Globalisation and the Low
Carbon Society: Help or
Hindrance?
Andrew Sentance
Professor of Sustainable Business, Warwick Business School
CAGE/CCCEP Workshop, 25 January 2011
Warwick Business School
Outline

Globalisation and the “new global economy”

The transition to a future “low carbon economy”

Key issues, opportunities and challenges
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Forces driving globalisation

Reduction in trade barriers

Deregulation and liberalisation

Political change

Technology – cutting cost of communication and
transport
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Global economic growth since 1820
% per annum increase in global GDP per capita
2.5
2
1.5
1
0.5
0
1820-70
1870-1913
Source: Maddison (2001) and 1MF
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1913-50
1950-2010
The “new global economy”

Since 1950s, trade and investment flows have been
increasing across the world economy

1990s and 2000s saw a significant intensification in this
process of globalisation:
 Integration into global economy of China, India and former
Soviet Union economies
 Global liberalisation of financial markets and capital flows

These developments extended globalisation pressures
from product markets to labour and capital markets
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The upside of the “new global economy”

Opportunities for rapid development in emerging
market and developing economies

Low-cost production opportunities for firms,
generating higher profits

Cheaper goods for consumers in US/Europe and
in other rich economies

A “long boom” in many countries – in which
living standards rose and inflationary pressures
were subdued
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World growth, 1960 - 2008
Real GDP, year on year percentage change
12
World
OECD
10
Non-OECD
8
6
4
\
2
0
-2
1960
1970
Note: GDP measured at market exchange rates
Source: IMF, OECD, Bank Calculations
1980
1990
2000
GDP growth in the world economy
Average percentage change on previous years; GDP at constant prices
7
Developing countries
6
OECD countries
5
4
3
2
1
0
1970s
Source: IMF, OECD.
1980s
1990s
2000s
World primary energy use
Millions tonnes oil equivalent
7000
OECD
Non OECD
6000
5000
4000
3000
2000
1000
0
1965
1970
1975
1980
1985
1990
1995
2000
Note: Oil consumption is measured in million tonnes; other fuels in million tonnes of oil equivalent
Source: BP Statistical Review
2005
Global energy and commodity prices
2000 =100
700
350
S&P GSCI Agriculture and
Livestock Index (RHS)
600
300
500
S&P GSCI Industrial Metals Index
(RHS)
400
Brent Crude (LHS)
250
200
300
150
200
100
100
50
0
2000
2001
2002
Source: Thompson Datastream.
2003
2004
2005
2006
2007
2008
2009
2010
0
2011
The downside of the “new global economy”

Helped create the conditions for the financial
crisis of 2007-9

Volatility and upward price pressure from global
energy and commodity prices

Energy consumption and carbon emissions rising
more rapidly, contributing to global warming
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CO2 emissions from energy and world growth
Average annual growth rates, percent
GDP
5
Carbon Dioxide
Em issions
4
3
2
1
0
70s
80s
Note: Carbon dioxide is measured in millions of tonnes
Source: World Bank and BP Statistical Review
90s
2000-08
Sustainable global emissions scenarios
Annual greenhouse gas emissions (GtCO2e)
70
60
50
40
30
20
2016:4%
10
Increased early grow th
2000
2010
2020
2030
2040
0
2050
Year
2016:4 trajectory with global emissions peaking in 2016 with subsequent reduction in total emissions of 4%
Source: Climate Change Commission
Greenhouse gas emissions, by source
Global GHG emissions in 2000 = 42GT CO2 equivalent
3%
5%
25%
14%
18%
14%
8%
Source: Stern Review (2006)
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Power
Industry
Transport
Buildings
Land use*
Agriculture*
Waste*
Other
13%
* Non-energy emissions
Low Carbon Economy: Key steps

“Decarbonisation” of power sector and transport

Big shift in energy efficiency of industry,
buildings & appliances

Cutting non-energy emissions from agriculture,
changes in land use & waste
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Building the “Low Carbon Society”
Economic
Instruments
Technology
Low Carbon
Society
Political
Frameworks
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Behavioural
& Structural
Change
Sustainability and economic development

Economic growth and rising living standards have
normally gone hand in hand with environmental
improvement

Globalisation, based on open trade and investment
systems, has been very supportive of economic
development

HENCE: Globalisation, economic development and
environmental sustainability should be compatible,
not conflicting goals
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Issues, opportunities and challenges

Political agreements and frameworks

Supporting technology co-operation and
transfer

Managing the transition to a high energy &
carbon cost world
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Impact of the financial crisis

In the short-run, economic and financial issues seen as
more pressing than climate change

However, low carbon investments featured in many
national recovery plans

In the long-term, may be a beneficial impact on climate
policy through:
 Development of mechanisms for international policy
development and co-operation (eg G20); and
 Focus on energy issues resulting from high and volatile prices
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The carbon G7
Gtonnes of CO2, from energy
7
Six countries + EU account for nearly threequarters of global CO2 emissions from energy
6
5
4
3
2
1
0
China
US
EU
Source: United Nations Statistics Division
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Russia
India
Japan
Canada
The carbon G7
Tonnes of CO2 (from energy) per head
20
18
16
14
12
10
8
6
4
2
0
US
Canada
Russia
Source: United Nations Statistics Division
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Japan
EU
China
India
Carbon strategies and economic development

High- income economies (US/Europe/Japan)
 Large emissions cuts required
 Leading in low carbon technologies
 High energy/carbon prices

Mid-income economies (inc China)
 Carbon-neutral growth
 Co-operation in development of low carbon technologies
 Rising energy/carbon prices

Lower income economies
 More carbon-efficient growth
 Rapid technology transfer
 Support for adaptation to ongoing climate change
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Accelerating technological change

Competition as a spur to innovation

Trade and technology transfer

International co-operation
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“It is not from the benevolence of the
butcher, the brewer, or the baker,
that we expect our dinner, but from
their regard to their own interest.”
Adam Smith, Wealth of Nations, 1776
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Potential size of carbon markets
20000
Million tonnes CO 2 emissions, 2002
18000
Total emissions from fossil fuels
16000
Emissions from power and industrial sectors (estimated)
14000
12000
10000
8000
6000
4000
2000
0
European Union United States of China, India,
Mexico, Brazil,
America
(25)
South Africa
(+5)
G7
EU25, Jap, Aus,
Can, USA
OECD
Top 20 Global
emitters
Extending EU ETS to power and industrial sectors in Top 20 countries would create
a market of US$90-350 bn
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Globalisation and climate change

Globalisation has put upward pressure on emissions growth

But it has also created:
 greater economic interdependence between nations
 recognition of the need for international co-operation on major global
issues
 potential spur to innovation and the development and transfer of new
technologies
 increased focus on energy management because of price pressures

These forces can potentially act as a spur to the transition to a
“new low carbon global economy”

But they are not a substitute for concerted policy action to
deliver a coherent political framework and stronger economic
incentives through carbon pricing
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