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Report highlights quality of growth

Avinesh Gopal In Berlin
Thursday, May 25, 2017

BOOSTING economic growth, improving productivity and reducing inequality need not come at the expense of locking the world into a high emissions future.

It is the quality of growth that matters, a report launched by the Organisation for Economic Co-operation and Development (OECD) yesterday argued.

The report, titled "Investing in Climate, Investing in Growth", was launched at the Petersberg Climate Dialogue in Berlin, Germany, yesterday morning.

"With the right policies and incentives in place — notably strong fiscal and structural reform combined with coherent climate policy — governments can generate growth that will significantly reduce the risks of climate change while providing near-term economic, employment and health benefits," an executive summary of the report says. "Such a climate-compatible policy package can increase long-run GDP by up to 2.8 per cent on average across the G20 in 2050 relative to a continuation of current policies, across developed and emerging economies.

"If the positive impacts of avoiding climate change damage are taken into account, the net effect on GDP in 2050 rises to nearly five per cent.

"Investment in modern, smart and clean infrastructure in the next decade is a critical factor for sustainable economic growth, especially as infrastructure generally has suffered from chronic underinvestment since before the financial crisis."

The report estimates that US$6.3 trillion ($F13t) of investment in infrastructure is required annually on average between 2016 and 2030 to meet development needs globally.

An additional $US0.6t ($F1.25t) a year over the same period will make these investments climate compatible, a relatively small increase considering the short and long-term gains in terms of growth, productivity and wellbeing, the report says.

"The additional investment cost is likely to be offset over time by fuel savings resulting from low emission technologies and infrastructure. Furthermore, the current fiscal environment provides a window of opportunity to take action now.

"Low interest rates have increased fiscal space in many countries and where there is less fiscal space, opportunities exist to optimise the tax and spending mix to align stronger economic growth with inclusive, low emission, resilient development.

"Well aligned climate, fiscal and investment policies will further maximise the impact of public spending to leverage private investment," an executive summary of the OECD report said.

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