A low-carbon economy (LCE) is an economy which absorbs as much greenhouse gas as it emits. Greenhouse gas (GHG) emissions due to human activity are the dominant cause of observed climate change since the mid-20th century. There are many proven approaches for moving to a low-carbon economy, such as encouraging renewable energy transition, energy conservation, and electrification of transportation (e.g. electric vehicles). An example are zero-carbon cities. Shifting from high-carbon economies to low-carbon economies on a global scale could bring substantial benefits for all countries. It would also contribute to climate change mitigation.

Definition and terminology

There are many synonyms or similar terms in use for low-carbon economy which stress different aspects of the concept, for example: green economy, sustainable economy, carbon-neutral economy, low-emissions economy, climate-friendly economy, decarbonised economy. The term carbon in low-carbon economy is short hand for all greenhouse gases. The UK Office for National Statistics published the following definition in 2017: "The low carbon economy is defined as economic activities that deliver goods and services that generate significantly lower emissions of greenhouse gases; predominantly carbon dioxide."

Rationale and aims

GHG emissions due to human activity are the dominant cause of observed climate change since the mid-20th century. Continued emission of greenhouse gases will cause long-lasting changes around the world, increasing the likelihood of severe, pervasive, and irreversible effects for people and ecosystems. Nations may seek to become low-carbon or decarbonised economies as a part of a national climate change mitigation strategy. A comprehensive strategy to mitigate climate change is through carbon neutrality.

Methods

Achieving a low-carbon economy involves reducing greenhouse gas emissions in all sectors that produce greenhouse gases, for example energy, transportation, industry, and agriculture. The literature often speaks of a transition from a high-carbon economy to a low-carbon economy. This transition should take place in a just manner (this is termed just transition). There are many strategies and approaches for moving to a low-carbon economy, such as encouraging renewable energy transition, efficient energy use, energy conservation, electric vehicles, heat pumps, and climate-smart agriculture. This requires for example suitable energy policies, financial incentives (e.g. emissions trading, carbon tax), individual action on climate change, business action on climate change.

Actions taken by countries

On the international scene, the most prominent early step in the direction of a low-carbon economy was the signing of the Kyoto Protocol, which came into force in 2005, under which most industrialized countries committed to reduce their carbon emissions. OECD countries could learn from each other and follow the examples of these countries in these sectors: Switzerland for their energy sector, UK for their industry, Netherlands for their transport sector, South Korea for their agriculture, and Sweden for their building sector.

Co-benefits

The main benefit of a transition to low-carbon economies is that it would contribute towards climate change mitigation. Apart from that, other co-benefits can also be identified: Low-carbon economies present multiple benefits to ecosystem resilience, trade, employment, health, energy security, and industrial competitiveness. During the green transition, workers in carbon-intensive industries are more likely to lose their jobs. The transition to a carbon-neutral economy will put more jobs at danger in regions with higher percentages of employment in carbon-intensive industries. Employment opportunities by the green transition are associated with the use of renewable energy sources or building activity for infrastructure improvements and renovations. Low emission industrial development and resource efficiency can offer many opportunities to increase the competitiveness of economies and companies. According to the Low Emission Development Strategies Global Partnership (LEDS GP), there is often a clear business case for switching to lower emission technologies, with payback periods ranging largely from 0.5–5 years, leveraging financial investment.

Energy aspects

Low-carbon electricity

Nuclear power

As of 2021, the expansion of nuclear energy as a method of achieving a low-carbon economy has varying degrees of support. Agencies and organizations that believe decarbonization is not possible without some nuclear power expansion include the United Nations Economic Commission for Europe, the International Energy Agency (IEA), and the International Atomic Energy Agency. The IEA believes that widespread decarbonization must occur by 2040 in order mitigate the adverse effects of climate change and that nuclear power must play a role.

Energy transition

Indices for comparison

The GeGaLo index of geopolitical gains and losses assesses how the geopolitical position of 156 countries may change if the world fully transitions to renewable energy resources. Former fossil fuel exporters are expected to lose power, while the positions of former fossil fuel importers and countries rich in renewable energy resources is expected to strengthen.

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