Low Carbon Economy

There is no doubt in the issue that the climate is changing. The magnitude or extent of climate change is projected by different scientific models. The average of many models predicts that at higher emission scenarios the temperature of the earth is going to rise by 4 degrees Celsius above the pre-industrial level by 2100 AD which would have a threat to the existence of humanity. Also at a lower emission scenario, the temperature is projected to rise to about 2 degrees Celsius. The rise in temperature of the earth should be limited to 2 degrees Celsius.  According to IPCC to achieve this aim there should be a cut in global emission by 50% by 2050 compared to 1990. For this, the developed countries like the US, European Union and also emerging economies like China, India, South Korea should come together towards a comprehensive climate agreement. All the deals that have been done are not strong and are mostly fragmented.

A low carbon economy basically means an economy that is based on a minimal output of Greenhouse gases specially carbon dioxide. It would address the challenges of diminishing fossil fuel reserves, climate change, environmental management and finite natural resources serving an expanding world population. The world has felt the urgency for the low carbon economy but they are afraid that with the adoption of it the overall Gross Domestic Product (GDP) of the world would fall apart as it may invite higher costs and slow economic growth. However, research and studies have shown that taking steps towards restraining climate change need not essentially lead to the economic declivity. In fact there are ways by which we can progress towards both the goals of abating carbon reductions as well as the increasing economy.

One of the many ways is increasing carbon productivity. Carbon productivity is obtained by calculating the amount of carbon dioxide emitted per ton to its economic productivity. Eric Beinhocker and Jeremy Oppenheim(McKinsey’s Climate Change Special Initiative) stated thatThe world today produces around 740 US dollars of GDP for every ton of emissions. If we are to cut emissions in half by 2050 versus 1990 levels as recommended by the IPCC and keep the world economy growing at more than 3 percent per year in real terms, then global “carbon productivity” must increase by a factor of at least 10, that means from 740 US dollars in GDP per ton today to 7,300 US dollars by 2050.”

European Union were successful in decoupling carbon dioxide emissions in their economic growth.

They decreased their 2010 greenhouse gas emissions by 15.4% below 1990 levels. At the same time, they had an increase in their GDP by more than 40%. EU is on track towards a 20% emission reduction by 2020 [5]. 

One of the major activities of carbon emissions is the production of electricity. Many countries have failed to control their emission in this aspect because of mainly three reasons. First buyers prefer low price electricity and fossil fuel electricity is often the lowest cost. Secondly, most countries allow free disposal of carbon dioxide into the atmosphere. Yes, the sky is a free attitude. And thirdly, there are very limited, if any, restrictions on emissions of carbon. The solution to this can be Carbon trading. A central authority (usually a governmental body) sets a limit or cap on the amount of a pollutant that may be emitted. The limit is allocated or sold to firms in the form of emissions permits which represent the right to emit or discharge a specific volume of the specified pollutant. Firms are required to hold a number of permits equivalent to their emissions. The total number of permits cannot exceed the cap, limiting total emissions to that level. Firms that need to increase their volume of emissions must buy permits from those who require fewer permits. The transfer of permits is referred to as a trade. In effect, the buyer is paying a charge for polluting, while the seller is being rewarded for having reduced emissions. Thus, in theory, those who can reduce emissions most cheaply will do so, achieving the pollution reduction at the lowest cost to society.

Delivering renewable sources of energy production is another low carbon economy strategy. There might be thought that developing hydropower, the solar, wind, and biomass as the energy-producing sector would take off jobs of some people who are already engaged in the carbon producing sector. Something must be arranged for the affected workers. But research has shown that a low carbon economy will produce more job opportunity than the one it would destroy.  A research group at the University of California, Berkeley modeled a scenario where 20 percent of U.S. electricity demand was covered by renewables by 2020. They estimated that such a scenario would lead to the net creation of between 78,000 and 102,000 additional jobs – an increase of 91 to 119 percent compared to a situation where that same demand was covered by coal or natural gas [3].

Another strategy for low carbon economy would be increasing energy efficiency. Increasing energy efficiency would not only contribute to reduction in emission of carbon but also secure energy. For example, the manufacturer of cars of Germany and Japan has increased the efficiency of the cars’ engine that the energy consumption of new cars has gone down by 25-30% compared to the cars of 4-5 years ago. By 2020, energy consumption of car would decrease by 50% of 2008.  So, increasing efficiency of energy usage will cut down the use of energy to large extent which would further cut down the import of oil and gases. Reduction in import of oil and gases saves such a high figure of budget that we can invest it in our own innovation and technology. EU, China, Japan, India are getting much dependent on oil and gas. USA is becoming completely dependent in oil and gas import and now are looking for export.

There would be social equity as well. The divide between the poor and the rich can be transparent if there is an escalating price of energy. Escalation of price would inflict a higher toll on lower-income consumers than they do on the middle class and the wealthy. Improving energy productivity would thus disproportionately ease the burden on the poor, helping narrow the economic and social divide.

A low carbon economy is possible. The prevailing technologies can reduce the emission of CO2 to a desired level. There is no need for technological breakthroughs by 2050. While these emerging technologies will require substantial investment flows, those investments will create jobs and economic growth. One has to remember that what economists view as “costs” in analyzing carbon abatement are for the most part investment in new capital stock. The building of that capital stock creates jobs and if that capital investment is financed over time, it can result in higher GDP growth.

Talking about my country Nepal, it along with more than other 150 other countries, signed the United Nations Framework Convention on Climate Change (UNFCCC) at the United Nations Conference on Environment and Development (UNCED) held in Rio de Janeiro in June 1992 [1]. Nepal ratified the Convention on 2nd May in 1994, and this convention came into force in Nepal on 31st July in 1994. As a non- Annex country, Nepal is not required to curtail the GHG emissions. However, it has an obligation to prepare and periodically update the national greenhouse gas inventory and submit “National Communications” to the UNFCCC. As a response to this obligation, Nepal completed Initial National Communication to the Conference of the Parties of the UNFCC in 2004 [2]. However the updates of the greenhouse gas inventory in recent years is yet to be done.

According to the estimation of GHG emissions in Nepal, the total contribution of the gases is very modest compared to other developing and developed countries at present and it is not very likely that the emissions will increase very much in the near future. Despite the low emissions, Nepal has stepped forward to increase its economy which is independent of carbon.

One of its instances is the investment in the micro hydropower sector at the local scale. Nepal is rich in water resources. Instead of burning firewood for a source of energy, we’ve been promoting to develop micro-hydropower and biogas as a substitution. Of course, the initial investment in micro-hydro power and biogas seems large but the benefits it would be reaping later are greater. Since micro-hydropower would be a renewable source of energy it would surely be an option for the firewood which emits carbon into the atmosphere. As a matter of fact, we can be sure that there would be declivity in the use of firewood. Forest and trees would provide better air quality and health. Food when prepared using firewood often leads to smoke which is mainly dealt with by the women and they are the most vulnerable group of the locality. So, micro-hydro power would indirectly be benefitting the health of the people. Apart from the health advantages, the water from the tailrace of the hydropower plant can be diverted and be used for irrigational purposes. This way the agricultural development would flourish in the locality and there would be better food production. This further will lead to increased food security and preparedness during a disaster. The moment of drought can be avoided through it as there will be the facility for refrigeration too. Thus a low carbon economy would lead towards more sustainable development.

If the country chooses to maintain its low-carbon status smartly, while going ahead, this status would give it the all-needed head start for massive economic development. An inspiration vision like “Zero Carbon Nepal” (ZCN) can bring in technical knowledge, foreign direct investment as well as foreign aid in much larger quantity, thereby providing the required impetus to push the Nepali economy on a fast-paced double-digit growth. Besides, a vision like ZCN, and branding Nepali products as ‘Made in Zero Carbon Nepal’ would give an advantage to Nepali exports- currently almost dying. A vision of the ZCN sort is the only way to get the country out of abject poverty and put it in the path of becoming a Developed Economy by 2030.

According to Ranjit Acharya, CEO, Prisma Advertising, “With the current low industrial development, Nepal has very little contribution to the total global carbon emission. This status can be carefully applied to build low-carbon economy by developing a “Made in Zero Carbon Nepal” label for every Nepali product which will not only make our economy strong but also help Nepal become a preferred country for foreign investments.” [4]

Economic growth and carbon reduction need not be two opposing goals. By aiming towards a low carbon economy we not only protect the threatening human existence due to climate change but also move towards a much sustainable development. To attain this objective globally, all the developed nations (USA and EU), powerful emerging economies (India and China) and the developing nations (Non-Annex countries like Nepal) should agree and work accordingly.


[1] HMG Ministry of Population and Environment, “Initial National Communication to the Conference of the Parties of the United Nations Framework Convention on Climate Change,” 2004. Retrived from http://unfccc.int/resource/docs/natc/nepnc1.pdf

[2] B. N. Oli and K. Shrestha, “Carbon Status in Forests of Nepal: An Overview,” Journal of Forest and Livelihood, Vol. 8, No. 1, 2009, pp. 62-66.

[3] Eric Beinhocker and Jeremy Oppenheim, “Economic opportunities in a low-carbon world”. Retrived from http://unfccc.int/press/news_room/newsletter/guest_column/items/4608.php

[4] Himalayan Climate Initiative, Retrived from http://himalayanclimate.org/ZeroCarbon

[5] Jos Delbeke, “EU Climate and Energy Policy – Moving to a competitive low carbon Economy”, 2013. Retrived from: http://www.youtube.com/watch?v=tWd76xaiVbY

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