ASTANA, Kazakhstan, March 29. Without efforts to decarbonize and take advantage of lower-cost technologies that reduce emissions, the long-term economic prospects of Europe and Central Asia look challenging, Ivailo Izvorski, the World Bank's Chief Economist for the Europe and Central Asia region, wrote in his article, Trend reports.
According to him, adoption of clean technologies will improve the competitiveness of early movers, amidst a growing trend towards carbon taxes on imports, such as the European Union’s Carbon Border Adjustment Mechanism (CBAM), which is being implemented fully in 2026.
According to Izvorski, the economic consequences of climate change can be very significant. To prevent this, it is necessary to spread innovations and technologies related to climate change mitigation and adaptation. And this, in turn, requires large investments.
"The cost of inaction is likely to be high," he wrote.
Large energy subsidies are one of the reasons for the high carbon intensity of Europe and Central Asia. Fossil fuel subsidies amounted to $110 billion in 2020, or 3.6 percent of regional GDP. Russia alone accounted for $78 billion (5.2 percent of GDP).
"The 2021–2022 energy shock has changed our understanding of energy security, highlighting the need to diversify energy supplies and reduce dependence on imported fossil fuels," Izvorski wrote.
As he noted, the energy transition will require significant costs. For example, Kazakhstan will need about $1.1 trillion over 2025–2060, or 6 percent of total GDP, to decarbonize its energy system. Türkiye will need approximately $644 billion (4.8 percent of GDP) to achieve net zero by 2040.
"Regardless of a region's success in reducing emissions or mitigating the effects of climate change, adaptation to climate change is necessary in all countries given the impact of global warming on the economy and other climate change-related phenomena," he noted.
Izvorski concluded by noting that investments, no matter how large, will not be enough to provide a clean, affordable, and secure energy supply that reduces emissions and promotes economic growth. He proposed a number of measures that countries need to take. These include pricing reforms, social policies to support the most vulnerable after the elimination of fuel subsidies, tax instruments to facilitate the green transition, regulatory policies, and investment in skills.