Quantifying cross-sectoral impacts of investments in climate change mitigation in Ecuador

Abstract

This study investigates whether a key conclusion of the Stern Review on the Economics of Climate Change, that is, an annual investment of 1% of Gross Domestic Product (GDP) to mitigate the negative economic impacts of climate change, would allow for the reduction of greenhouse gas (GHG) emissions in the Republic of Ecuador (Ecuador). An integrated modeling approach to support climate policy evaluation, consisting in the Threshold 21 (T21) model and other methodologies, is employed to carry out a country-wide, cross-sectoral analysis of Ecuador's energy, social, economic and environmental sectors. The investigation assumes an investment of 1% of GDP in energy efficiency and renewable energy technologies to measure the potential to stabilize carbon emissions from fossil fuel electric power generation. Results of the study indicate that while investing 1% of GDP annually through 2025 would reduce GHG emissions in the electric power sector, it would not stabilize national emissions. On the other hand, avoided electricity costs realized from the investment in energy efficiency, amounting to over USD 5 billion by 2025, could contribute significantly to poverty alleviation, job creation, and to the improvement of social services. Finally, the authors find that these positive economic and social results are likely to increase energy consumption, making the goal to reduce GHG emissions more challenging.