SINGAPORE - The move to net-zero emissions can be an engine of growth for the global economy over the coming decades and Asia will play a key role in the great green transformation with the right policies and access to low-cost finance, a leading economist said.
"The move to net zero can be the great driver of a new form of growth - the growth story of the 21st century," said Professor Nicholas Stern, chair of the Grantham Research Institute on Climate Change and the Environment in Britain.
"This growth will be more resource-efficient, more productive, healthier and will offer greater protection to our biodiversity," he told a media briefing on Monday (Oct 25).
But he said it is crucial for Asia's rapidly developing economies to accelerate the transition to cleaner energy and away from fossil fuels because what this region does will largely determine the course of climate change.
That is because Asia's huge appetite for energy is still largely met by using coal, oil and gas. Asia has several of the world's top greenhouse gas polluters, with China ranking first, India third and Japan fifth. Other major polluters are South Korea and Indonesia.
While investments are growing in the region, especially in China and India, the additional solar, wind and hydro power capacity is not yet displacing fossil fuels in a major way.
But that needs to quickly change for a region that is also one of the most vulnerable to the impacts of climate change, such as rising sea levels, floods, storms and crippling droughts.
Prof Stern said, first, it is important to focus people's minds on how vulnerable Asia really is to climate risks, and that they understand that it is vital to act now to invest in a cleaner energy story to reduce the risks to lives and livelihoods.
"The second is the recognition of the importance of Asia. A very big part of the investment in infrastructure that is going to occur, which will in many ways shape the emissions, will be in Asia. These are the countries that are likely to grow fastest."
Third is to underline that renewables are out-competing fossil fuels. "That reality is changing the way people understand these issues," said Prof Stern, who was speaking ahead of the release of a paper to be published in The Economic Journal of the Royal Economic Society.
The paper marks the 15th anniversary of the landmark review by Prof Stern in 2006 on the economics of the climate crisis that changed the way the world thought about climate risks.
The review concluded that the costs of inaction on climate are far greater than the costs of action and that the climate crisis is the biggest market failure in history.
Prof Stern said access to low-cost finance for developing nations in Asia, and elsewhere, is vital.
This could come from bilateral or multilateral sources (nation to nation or via big development banks), private funding, carbon markets or philanthropy.
Key, too, is helping to manage the risk associated with large-scale green investments. This includes early-stage risk covering the first four or five years of a project. This could involve equity, risk guarantees, or long-term capital.
Multilateral development banks, such as the Asian Development Bank, World Bank and Asian Infrastructure Investment Bank, have a critical role to play and there would need to be a big expansion in their lending abilities, he added.
Blending all these streams of finance, plus good policies at the country level, will bring down the cost of capital, he said and help accelerate a powerful transformation of the global economy that is already under way.
"The world is recognising the huge investment opportunities and that this involves a huge re-allocation of capital," he said.
"Capital markets of the world understand now that the technologies of the last century and 19th century based on fossil fuels are more risky investments than the low- and zero-carbon investments of this century."