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Climate policy brief for G20 finance ministers

03/17/2017 - In a policy brief for the G20 finance ministers, an expert group led by Ottmar Edenhofer proposes low-carbon growth stimulation through a steep increase in sustainable infrastructure, mobilizing sustainable finance, and adoption of carbon pricing. This would simultaneously achieve the objectives of the Paris Agreement and the Sustainable Development Goals, the experts argue. The Finance minister and central bankers of the world's leading economies meet in Baden-Baden, Germany, this weekend. Edenhofer is chief economist of the Potsdam Institute for Climate Impact Research (PIK) as well as Director of the Mercator Research Institute for Global Commons and Climate Change (MCC).

"Climate change is a widely underestimated risk to the financial market", says Edenhofer. "The G20 finance ministers should now set a clear framework to avoid bad investments. As a first step, the time for all subsidies for fossil fuels should run out as soon as possible, preferably within five years. This would create planning security for investors. In addition, from 2022 onwards, this would provide the G20 finance ministers with around 180 billion U.S. dollars a year. They could invest this money in the construction of sustainable infrastructure, thus boosting not only domestic economies but simultaneously achieving the United Nations’ Sustainable Development Goals. As a second step, the finance ministers should underpin the ambitious climate policy targets of their countries with concrete policy measures. To this end, they should examine whether current CO2 prices in the G20 countries are sufficient to implement the National Determined Contributions under the Paris Agreement. In addition, private banks should adopt shadow carbon prices for their investment decisions."

Edenhofer's MCC heads the task force 'Climate Policy and Finance' as part of the Think 20 (T20) process which is part of Germany’s G20 presidency. The G20 countries account for about 75 percent of global greenhouse gas emissions and generate more than 80 percent of the world’s gross domestic product.

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