Countries in central and eastern Europe and central Asia must prioritize reducing their carbon intensity or risk being shut out of developed markets in the future, leading experts have warned.
Speaking on the eve of the EBRD’s annual meeting in Astana, the bank’s chief economist Erik Berglof told Emerging Markets that the region’s energy producing states in particular could suffer for their carbon-intensive approach.
“Many regional economies have a very high carbon intensity and are trying to export to countries that are investing in improving climate change mitigation, and there will be a time when this will become a liability,” he said.
“They’re not going to be able to free-ride on that system forever, they need to use today’s high energy prices to start investing today in putting together the framework for their long-term development.”
He urged concerted efforts towards energy efficiency and low-carbon reforms, in line with the recommendations of a recently published joint report authored by Berglof and Sir Nicholas Stern, of the London School of Economics.
The report highlights the importance of establishing credible carbon pricing mechanisms across the region, as well as energy price reforms and measures to support energy efficiency and the development of renewable energy industries.
Writing today in Emerging Markets, Stern and Berglof emphasize the importance of establishing carbon pricing, and the potential costs for the region if it fails to adapt.
“Without functioning carbon markets or other mechanisms to generate predictable global prices for carbon emissions and dramatically improved policies the region will inevitably fall short,” Stern and Berglof write.
“It is in the long-term self-interest of the EBRD countries to be part of this revolution, adapt their economies and avoid being left behind. The risk is not just falling behind technologically, but also in a decade or so of being shut out of markets if products are seen as ‘dirty’ by countries and regions taking strong action.”
Berglof drew a contrast between EU accession states in central and eastern Europe that had made “remarkable” progress towards reducing their carbon intensity over the past two decades, and former CIS states, many of which are net commodity exporters and which remain extremely carbon intensive.
While some CIS environmental groups and local governments had been receptive to the proposals, Berglof said the strong influence of large traditional energy producers remained an obstacle to achieving genuine progress on reducing carbon intensity.
“In these countries we have to fight against very strong vested interest, but that’s exactly why we are publishing this report,” he said. “We need to get across this message into the core of the decision making process because these issues affect every aspect of the economy.”
The EBRD’s key focus in the near-term will be on attracting private-sector investment in energy efficiency projects and reforms.
He highlighted China as an example of how carbon-intensive economies with powerful vested interests can adopt meaningful moves towards adopting low-carbon technology. “China is now producing more than half of all windpower turbines in the world. This kind of investment is forward-looking and job creating,” he said.
(See today’s Final Word)