Decarbonizing Development: Three Steps to a Zero-Carbon Future
Marianne Fay
Business & Money
Decarbonizing Development: Three Steps to a Zero-Carbon Future

The science is unequivocal: stabilizing climate change implies bringing net carbon emissions to zero. And this must be done by 2100 if we are to keep climate change anywhere near the 2 C. degree warming that world leaders have set as the maximum acceptable limit. Decarbonizing Development looks at what it would take to decarbonize the world economy by 2100 in a way that is compatible with countries’ broader development goals. It argues that the following are needed:

  • Act early with an eye on the end-goal;

  • Go beyond prices with a policy package that triggers changes in investment patterns, technologies and behaviors;

  • Mind the political economy and smooth the transition for those who stand to be most affected.

Planning for a Low-Carbon Future: What We Need to Do Now Depends on the End Goal
Enabling the Transition with a Policy Package That Is Efficient, Acceptable, and Credible
Managing the Transition: Protecting Poor People and Avoiding the Potential Pitfalls of Reforms
In Conclusion
Part I: Planning for a Low-Carbon Future: What to Do Now Depends on the End Goal
1. Reducing Carbon Emissions to Zero
Stabilizing the Climate Requires Zero Net Emissions
Zero Net Emissions Requires Action on Four Fronts
2. Acting Sooner Rather than Later
Feasible Really Means Cost-Effective
Cost-Effectiveness Requires Early Action
The Costs of Early Action Should Be Modest
Early Action Paths Are Prudent
3. Planning Ahead with an Eye on the End Goal
Factor in Uncertainty, Disagreement, and Multiple Objectives
Focus on What Is Urgent and Carries Co-Benefits
Build Sectoral Pathways to Carbon Neutrality
Annex 3A: Tools to Develop Sectoral Pathways to Zero Emissions
Part II: Enabling a Low-Carbon Transition: Prices and More
4. Getting Prices Right
A Necessary Step: Removing Fossil-Fuel Subsidies
The Economics of Carbon Prices—Pretty Straightforward
5. Building Policy Packages That Are Acceptable, Credible, and Effective
Ensuring the Needed Technologies Are Available and Affordable
Ensuring the Needed Infrastructure Is in Place
Tackling Other Factors—Such as Behavior—That Reduce the Impact of Price Incentives
6. Getting the Finance Flowing
Growing the Pie
Greening the Pie
Part III: Managing the Transition: Protecting the Poor and Avoiding the Potential Pitfalls of Reforms
7. Ensuring the Poor Benefit
Direct Distributional Impacts of Right Pricing—Possibly Positive?
Revenue Recycling Enables Redistribution and Allows for Pro-Poor Climate Policies
Managing Perceived Impacts
Land-Use-Based Mitigation—Impacts Depend on Design
8. Smoothing the Transition to Make It Happen
Managing Concentrated Losses
Managing the Fears of Competitiveness Loss
Managing the Risk of Government Failures
1.1 The “Full” Story on Greenhouse Gases
2.1 An Extreme Case of Commitment—Urban Forms
3.1 Short-Term Strategies Need to Be Designed Keeping the Long-Term Goal in Mind—Examples from Brazil and Germany
3.2 A World Bank Software for Comparing Abatement Options: MACTool
3.3 Using Space to Design Deforestation Policies
4.1 Agricultural Subsidies Are Also Sizable
4.2 Progress on Fossil-Fuel Subsidy Reform
4.3 Gaining Momentum on Carbon Pricing
4.4 Public Acceptance of Carbon Taxes: Good Communication Helps
4.5 Global Mechanisms to Cut Emissions from Deforestation and Forest Degradation
5.1 Fiscal Instruments to Encourage Demand for Clean Technology Products
5.2 Combining Carbon Pricing with Infrastructure Development in Paris
5.3 Orchestrating Renewable Power Scale-Up—The Case of India and Australia
6.1 Infrastructure Investment Needs Illustrate the Challenges Faced in Securing Long-Term Financing in Developing Countries
6.2 Innovative Public Finance at Work
6.3 Global Innovation Lab for Climate Finance’s “Call for Ideas”
6.4 A Toolkit of Banking Regulation Measures for Low-Carbon Finance
7.1 Nonprice Instruments Are Often Regressive
7.2 Tips on a Good Communication Strategy for Fossil-Fuel Reform
7.3 Managing the Impacts of Global Land-Use Initiatives on the Poor
O.1 The Tortoise and the Hare: Not Starting Early Will Entail More Drastic Emission Cuts Later
O.2 Using a Longer Time Frame Changes the Optimal Policy Mix for Brazil
O.3 Devising a Strategy Requires Information on Time, Cost, and Emission-Reduction Potential
O.4 How to Assess the Obstacles to Low-Carbon Solutions
O.5 Using Fossil Fuel Subsidy Resources for Universal Cash Transfers Benefits Poor People
1.1 Rising Cumulative Emissions of CO[(sub)2] Mean Rising Temperatures
1.2 Carbon Neutrality Is Needed by 2100 to Achieve Climate Goals
1.3 The Four Pillars of Decarbonization
1.4 The Possible Paths to Decarbonizing Electricity
1.5 Low-Carbon Energy Sources Must Become Much More Widely Used
1.6 The Transport Sector Needs to Tackle Both Efficiency and Fuel Shifting
1.7 The Building Sector Can Focus First on Efficiency
1.8 The Industry Sector Doesn’t Fall Neatly into Any One Approach
1.9 Changing the Way We Eat Can Help
2.1 Delaying the Peak Date Means Cutting Emissions even Faster Later
2.2 Long-Lived Capital Lasts a Very Long Time
B2.1.1 Viewing Paris through a Public Transport Lens
2.3 A Majority of Known Fossil-Fuel Reserves Will Need to Stay in the Ground
2.4 Early Action Results in Fewer “Stranded Assets”
2.5 Mitigation Costs Rise with More Ambitious Target, but with a Big Uncertainty Range
2.6 The Costs of Mitigation to Reach the 2°C Target Varies across Regions
2.7 Lower Air Pollution Means Lower Mortality Rates
2.8 Early Action Investments Kept Manageable by Lower Needs in Some Sectors
3.1 Some Countries Worry Much More about Environmental Issues than Others
3.2 Evaluating a Policy Package along Several Dimensions
3.3 Marginal Abatement Cost Curves Provide Information on the Cost and Potential of Emission-Reduction Options
B3.1.1 Using a Longer Time Frame Changes the Preferred Investment Plan
3.4 Devising a Strategy Requires Information on Time, Cost, and Mitigation Potential
B3.3.1 The Costs of Avoiding Deforestation in the Brazilian Amazon
3A.1 Formulating a Power Sector Strategy for Europe and North Africa
4.1 Fossil-Fuel Subsidies in the Middle East Distort Incentives for Clean Energy
4.2 Fossil-Fuel Subsidies in the Middle East Lengthen Payback Period for Investments in Energy Efficiency
4.3 A Rising Rate Can Offset a Declining Tax Base
5.1 Green Innovation Generates Much Greater Knowledge Spillovers than Brown Innovation
B5.2.1 Carbon Taxes Work Best When Public Transport Is Available
5.2 Institutions with a Shadow Carbon Price Use a Range of Value That Increases over Time
5.3 How to Assess the Obstacles to Low-Carbon Solutions
5.4 What Matters Is the Relative Lifetime Energy Cost
6.1 After Two Decades of Growth, Private Infrastructure Investments in Developing Countries Seem to Have Plateaued
6.2 Project Preparation Costs Can Sharply Increase the Overall Tab
6.3 Multilateral Development Bank Lending for Infrastructure Peaked in 2010
6.4 Annual Green Bond Issuances Are Up Dramatically
7.1 Using Fossil-Fuel Subsidy Resources for Universal Cash Transfers Benefits Poor People
B7.2.1 Most Egyptian Households Were Unaware of the Size of the Energy Subsidy
B4.2.1 Many Countries Are Moving to Reform Fossil-Fuel Subsidies
B4.3.1 More Countries Are Turning to Carbon Pricing
5.1 Pinpointing Where to Install Large Solar Power Plants in South Africa
3.1 Some Guiding Principles for Establishing Green Growth Strategies
3.2 Examples of Possible Sectoral Targets for Tracking Progress toward the Decarbonization End Goal
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