Renewables Improve Human Welfare in Ways Not Captured by GDP

National climate commitments under the Paris Agreement largely hinge on energy decarbonisation. The historic 2015 climate deal, endorsed nearly worldwide, calls for keeping the rise in average global temperatures “well below” two degrees Celsius during the present century, compared to pre-industrial levels. Achieving a climate-safe future, however, depends on swift global action. Current plans and policies, including Nationally Determined Contributions (NDCs), fall far short. Energy-related emissions have risen around 1% yearly since 2015, while the world’s “carbon budget” looks set to run out within a decade. Based on IRENA’s analysis, energy-related carbon-dioxide (CO2) emission reductions would have to decline 70 percent by 2050, compared to current levels, to meet climate goals.

According to IRENA, increased use of renewable energy, combined with intensified electrification, could prove decisive for the world to meet key climate goals by 2050. Renewables already make up more than half of newly installed power-generation capacity. Yet their overall share in the energy mix (including power, heat and transport) needs to grow six times faster. The energy transformation would boost gross domestic product (GDP) by 2.5% and total employment by 0.2% globally in 2050. It would also bring broader social and environmental benefits. Health, subsidy and climate-related savings would be worth as much as USD 160 trillion cumulatively over a 30-year period. Thus, every dollar spent in transforming the global energy system provides a payoff of at least USD 3 and potentially more than USD 7, depending on how externalities are valued. Renewables, meanwhile, would create more new jobs than those lost in fossil-fuel industries. Policy inputs can further improve the socio-economic footprint of the transformation.

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