A recent report by the Organisation for Economic Co-operation and Development (OECD) argues that the objectives of the Paris Agreement are still attainable while calling for swift action to reduce emissions and implement policy changes across the board.
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We are at a turning point in climate action. According to a new in-depth policy report from the Organisation for Economic Co-operation and Development (OECD), it is technically feasible to keep the world within striking distance of net-zero emissions by 2050. However, the window is closing quickly because the pace at which climate policy is being delivered has drastically decreased.
The report, published in May as part of the OECD's Building Climate and Economic Resilience project, is timely. 2024 was the record-breaking warmest year and the first year global average temperatures rose above 1.5C from pre-industrial levels. From last year's devastating flooding in Valencia, Spain to the catastrophic fires in Los Angeles earlier this year, the increasing frequency and severity of climate impacts highlight the growing threats that climate change poses to both human security and economic well-being.
Since the Paris Agreement was adopted in 2015, major strides have been taken to turn the world's climate trajectory. A decade ago, current policy was projected to lead to up to 4.8C increases in temperature by the year 2100. With strengthened policies and rising global ambition, that estimate has now been upgraded to the range of around 2.6C to 3.1C over the course of this century.
Though this is a considerable advance, it remains well above the 1.5C threshold set in the Paris Agreement. Even more forebodingly, new evidence indicates that the pace is faltering. Over 2022 and 2023, the level of global climate policy stringency increased by just 1-2% per year, a breathtaking slowdown from the 10% average annual increase of the previous decade.
"To close the gap between ambition and delivery, we need to raise our game and ensure we deliver," OECD Secretary-General Mathias Cormann states in his foreword to the report.
The document contains several persuasive data visualisations that convincingly communicate the imperative and possibility of climate action.
Figure 1 is one such piece of compelling evidence for the renewables revolution, showing how the cost of electricity from solar photovoltaics has declined below coal and gas in the major economies from China to Germany, India, Japan, the United States, and Vietnam. This visualization effectively shows how cost barriers to the use of clean energy have largely disappeared.
Figure 5 provides a very explicit methane abatement potential split, separating opportunities among oil, gas, coal, agriculture, and waste sectors. The figure very nicely illustrates that up to 85 megatonnes of methane emissions can potentially be cut by 2030, and the greatest near-term opportunities are provided by the energy sector.
In the face of anxieties over economic trade-offs, the OECD analysis reveals that ambitious climate action is feasible without damaging economic growth. Raising Nationally Determined Contributions (NDCs), if implemented with well-crafted policies and with adequate finance, can accelerate development of efficient energy systems more quickly, create good jobs, and bring important co-benefits like enhanced access to energy, enhanced energy security, and enhanced health.
The global market for six central green energy technologies - solar photovoltaic, wind turbines, electric vehicles, batteries, electrolysers, and heat pumps - was more than $700 billion in 2023. Under current policy settings, this market will expand almost to three times this size by 2035, on par with the global crude oil market in recent times.
The report identifies the years through 2030 as categorically critical to spur and amass innovation and investment. Several key areas require immediate attention:
Green industrial policies can be employed to create positive tipping points in order to propel technology development and advance emissions reductions. But they have risks and must be properly designed to avoid market distortions, overcapacity, and trade tensions.
Action on methane emissions can be an application of the handbrake on warming. An attenuation of 30% in global methane emissions by 2030 would remove about 0.2C of warming by 2050.
The existing cost-effective abatement technologies that can be found in the energy, waste, and agriculture sectors cumulatively represent nearly all human-induced methane emissions.
Though potentially enormous for mitigation, demand-side policies are still underexploited. They have the potential to reduce greenhouse gas emissions from large end-use sectors by 40-70% by 2050 worldwide, largely through energy efficiency, behavioral change, and shifts in consumption patterns.
Figure 11 gives important insights into labour market change and identifies that in OECD nations, only 6% of workers have greenhouse gas-intensive employment, whereas approximately 20% have green-led employment. It indicates potential manageable labour market change with proper systems of support in place, although it still differs extensively regionally.
Most insightful maybe is Figure 12, which graphically illustrates governments' deficit of trust. Only 30% of those who took part in the survey were confident that their government could reduce greenhouse gas emissions. The above visualization makes it quite evident that mere technical fixes are insufficient. Sustaining public trust and achieving equitable outcomes are the passport to success.
Figure 16 provides key background on investment alignment and the bleak reality that whereas investments in clean energy reached $1.7 trillion in 2022, that is a paltry fraction of fixed capital formation of $26.4 trillion during the same year. Although there is progress, the magnitude of financial system realignment required is enormous.
Investment needs to double at least by 2030 - to $2.4 trillion annually by the end of the decade from an estimated $600 billion in 2022 - for developing economies and emerging markets. This was accepted in the new collective quantified goal that was adopted at COP29, which aims to mobilise at least $300 billion by 2035 for developing country climate action.
The OECD report is an elegant distillation of multidisciplinary climate policy research. Its biggest virtue is its ability to demonstrate that action on climate is economically prudent, rather than economically costly. This is a crucial reframing for policymakers who are being asked to balance competing budget demands.
However, a number of shortcomings must be considered.
The optimistic framing of the report on "positive tipping points" may downplay the political economic barriers to toppling entrenched fossil fuel interests. Although analysis recognizes that industrial policy has risks, the tools for averting subsidy races and market fragmentation are provided with too limited explanation.
Treatment of developing country financing, although thorough, perhaps underestimates the political complexities of scaling climate finance from where it is currently to the trillions required. The report quantifies the $1.7 trillion needs gap for developing countries but offers few tangible solutions beyond the tired mantras of "blended finance" and "enabling environments".
Above all, the evidence base of the report reveals an alarming knowledge deficit: ex-post evaluation of policy efficacy remains poor. The report acknowledges that "more evidence is needed on their effectiveness, interactions, and what works best in what context." That admission suggests policymakers are making largely uncharted waters, navigating by points of incomplete information.
The social aspect is given the proper focus, especially on just transitions and citizens' participation. However, the gap between the magnitude of transformation needed and existing levels of public trust - where just 30% trust government action on climate - implies that the "people-centred approach" promoted might need even more drastic institutional reforms than the report envisions.
As climate impacts intensify, the report stresses that adaptation investment and activities must be fast-tracked with speed. Global annual adaptation investment needs are anticipated to be in hundreds of billions of dollars, but only a projection of adaptation investment flows totalled $76 billion in 2022, a far cry from meeting requirements.
The OECD report offers a real-world guide to action for governments to address climate challenges with the urgency, scale, and co-ordination that the crisis requires. The message is simple: net zero is still achievable, but only with transformative action now in every sector of the economy and society.
The report's most valuable contribution may be its synthesis of evidence to demonstrate that climate action and economic growth are complementary goals, rather than zero-sum options. To policymakers constrained by politics and competing priorities, such frames are an invaluable support for robust climate policy.
But the paper also reveals some uncomfortable truths: policy momentum has slowed exactly when it should be gathering pace, public trust is still at risk, and the evidence base to maximize policy design is still absent. Success in the net-zero task will require not only implementing known solutions but also fast learning from policy pilots and consistent political will in the face of inevitable disappointments.
The coming half-decade will determine if the world can keep the 1.5C goal in view or settle for tolerating a more dangerous climate future. The OECD report provides the analytical groundwork for taking the first course of action - now the challenge of implementation is more daunting.