he past 12 months have seen someprogress in the international negotiationson climate change. However, there stillremains insufficient understanding of theurgency with which the science indicates we should bedealing with this challenge. After the disappointment with the outcome of the 15thsession of the Conference of the Parties to the UnitedNations Framework Convention on Climate Change,COP15, in Copenhagen in December 2009, thesubsequent conference -COP16 in Cancun, Mexico atthe end of 2010 -was constructive both in atmosphereand outcome. However, over the last two years, climate change hasslipped down the agenda in many parts of the richworld. This reflects the understandable refocusing ofattention to the financial and economic crisis and thetargeted yet dishonest assault on the climate science.In the United States, the mid-term elections ofNovember 2010 seemingly put paid to the possibilityof strong federal climate legislation for the near future. Yet the risks from climate change remain ever-present.There is mounting evidence that absorption of carbondioxide in some oceans is falling more so thanpredicted by many models, emissions are growingfaster than we thought, and that the melting of Arcticsea ice and ice sheets and damages to ecosystems arehappening faster than we thought. If the science isright, and we lock into high and rising concentrationsof greenhouse gases, the risks associated with trying toaddress the problem later could be overwhelming. Yet there exists a unique opportunity for action.Climate policies and focusing on the economicrecovery are complements and not substitutes. Bysending a credible signal in the form of clearly-identified market-based policy instruments - involvinglong-term carbon pricing, standards and regulations,together with carefully designed support for technology- governments across the world could unlock privateinvestment in renewable energy, energy efficiency andlow-carbon vehicles on a vast scale. They would do so by utilising the record pool ofavailable private saving rather than drawing on scarcepublic funds. This would unleash sizeablemacroeconomic benefits by boosting private spending,creating jobs and generating tax revenues. The time toFOREWORD012THE NEW ECONOMYNICHOLAS STERN, CHAIR, GRANTHAM RESEARCH INSTITUTE ON CLIMATE CHANGE ANDTHE ENVIRONMENT, LONDON SCHOOL OF ECONOMICS AND POLITICAL SCIENCEDIMITRI ZENGHELIS, SENIOR VISITING FELLOW, GRANTHAM RESEARCH INSTITUTE ONCLIMATE CHANGE AND THE ENVIRONMENT, LONDON SCHOOL OF ECONOMICS AND POLITICAL SCIENCE; AND SENIOR ECONOMIC ADVISOR, CISCOT

" "THE TIME ISRIGHT FOR G8GOVERNMENTS TOGRASP THE GREENOPPORTUNITY TO SUPPORT INNOVATION ANDUNLEASH HUGE PRIVATE INVESTMENT OPPORTUNITIESTHE NEW ECONOMY013energy industrial revolution presents. However,innovators and investors seek credible governmentpolicies, at the national and international levels, inorder to ensure that this revolution is efficient, rapidand on a sufficient scale to make substantial profits. The further good news is that green technologicaldevelopment has continued apace over the last twoyears, with growing recognition of the potential of thisnew energy-industrial revolution. Across all keyeconomic sectors - agriculture, building, transport,new materials, renewables, or smart grid - innovationis advancing and new competitive technologies arebeing developed. Not all will work, but there are somany exciting innovations underway that we can beconfident that many will. The time is right for G8 governments to grasp the greenopportunity to support innovation and unleash hugeprivate investment opportunities. If instead countriesfail to act, they risk locking themselves into a high-carbon infrastructure, falling behind technologically,unnecessarily delaying economic recovery and beingshut out of markets a decade or two from now. nABOUT THE AUTHORSNicholas Stern is I.G. Patel Professor of Economicsand Government and Chair of the Grantham ResearchInstitute on Climate Change and the Environment atLondon School of Economics and Political Science.Dimitri Zenghelis is a Senior Visiting Fellow at theGrantham Research Institute on Climate Change and the Environment at London School of Economicsand Political Science and a Senior Economic Advisorto Cisco.invest in change is when economic activity is slow andthe competition for natural and human resources isreduced. There is currently very little fear of "crowdingout" alternative investment, or displacing jobs. Thechallenge is to launch a new industrial revolution inenergy: putting the science and the economicstogether tells us that we must start it now.The good news is that many emerging-marketeconomies such as South Korea and China haveunderstood the logic of this approach. China has moveddecisively to embrace low-carbon growth, notably in itsstimulus package of 2008-2009 but also, and moreimportantly, in its outline for the 12th five-year plan. This plan sets strong targets. China and other countriesthat recognise the way forward will lead the "greenrace," one that has already begun. Those thatdeliberately opt out may find they miss out on thefastest growing markets and have their exports taxed as"dirty" a decade or so from now. History shows thatinvestment flows to the pioneers of the revolutions. Even in the developed world, we are likely to seeEurope press ahead with action to reduce emissionsand with the possibility of raising targets for emissionsreductions between 1990 and 2020 from 20 to 30 percent. And it should not be forgotten that many states,cities, and firms in the United States are applyingambitious climate policies. California, for example, hasdeveloped a successful cluster of "clean invention,"and in November 2010 an attempt (Proposition 23) toundermine climate legislation was defeated and aclimate-aware governor, Jerry Brown, was elected. Many businesses see the opportunities that will bepresented by the transition to the low-carbon economy,and are recognising the opportunities the comingAbove: Dimitri ZenghelisLeft: Nicholas Stern