The governments of the UN’s 193 member states are gearing up to select a set of development and environmental targets for the next 15 years to replace the millennium development goals (MDGs) that expire this year. These targets will influence the £1.6tn in development aid the OECD predicts will be needed by 2030 and countless trillions in national budgets – as well as set the tone for corporate green spending.
Together with targets focusing on poverty, health, hunger and education, environmental targets are on the shortlist. These range from relatively niche (“devise and implement policies to promote sustainable tourism”) to very ambitious (“endeavour to decouple economic growth from environmental degradation”).
After a process of haggling and horse-trading, the UN has a working list of 169 targets – a whopping 151 more than the 18 MDGs that I believe changed the world. This is a mistake. Having 169 priorities is like having no priorities at all.
My thinktank, the Copenhagen Consensus Center, asked 60 teams of top economists, including Nobel laureates Finn Kydland and Thomas Schelling, to evaluate the economic, social and environmental costs and benefits of the proposed targets. Their analysis highlights some of the best investments we could make for the planet, guiding policymakers, philanthropists and socially-minded businesses.
Economic analysis shouldn’t be the only tool that we use, but it is a vital input to help decision-makers – whether politicians or business leaders – to make informed decisions. Among the environmental goals, the economists’ analyses show that reducing indoor air pollution, cutting coral reef loss and increasing energy research and development are among the most cost-effective targets.
Indoor air pollution
Indoor air pollution is the world’s deadliest environmental problem but one that is often overlooked. It killed 4.3 million people in 2012, according to recent World Health Organisation calculations, mainly because 2.7 billion people still use firewood, dung and coal for cooking and keeping warm, breathing polluted air inside their homes every day.
An effective investment would be to provide 30% of the current unserved population with improved cooking stoves – those that dispel smoke outside through chimneys and vents, and operate with LNG or LPG instead of burning wood and dung. These would lead to less indoor air pollution, while reducing fuel costs and time spent collecting wood.
This would not be cheap – the cost is estimated at around £7bn a year. But calculating the benefits, both from avoided deaths and time and money spent, works out at £103bn a year. In other words, every pound spent on smart improvements to indoor air pollution would do almost £15 worth of good. By raising consumer awareness about household air pollution and stimulating the demand for affordable cookstoves, businesses could help develop a thriving market for cleaner and more efficient stoves and fuels.
Coral reefs
Among the many proposed goals to improve biodiversity, the economists highlight stemming the loss of coral reefs as very effective. Coral reefs are vital both for fishing – they’re a home for marine life – and tourism. Halving global coral loss by 2030 would cost about £1.9bn a year but the total benefits are likely to run to at least £46bn, or about £24 back for every pound invested.
Business has a significant role to play. The fishing industry, for example, needs to be informed that abstaining from destructive practices such as dynamite fishing will eventually be profitable for them, since coral reefs act as vital fish hatcheries.
Cleaner energy
To tackle the overarching topic of climate change, a key proposed development target is to double the share of renewable energy in the global energy mix. While this will bring significant environmental, economic and social benefits – £265bn annually in energy and climate change effects – it comes at an annual cost of £329bn, largely in subsidies. This solution will return less than a pound for every pound spent because the technologies are still immature and intermittent.
Both the private sector and governments need to invest more in research. The development of better energy technology – in areas including storage, transmission and distribution – is an effective goal. A focus on R&D in energy technologies can help create green energy solutions that would be effective enough to take on fossil fuels in the market.
This could be funded with a slowly rising carbon tax (giving businesses an incentive to cut emissions but not telling them how to do it). In total, this solution could avoid £11 of climate damages for every pound spent.
Cutting subsidies
Another effective goal would be to phase out fossil fuel subsidies. Globally, £351bn is wasted on such subsidies, almost exclusively in developing countries. This drains already-stretched budgets of resources that could be used to provide health and education services, while encouraging more pollution and greater carbon-dioxide emissions.
Phasing out fossil fuel subsidies has benefits 15 times the cost, with benefits to national budgets as well as to climate change and air pollution.
When selecting environmental targets for the world, both businesses and politicians should pick them, not for how lofty and ambitious they sound, but rather for how much benefit they would deliver for the environment. Getting us all to focus on these smart targets could be the single best thing we do in the next 15 years.
All figures are taken from the Copenhagen Consensus Center’s Post-2015 project and have been converted from dollars to pounds.