others where possible, should commit to introducing or strengthening carbon pricing by 2020, and should phase out fossil fuel subsidies.

6. Ensure new infrastructure is climate-smart

G20 and other countries should adopt key principles ensuring the integration of climate risk and climate objectives in national infrastructure policies and plans. These principles should be included in the G20 Global Infrastructure Initiative, as well as used to guide the investment strategies of public and private finance institutions, particularly multilateral and national development banks.

7. Galvanise low-carbon innovation

Emerging and developed country governments should work together, and with the private sector and developing countries, in strategic partnerships to accelerate research, development and demonstration (RD&D) in low-carbon technology areas critical to post-2030 growth and emissions reduction.

8. Drive low-carbon growth through business and investor action

All major businesses should adopt short- and long-term emissions reduction targets and implement corresponding action plans, and all major industry sectors and value chains should agree on market transformation roadmaps, consistent with the long-term decarbonisation of the global economy. Financial sector regulators and shareholders should actively encourage companies and financial institutions to disclose critical carbon and environmental, social and governance factors, and incorporate them in risk analysis, business models and investment decision-making.

9. Raise ambition to reduce international aviation and maritime emissions

Emissions from the international aviation and maritime sectors should be reduced in line with a 2°C pathway through action under the International Civil Aviation Organization (ICAO) to implement a market-based measure and aircraft efficiency standard, and through strong shipping fuel efficiency standards under the International Maritime Organization (IMO).

10. Phase down the use of hydrofluorocarbons (HFCs)

Die Parteien des Montrealer Protokolls sollten das Protokoll um eine allmähliche Beendigung der Produktion und des Einsatzes von FKWs ergänzen.

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