Key message 1 – Climate change is now the most pressing, central challenge facing the world.

Energy is the source of all economic activity. Engineering revolutions across the centuries have enabled us to harness more and varied forms of energy for work, and in turn, economic growth. Around 80% of the world’s energy needs are presently fulfilled by non-renewable, fossil fuels (EESI 2021). As technologies advanced and economies expanded, fossil fuel consumption has grown nearly eight times since the 1950s (Ritchie, Roser, and Rosado 2020), and almost doubled since the 1980s. Environmental degradation has been the price of this economic growth. The devastating impact of greenhouse gas emissions has been clear for more than 100 years now (Arrhenius 1896), and yet their generation has remained unabated. This has now brought the world economy to a threshold where the damage to the environment will be irreversible if greenhouse gas emissions aren’t drastically reduced now (IPCC 2022).

A warmer world is certain as current emissions trajectories signal an average warming of 3°C by 2100. Different parts of the world face different challenges but nowhere is immune. The incidence and severity of heatwaves, droughts, and extreme weather events such as floods have grown significantly. Large-scale disruptions to society are inevitable. The economic costs from mortality due to rising temperatures, even after factoring in income growth and adaptation, are expected to be 3.2% of global GDP in 2100 (Carleton et al. 2022). Add to this the damages from stronger storms, displaced populations, rising food insecurity, and lower productivity, and the costs of climate change increase substantially. Climate change is unequivocally the central, most pressing challenge facing the world, provoking a paradigm shift in the growth process.

Greener growth

Reducing losses from climate change necessitates staunching the flow of global emissions. This does not, however, mean staunching economic growth. Economic growth is as important for individual wellbeing as it will be for protecting against climate change. The relationship between climate change and economic development is intertwined (Jayachandran 2022) – unsustainable economic development can have dire consequences on the environment (as it already has) while climate change can directly harm productivity across sectors. Simultaneously, as economies become richer and technologies advance, it will become increasingly possible to transition to greener growth paths that don’t compromise on economic gains and environmental quality. This will come in tandem with people’s increased willingness to pay for a better environment and practices to safeguard it at the microeconomic level, and in turn, benefit from fewer environmental extremities.

For instance, remarkable declines in the relationship between mortality and high temperatures have been observed as households became richer and adopted cooling technologies to protect themselves (Barreca et al. 2016). Urban areas in India have seen a similar relationship between mortality and temperature as the US, but a far steeper increase in deaths for hot days in rural areas (Burgess et al. 2017), highlighting the importance of structural transformation for adaptation. Additional evidence from India has shown the willingness to pay for face masks to mitigate the impact of air pollution in New Delhi increases with greater income and education (Baylis et al., 2021). Similar results from China have revealed willingness to pay for air filters for cleaner indoor air increases with greater income (Ito and Zhang 2020).

Credit: Getty Images. A girl covers her face with a mask in New Delhi, India.

Growth must remain a central tenet of the transition to a greener economy. Without a path for growth, there is no path to a green transition. This requires letting go of old models of economic growth which do not internalise the costs of environmental degradation while also bridging the political-economic tensions of unequal contributions to environmental degradation. Solving international coordination problems on climate action is another challenge. In his research, Hsiao 2022 illustrates how in the absence of coordinated and committed domestic regulations, the international community can come together and intervene by leveraging import tariffs and considerably reduce emissions by 39% in the palm oil industry.

Global partnerships and support are even more crucial for developing countries that have not historically contributed much to emissions but still stand to face the brunt of the climate crisis owing to their weaker social safety nets, poorer physical infrastructure, and lower financial and technological resources to engineer resilience against a changing climate. Yet, developing countries also hold the greatest potential and opportunities for sustainable growth. Given their share of world population and the global economic growth trajectory, they might just hold the key to successful climate change mitigation.