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Daniel Gros (pictured), director of the Centre for European Policy Studies, is the lead author of a report, Too late, too sudden, published in February. It says the transition to a low-carbon economy should ideally be a gradual one, but if too little is done now and an abrupt adjustment of the global economy is needed around 2030, the cost to GDP could be considerable, with carbon-intensive industries becoming unviable and climate catastrophes sucking large amounts of money from national budgets.
In an interview with T&E, Gros said: ‘The Paris agreement has some nice promises, but the financial markets should be wary of nice promises. If too little happens in the short term to put the CO2 reduction proposals into practice, the adjustment when it comes will be too quick, and bring with it higher costs.’
The scientific consensus recognised in the Paris agreement is that the rise in global temperatures needs to stay below 2°C between 2000 and 2100 to avoid climate change getting out of control. However, the package of measures agreed in Paris envisages rises of 2.7°C, and many observers say even that is optimistically low.
‘I am worried,’ added Gros. ‘In fact I am near certain that very little will be done over the next 10 years. At the moment it’s easy to meet emissions reduction targets because of the economic slowdown, but what happens when the slowdown ends? I fear the slowdown will be taken to be a paradigm shift, meaning that vital years in which we should be making a start on carbon reduction will be wasted.’
The report warns that investing in carbon-intensive industries will be increasingly risky, and suggests policy makers should try to improve methods of monitoring the carbon-intensity of companies. Given that many of the more carbon-intensive firms have been funded by debt, it says financial companies need to be assessed in a different way, in order to keep track of how vulnerable they would be to a late and sudden transition after financing carbon-intensive companies that are suddenly unviable if the world has to adjust to a low-carbon economy.