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Keywords:

  • government policy;
  • green economy;
  • political will;
  • sustainable development

ABSTRACT

  1. Top of page
  2. ABSTRACT
  3. Introduction
  4. A Bold Vision of the Green Economy
  5. How Can the Green Economy Achieve Sustainability?
  6. Steps to greening the economy
  7. Short-comings of the green economy and green growth strategies
  8. ‘Green-washing’ or a paradigm shift?
  9. Conclusions
  10. References

The concept of the green economy presented in three reports from leading global organizations is examined in this paper. These include the United Nations Environment Programme's Towards a Green Economy, the World Bank's Inclusive Green Growth and the Organisation for Economic Co-operation and Development's Towards Green Growth. The main critiques of the concept of the green economy are also considered. Contrary to views that the green economy merely represents ‘green-washing’ and tweaking of the current economic system, this paper concludes that the green economy has the potential to effect substantive and transformative change towards the goal of sustainable development. Copyright © 2013 John Wiley & Sons, Ltd and ERP Environment.


Introduction

  1. Top of page
  2. ABSTRACT
  3. Introduction
  4. A Bold Vision of the Green Economy
  5. How Can the Green Economy Achieve Sustainability?
  6. Steps to greening the economy
  7. Short-comings of the green economy and green growth strategies
  8. ‘Green-washing’ or a paradigm shift?
  9. Conclusions
  10. References

The concept of the green economy has emerged from the field of environmental economics to become increasingly influential in government policy and decision-making over the last few years (United Nations Environmental Programme (UNEP), 2011a). This is due in part to the global economic crisis. Added to this is the likelihood that the world's population will reach nine billion by 2050 (Organisation for Economic Co-operation and Development (OECD), 2011). Their water, energy and food needs will place the planet's resources under immense pressure. In light of growing concern surrounding global climate change and mounting public pressure to address environmental degradation, the green economy is seen by many as the way to both protect the environment and stimulate global economic recovery.

The Stern Review on the Economics of Climate Change (Stern, 2006) was pivotal in recognizing climate change as a potential catastrophe requiring urgent attention. Stern argued that climate change is the greatest market failure ever, and that only collective economic adjustment on a global scale can avert disaster. Action to mitigate greenhouse gas levels is a cost that must be incurred now to avoid the risks of serious consequences in the future. Stern (2006) argued that these costs are manageable and that opportunities for economic growth and development will present themselves in the process. Nevertheless, the success of this depends on a policy that will ‘promote sound market signals, overcome market failures and have equity and risk mitigation at its core’ (Stern, 2006: 1).

In addition to its role in ameliorating the effects of the global crisis and improving the environment, the green economy is also widely touted as the means of eradicating global poverty and redressing social disparities (Bowen et al., 2009; United Nations Environmental Programme (UNEP), 2011a; United Nations Environmental Programme (UNEP), 2011b; Johnson & Hälström, 2012; Raworth, 2012). Economic growth has led to a significant decline in the numbers of poor people in the last several decades (World Bank, 2012). There is a broad consensus that green growth strategies must address poverty reduction, especially in developing countries. There are many complementarities between green growth and poverty reduction (Organisation for Economic Co-operation and Development (OECD), 2011). For example, supplying sanitation to the poor not only improves their health, it also reduces the costs associated with treating outbreaks of diseases, as well as preserving water sources. In this way the green economy is argued to address each of the three pillars of sustainability: the environmental, economic and social dimensions of development.

The concept of the green economy as presented in three reports from leading global organizations is examined in this paper. These are UNEP's Towards a Green Economy, the World Bank's Inclusive Green Growth and the OECD's Towards Green Growth, all released within the last 2 years. They have very similar approaches to the green economy, although there are some differences in their focus and their potential usefulness in crafting green growth strategies. All three reports aim to provide a policy framework to help achieve green growth. Green growth leads to a reduction in greenhouse gas emissions, prevents further environmental degradation and promotes the efficient use of natural resources (Organisation for Economic Co-operation and Development (OECD), 2011; United Nations Environmental Programme (UNEP), 2011a; World Bank, 2012). The UNEP report takes these ideas one step further and argues that greening the economy can outpace the current environmentally damaging rate of growth. These reports also stress the importance of government in creating the enabling conditions for investment to be redirected from activities employing environmentally harmful means to greener industries and businesses. The World Bank argues that short-term interventions (next 5–10 years) are the most important to prevent lock-ins and show immediate benefit to society in the period in which the costs of greening growth are highest and most keenly felt.

Given that the green economy is not a particularly new concept, why is it receiving so much attention now and why are these global organizations discussing it at such length? As the World Bank's Inclusive Green Growth (2012: 2) states, ‘Inclusive green growth is not a new paradigm’ and textbooks in the 1950s already contained ideas regarding the necessity of environmental taxation, norms and regulations to green growth. UNEP's Towards a Green Economy (2011) refers to Blueprint for a Green Economy (Pearce, et al., 1989), first published in 1989, which outlines similar approaches to greening economic growth and achieving sustainable development. It is the unique confluence of increasing concern over global climate change and the economic crisis that has provided the environment for wide-scale penetration of the concept among government policy-makers, as well as business and private citizens. The green economy is an idea whose time has come.

There are also doubts and unanswered questions about the green economy. For all its promise of repairing damage to the environment and mitigating further destruction, spurring economic growth and redressing social inequality, the green economy may not represent a sufficient departure from the current economic system to achieve all-round progress. It has been suggested that the green economy represents mere ‘green-washing’ and not substantive change towards achieving sustainability. The outcome document, The Future We Want, from the United Nations Conference on Sustainable Development (UNCSD), known as Rio + 20, held in June 2012, has been criticized for not being specific enough about how to achieve sustainability as well as lacking the firm commitment of world leaders to the principles contained in the document (Utting, 2012). This lack of detail and political will has led to much disappointment post-Rio + 20 and growing disillusionment for some with the green economy.

The following sections of the paper discuss the vision of the green economy and the tools necessary to achieve green growth. Some of the main critiques of the concept are also considered. Finally, the paper attempts to answer the question of whether the green economy represents enough of a departure from the status quo to achieve the goal of sustainable development.

A Bold Vision of the Green Economy

  1. Top of page
  2. ABSTRACT
  3. Introduction
  4. A Bold Vision of the Green Economy
  5. How Can the Green Economy Achieve Sustainability?
  6. Steps to greening the economy
  7. Short-comings of the green economy and green growth strategies
  8. ‘Green-washing’ or a paradigm shift?
  9. Conclusions
  10. References

Each report describes the challenges facing the world's population and damage to the environment. The UNEP and World Bank reports refer to the degradation of 60% of ecosystem goods and services at the expense of quadrupled world economic growth in the last 50 years. There is a powerful critique of the argument for continuing the current form of economic growth and ‘cleaning-up later’. Damage to the environment has serious negative consequences for people's quality of life as well as the economy. For example, poor solid waste disposal systems in Haiti and India are responsible for outbreaks of disease as well as costly flood damage. More importantly, cleaning up later may be impossible or prohibitively expensive. For example, greenhouse gases exist in the atmosphere for decades and even centuries; hence the urgency to address the situation now.

It is emphasized that the green economy should not be viewed as a substitute for sustainable development. The OECD states that green growth is ‘a subset of sustainable development but does not replace it’ (Organisation for Economic Co-operation and Development (OECD), 2011: 11). Green growth and the green economy are portrayed as the pathway to sustainability, reflected in the subtitles of both the World Bank and the UNEP reports. Sustainable development is defined to include economic prosperity, reduced poverty and social inequality, and environmental progress. Most interpretations of sustainability follow from the World Commission on Environment and Development's (WCED) 1987 definition of ‘development that meets the needs of the present without compromising the ability of future generations to meet their own needs’ (World Commission on Environment and Development (WCED), 1987: 16). In economic terms, this means that the improved economic well-being of people today should not reduce the well-being of those in the future. The green economy, with its principles of economic growth that is not environmentally damaging, is well suited to this goal.

Although each of these reports frames sustainable development as the goal, they appear to have different points of focus in terms of which aspects of sustainability are underlined. While all three mention the three pillars of sustainability, the World Bank and UNEP pay more attention to the social aspect of sustainable development than the OECD. According to UNEP, a green economy is one that ‘results in improved human well-being and social equity, while significantly reducing environmental risks and ecological scarcities’. (United Nations Environmental Programme (UNEP), 2011a: 16). While this is a rather broad definition, a more specific explanation of the term is given in the following elaboration on the concept (United Nations Environmental Programme (UNEP), 2011a:16):

‘…a green economy can be thought of as one which is low carbon, resource efficient and socially inclusive. In a green economy, growth in income and employment should be driven by public and private investments that reduce carbon emissions and pollution, enhance energy and resource efficiency, and prevent the loss of biodiversity and ecosystem services. These investments need to be catalyzed and supported by targeted public expenditure, policy reforms and regulation changes. The development path should maintain, enhance and, where necessary, rebuild natural capital as a critical economic asset and as a source of public benefits, especially for poor people whose livelihoods and security depend on nature.’

For these reasons, the green economy is portrayed as the way to improve the environment and reduce environmentally harmful practices. It can also enable the economy to grow while making it more socially inclusive at the same time.

The World Bank definition of green growth is simply ‘economic growth that is environmentally sustainable’ (World Bank, 2012: 24). This definition includes no mention of social inequality. Accordingly, the World Bank refers specifically to ‘inclusive’ green growth, in recognition of the fact that social inequality has often been ignored in favour of environmental degradation and economic growth when discussing sustainability. To address issues around inequality, a specifically pro-poor approach must be taken when designing green growth strategies (World Bank, 2012: 24):

‘Like the approach promoted in this report, these definitions [of the green economy] are consistent with sustainable development as an ultimate objective and with green growth or a green economy as a means to reconcile its economic and environmental pillars, without ignoring social aspects.’

The OECD definition of sustainability has a more exclusive focus on the economy and the environment. ‘Green growth … is narrower in scope [than sustainability], entailing an operational policy agenda that can help achieve concrete, measurable progress at the interface between the economy and the environment’ (Organisation for Economic Co-operation and Development (OECD), 2011: 11). It is also stated though that, ‘There are many important complementarities between moves to green the economy and poverty reduction’ (Organisation for Economic Co-operation and Development (OECD), 2011: 201).

Consequently, the main focus of the green economy is the relationship between the environment and the economy, but the social dimension is not ignored. All three reports emphasize that any attempts to green the economy must take a pro-poor approach, although there is some ambiguity about how far this should go. The World Bank (2012) argues that economic growth, while it has been environmentally damaging, has lifted 660 million people out of poverty over the last 20 years. Because growth drives poverty reduction, green growth is seen as the means to help repair the damaged environment as well as alleviate poverty through job creation (Hallegatte et al., 2011). For example, green farming techniques can increase yields, thereby giving small-scale farmers surplus produce to sell. However, the primary means to address poverty identified revolves around service delivery to the poor. The poor are most vulnerable to ecological scarcity, energy and water poverty, for example, as they cannot afford to pay for these resources (Barbier, 2012; United Nations Environmental Programme (UNEP), 2011a). The rural poor are also most reliant on ecosystem services. Therefore, the protection and restoration of these systems can reduce their vulnerability to natural disasters, as well as increasing their livelihood security (Organisation for Economic Co-operation and Development (OECD), 2011). Other examples of instruments for poverty reduction involve developed countries compensating developing countries for ecosystem services. This can take the form of rural farmers being paid not to cut down forests to make way for agricultural lands (Organisation for Economic Co-operation and Development (OECD), 2011). Another example includes energy subsidy reform and how this should include compensation to low-income households.

How Can the Green Economy Achieve Sustainability?

  1. Top of page
  2. ABSTRACT
  3. Introduction
  4. A Bold Vision of the Green Economy
  5. How Can the Green Economy Achieve Sustainability?
  6. Steps to greening the economy
  7. Short-comings of the green economy and green growth strategies
  8. ‘Green-washing’ or a paradigm shift?
  9. Conclusions
  10. References

The core assumption of the green economy concept is that environmental progress cannot be separated from economic growth and development. Curtailing growth or ignoring the economy will not lead to meaningful environmental improvement. This is stated explicitly in all three reports: ‘there is a growing recognition that achieving sustainability rests almost entirely on getting the economy right’. (United Nations Environmental Programme (UNEP), 2011a: 17); ‘Most importantly, good economic policy lies at the heart of any strategy for green growth’ (Organisation for Economic Co-operation and Development (OECD), 2011: 10).; ‘In sum, this report approaches green growth from a pragmatic point of view. The current model is not just unsustainable, it is inefficient. Improving it is good economics’ (World Bank, 2012: 23).

The proposition is that sustainability can only be achieved by adjusting the economy and the way investment decisions are made. The proposed change revolves around the valuation of natural resources and accurate reflection of that value in economic activity. Few would disagree that the dominant global economic paradigm has damaged and degraded the environment. This is partly attributable to various kinds of market failures. The state of the environment is not considered in decision-making due to imperfect information about the ecosystem services it provides. The current market system reflects neither the inherent value of ecosystem services and natural capital, nor the costs of their degradation. Natural capital is undervalued and consequently mismanaged (Organisation for Economic Co-operation and Development (OECD), 2011). These reports argue that if the true value of ecosystem services was reflected in the market, economic activity would be more resource efficient and less environmentally damaging, i.e. more sustainable. This is because in a green economy, the accurate valuation of natural capital drives appropriate management of environmental resources (United Nations Environmental Programme (UNEP), 2011a). Hence, the notions of the green economy and green growth.

A central feature of the green economy is integrating the natural asset base into everyday market decisions. This requires extensive use of market-based and pricing instruments. Pricing mechanisms provide incentives for greater efficiency gains and innovation (Organisation for Economic Co-operation and Development (OECD), 2011). This is particularly important for example in taxing pollution and the over-exploitation of natural resources.

It is recognized that not every situation lends itself to market instruments. Appropriate regulation, active technology-support policies and voluntary approaches may also be useful to complement market instruments (Organisation for Economic Co-operation and Development (OECD), 2011). Because people do not make decisions based on rational, market-related prices alone, other measures are necessary to change behavioural patterns (World Bank, 2012). For example, a study of electricity provision shows how people may opt for renewable energy even though it is more expensive (Picherta & Katsikopoulos, 2008). This study looked at what people did in response to their electricity provider presenting the higher priced energy package using more renewable energy as the default. The rational, price-based decision would have been to opt out of this in favour of a cheaper package without the renewable energy component. Despite this, less than 5% of users chose to opt out of this ‘green default’.

The transition to a green economy will require specific enabling conditions to encourage public and private investment. At present, these enabling conditions are heavily weighted towards the prevailing fossil fuel-reliant, resource-squandering and environmentally detrimental ‘brown economy’. Enabling conditions for a green economy consist of national regulations, policies and incentives, as well as international market and legal infrastructure, trade and technical assistance (United Nations Environmental Programme (UNEP), 2011a). Government has a crucial role to play in fostering an environment conducive to greener economic decisions from both the private sector and the public.

Steps to greening the economy

  1. Top of page
  2. ABSTRACT
  3. Introduction
  4. A Bold Vision of the Green Economy
  5. How Can the Green Economy Achieve Sustainability?
  6. Steps to greening the economy
  7. Short-comings of the green economy and green growth strategies
  8. ‘Green-washing’ or a paradigm shift?
  9. Conclusions
  10. References

There is widespread consensus that traditional indicators of economic growth, such as gross domestic product (GDP) are insufficient (Schmalensee, 2012). GDP does not include the pricing of natural capital and externalities that arise from natural resource use. These externalities include pollution, loss of ecosystems and lack of resources for human consumption (United Nations Environmental Programme (UNEP), 2011a).

All three reports suggest similar policy and pricing measures to enable green growth. Green growth policies aim to minimize the disparities between private returns from economic activity and the benefits to society as a whole. These gaps arise from market failures, constraints and distortions, or because of poor government policies. They also aim to raise returns to ‘green’ investment and innovation. The reports cover the following types of interventions:

  1. Institutions, norms, regulations and behaviour-based policies
  2. Innovation and industrial policies
  3. Education and labour market policies
  4. Natural capital, agriculture and ecosystems services management
  5. Infrastructure, building, urbanism, transport and energy.

The following sections describe each of these briefly.

  • i.
    Institutions, norms, regulations and behaviour-based policies

These are measures that can be taken to change behaviour with respect to the environment and natural resources. They include incentives to encourage green growth, improved information for better decision-making, and imposing rules and regulations (World Bank, 2012).

Current pricing mechanisms and markets lead to the misallocation of capital to industries and practices that are fossil-fuel-reliant and energy-inefficient (United Nations Environmental Programme (UNEP), 2011a). They allow businesses to run up substantial and largely unaccounted for social and environmental externalities. Through better environmental valuation, these externalities can be integrated into economic development policy and strategy (United Nations Environmental Programme (UNEP), 2011a). Pricing and fiscal policy measures that can redress this particular market failure include taxes, tradable permits and subsidies. For example, tax incentives can be developed to encourage the development and adoption of resource-efficient technologies. Increasingly onerous taxes can be imposed on those industries that generate the most pollution to discourage their growth or to transform their practices. Tradable permits have been used for many years to correctly price pollution from carbon dioxide emissions. Subsidies can also be removed from industries that rely on fossil fuels, or use land, water and forestry resources inefficiently, and reallocated to those that are less reliant on fossil fuels.

The purpose of these measures is to develop payoffs that more accurately reflect the value of natural resources (Organisation for Economic Co-operation and Development (OECD), 2011). Such pricing mechanisms can incentivize efficiency and innovation, as well as generate funds for poverty alleviation and development.

Although price instruments are viewed as the most effective because of the powerful impact of incentives, they are not always appropriate. Market imperfections and political considerations mean that additional measures may be needed (World Bank, 2012). These complementary tools address behavioural biases and changes in values and preferences. The earlier example of the common behavioural bias for people to retain the default option shows how complementary tools can direct the public towards adopting more sustainable practices.

Imposed rules and regulations may also be necessary to complement these price-based and behavioural measures. For example, proponents of fuel efficiency standards argue that consumers do not correctly value fuel economy. Fuel efficiency standards for new cars can solve this problem by imposing limits on vehicle emissions (World Bank, 2012).

  • ii.
    Innovation and industrial policies

To green the economy, new industries and technologies will be needed, hence innovation (Organisation for Economic Co-operation and Development (OECD), 2011; World Bank, 2012). Green industrial policies can be used to help spread new technologies and foster the growth of new sectors. Examples of this include feed-in tariffs for solar electricity and subsidies for research and development in renewable energy. In all three reports, the main focus when discussing green industrial policy is on innovation and using new technology to spur green growth.

Green innovation policies either encourage innovation broadly, or support specific technologies (World Bank, 2012). The particular policy measures for promoting the development, dissemination and adaptation of green technologies will vary according to the country-specific conditions regarding the maturity of available technologies and specific market failures. Any green innovation policies should aim to (World Bank, 2012: 72):

‘…strengthen entrepreneurship and local firm absorptive capacity, support new knowledge creation and commercialization, and support diffusion and adaptation of existing knowledge to new local contexts.’

It is generally recognized that governments have a crucial a role to play in all these respects (Organisation for Economic Co-operation and Development (OECD), 2011; United Nations Environmental Programme (UNEP), 2011a).

  • iii.
    Education and labour market policies

The green economy can ameliorate the global downturn by facilitating more sustainable job creation. Greener growth will lead to a variety of different kinds of new jobs, including skilled jobs in innovative activities. Of course, some jobs will also be at risk, particularly in pollution-heavy, fossil-fuel-dependent sectors. This implies a need to facilitate the re-allocation of workers from contracting to expanding sectors, such as renewable energy. New industries and occupations will require new skills, making appropriate re-education and training policies crucial to a green economy (Organisation for Economic Co-operation and Development (OECD), 2011). The OECD argues that the scale of adjustment will be modest, while United Nations Environmental Programme (UNEP) (2011a) states that the new green jobs will offset any job losses. Clearly, much depends on the size of the stimulus to the green economy and the speed of the transition from the old polluting economy.

Interestingly, it is emphasized that green growth strategies cannot solve structural constraints to economic growth and job creation (Organisation for Economic Co-operation and Development (OECD), 2011; World Bank, 2012). Labour market ‘distortions’ and an unattractive business environment must be addressed before green growth strategies can be implemented effectively. The World Bank singles out the example of South Africa, where regulatory hindrances to small business development and skill shortages are serious obstacles to the development of green industries.

  • iv.
    Natural capital, agriculture and ecosystems services management

Better management of natural resources can lead to green growth. These include provisioning services which directly provide goods and services, such as extractable renewable resources (fisheries, forests, soil and water), cultivated renewable resources (agriculture) and non-renewable resources (oil, gas, coal and minerals). They also include non-provisioning services which provide regulating, supporting and cultural services (ecosystems) (World Bank, 2012).

The environment is viewed in all three reports as natural capital that is currently poorly managed. Accordingly, investing in this natural capital, as with any other form of capital, is argued to be good growth policy. The environment is particularly important to poor communities as most of their livelihoods depend on nature. Therefore, maintaining and improving natural capital is vital to poverty alleviation.

Different types of resources require different types of policies (World Bank, 2012). For example, agriculture requires policies focusing on innovation, increased efficiency and sustainability, as well as an integrated land-use approach. Extractable renewable resources, such as fisheries, require policies centred on improved property rights and facilitating businesses to move up the value chain to generate higher incomes.

  • v.
    Infrastructure, building, urbanism, transport and energy

All the reports recognize the vital role of infrastructure in greening growth. The World Bank goes furthest in arguing that infrastructure policies are central to green growth. This is partly because of the ‘huge potential for regret’,, i.e. to prevent decisions that prove costly in the long term (World Bank, 2012: 133). The scale and longevity of infrastructure mean that greening this sector requires careful, integrated planning. Many assets require massive investments and are long-lived, thereby increasing the risks of being locked into patterns of unsustainable growth (Organisation for Economic Co-operation and Development (OECD), 2011). Conversely, infrastructure developments present substantial potential for co-benefits. These are additional benefits over and above the intended outcome of a measure taken. For example, the introduction of solar power to replace coal would not only replace an environmentally damaging system with an environmentally friendly one. It could also create new jobs for solar panel manufacturers and technicians, and improve air quality due to the closure of coal power stations. The lack of infrastructure in developing countries presents opportunities for improvements in welfare, productivity and the environment through greener infrastructure design (World Bank, 2012). A good example is the introduction of solar technology to provide electricity to poor areas previously off the main power grid through the installation of individual solar panels in the roofs of homes. Electricity brings major health benefits compared with burning fossil fuels.

In short, the green economy involves a powerful array of policy instruments that, used together, could undoubtedly lead to significant shifts in economic decisions and behavioural patterns.

Short-comings of the green economy and green growth strategies

  1. Top of page
  2. ABSTRACT
  3. Introduction
  4. A Bold Vision of the Green Economy
  5. How Can the Green Economy Achieve Sustainability?
  6. Steps to greening the economy
  7. Short-comings of the green economy and green growth strategies
  8. ‘Green-washing’ or a paradigm shift?
  9. Conclusions
  10. References

The question at the heart of the green economy is whether it is possible to correct environmental degradation and social inequality through the current economic system, i.e. the very system that gave rise to these problems. The reports are not uncritical of the tools of mainstream economics. For example, several obstacles to valuing environmental assets in the economy are highlighted (Organisation for Economic Co-operation and Development (OECD), 2011; United Nations Environmental Programme (UNEP), 2011a; World Bank, 2012):

  • Valuing ecosystem goods and services is difficult: there is much uncertainty around the size and timing of the benefits humans derive from maintaining ecosystem services due to the complexity of the interactions between ecosystem services, climate change and biodiversity.
  • While the benefits of greening growth are usually diffuse and often uncertain, the costs are immediate and highly visible.
  • Market imperfections are a constant constraint. For example, price signals lack credibility and predictability. If governments are unable to commit to maintaining environmental price instruments over the long term (which many are), they are then in a weak position to encourage firms to undertake long-term, risky investments in green growth initiatives. On the question of the long term, how does one place a price on the value of a depleted natural resource to future generations? Other examples include coordination failures and knowledge externalities, and prices are intrinsically ill suited to address ‘classic’ market failures.
  • Because of inertia and biases in behaviour, many efficiency measures that might pay for themselves are not implemented.
  • There are inadequate financing tools for up-front investment in green technology (a problem particularly in developing countries). For example, solar/wind/hydroelectric power has a high capital cost, but low operating costs.

These are some of the problems with the market mechanism specifically. There are also questions surrounding the very idea of economic growth, green or otherwise, as the path to sustainability. The objection is that the green economy espouses sustainable development via mainstream, market-driven mechanisms, technology and government regulation. This is the same set of tools that has resulted in current economic and social problems (Adams & Jeanrenaud, 2008).

Detractors of the green economy concept contend that in focusing on continued growth, supporters of the green economy do not consider the argument that there are limits to growth (Bina & Camera, 2011; Brockington, 2012; Victor & Jackson, 2012). The concept of the green economy begs the question of whether resilient and sustainable economies are achievable without the absolute decoupling of economic growth from environmental impacts (Giljum & Polzin, 2009; Bina & Camera, 2011). Related to this debate around the limits to growth, scholars also contend that continued over-consumption, even for environmentally less damaging products and resources, can still lead to just as much environmental degradation. Therefore, opponents of the green economy conclude that some degree of curtailment of economic growth is required if the goal of a significant reduction in carbon dioxide emissions is to be realized.

The UNEP report in particular is open to criticism of its Macroeconomic Threshold 21 (T21) model. This compares the impacts of ‘business as usual’ vs. green economy investments (United Nations Environmental Programme (UNEP), 2011a). It produces simulations over a 40-year period from 2010 to 2050. One of the model's unique features is the inclusion of natural resources as a factor of production. It also internalizes the externalities produced because of the mismanagement of these resources (Brockington, 2012). The model assesses the impact of an annual investment of US$1.3 trillion or 2% of current global GDP on 10 key sectors (water, forests, agriculture, fisheries, renewable energy, manufacturing, waste, buildings, transport and tourism). It shows the effect on growth, employment, resource use and ecological footprints. Several bold claims are made, including that over the long term, investing in green growth leads to improved economic performance, i.e. a faster rate of economic growth than ‘business as usual’. This also happens ‘while enhancing stocks of renewable resources, reducing environmental risks, and rebuilding capacity to generate future prosperity’ (United Nations Environmental Programme (UNEP), 2011a: 24).

Some of the claims made using this model have been questioned, such as the absolute levels of reduction in pollutants. Victor and Jackson (2012) argue that the greenhouse gas emissions targets proposed are too low to avoid environmental catastrophe. The model is also biased towards providing more investment to the ‘greenest’ scenario. Under this scenario, global GDP is assumed to be greater than under the ‘business as usual’ scenario, and therefore 2% of this GDP represents a larger absolute investment. This leads to the false conclusion that green economic growth is faster than growth following the current economic model (Victor & Jackson, 2012). Questions arise around the scale of the model and its global focus. Massive regional differences in greenhouse gas emissions are ignored, as well as national and class differences. Social struggles and how markets affect the poor are ignored. It seems doubtful that the environmental and equity objectives of a green economy can be achieved if differences in levels of wealth are not taken into account and it is not inherently pro-poor (Victor & Jackson, 2012).

Many of the model's assumptions about how much money can be invested, and what could be supplied through improved technology, are arguably over-optimistic. For example, in the model for greening agriculture, no less than one-quarter of the investment is ‘assumed to be invested in environmentally sound practices’ (United Nations Environmental Programme (UNEP), 2011a: 61). While all models require several assumptions, one has to question the realism that one-quarter of all funds worldwide invested in agriculture will be dedicated to green farming techniques.

All three reports contain other examples of over-optimism and over-simplification of the challenges to greening growth. The OECD was quoted earlier to the effect that the rate of employment growth may be only marginally impacted by moves to reduce greenhouse gas emissions. In fact, significant reductions in such gas emissions would require a dramatic reduction in the activities of several industries, with wide-ranging knock-on effects on jobs and incomes. The extent to which these would be compensated for by positive effects in greening industries is very unclear. The World Bank argues that because economic growth has led to reduced poverty in many countries, ‘the links between the economic and social pillars of sustainable development are generally self-reinforcing’ (World Bank, 2012: 5). This generalization brushes over complex issues of social and spatial distribution and structural divisions in many economies. Systemic changes may be required to overcome the structural inequalities and create an inclusive economy with significant environmental improvement.

Other important questions surround the social dimension of the green economy. Social issues are often marginalized in green economic analysis in favour of the environment and economy (Fulai, 2009; United Nations Institute for Social Development (UNRISD), 2012). An important question revolves around who the winners and losers are in the shift towards a more sustainable economy. This is particularly relevant to the issue of employment. It is vital to identify the social groups that stand to lose from industrial restructuring and the extra burden of emissions reduction policies and environmental taxes (United Nations Institute for Social Development (UNRISD), 2012). Many estimates of green job growth give little recognition to the serious problems likely to arise from jobs lost in industries that are no longer in favour, such as heavy manufacturing and coal power generation (Morriss et al., 2009). The World Bank talks about allocating resources to compensate losers, but welfare is no substitute for productive employment. Enacting such a strategy also requires complicated financial flows and capable governments.

A further issue is whether market-centred approaches to the green economy may reproduce rather than moderate persistent patterns of poverty and vulnerability (Kosoy & Corbera, 2010). It has been argued that an ecosocial policy that integrates environmental and social risks and can support a fair and green economy is required (United Nations Institute for Social Development (UNRISD), 2012). UNRISD argues that many policy interventions are residual and compensatory and take the form of programmes which are ‘add-ons’ to policies designed to achieve economic and environmental goals. Mainstreaming the social dimension is difficult when the priorities lie elsewhere and there is a heavy reliance on market mechanisms to deliver change.

Thus, just as many critics of green growth are concerned that economic growth will not deliver significant improvements to the condition of natural resources and environments, so too many believe that the orthodox economics approach to the social dimension of sustainability is also inadequate and will not lead to meaningful social progress.

Despite the claims of these reports that the green economy is the means to achieve sustainability, there may be serious obstacles to the current market system being able to achieve this goal. In some views, the green economy represents ‘green-washing’ and the limited adoption of green production methods and policy, while continuing with a mostly ‘business as usual’ economy. Greater environmental sustainability cannot be achieved without making substantive changes and improvements. In addition, unless the underlying inequality of the current economic growth model and power structures is addressed, the greater equality and benefits to the poor envisaged in the green economy are unlikely to be realized (United Nations Institute for Social Development (UNRISD), 2012).

‘Green-washing’ or a paradigm shift?

  1. Top of page
  2. ABSTRACT
  3. Introduction
  4. A Bold Vision of the Green Economy
  5. How Can the Green Economy Achieve Sustainability?
  6. Steps to greening the economy
  7. Short-comings of the green economy and green growth strategies
  8. ‘Green-washing’ or a paradigm shift?
  9. Conclusions
  10. References

These debates may lead one to ask: How substantive is the vision encompassed in green growth and the green economy concepts? Is a major overhaul of the current economic system required? Do these reports represent a call for a paradigm shift or is this simply ‘tweaking’ the system and ‘green-washing’?

Critics of the green economy have argued that the types of interventions and solutions it presents still operate according to an orthodox economic model. They argue that this does not represent the fundamentally different way of operating necessary to achieve sustainability (Kosoy & Corbera, 2010; Brand, 2012). However, the green economy calls for accurate representation of nature's economic value in the market, much greater government intervention in the form of regulation and policy, and a market system geared towards sustainable growth. If this vision were to be achieved, arguably it would represent a very different system to current unsustainable growth.

Also, by framing issues of sustainability in terms of economic growth, they are far more likely to be taken seriously and acted upon. As Sterner and Damon (2011: 7170) argue ‘The strong threat of a slowdown in global growth makes the lure of green growth all the more attractive’. Environmentalists may not like the idea of ‘putting a price’ on nature, but it too has to compete with other things for scarce economic resources (Dietz & Neumayer, 2009). Given the economic crisis and growing recognition of global climate change, the green economy is an attractive concept to governments and businesses. It offers a simultaneous solution to unemployment and environmental degradation with new green industries and tools for mitigating environmental damage, e.g. carbon taxes. Thus, it is not surprising that:

‘The environmental issue has now reached the core of global economic elites, which represents a change of paradigm that environmental scientists and environmentalists have been calling for decades’ (Jänicke, 2012: 000).

Also, ‘Condemning (mass) consumerism per se has proven not only to prevent successful environmental communication but also to jeopardise progress in the environmental dialogue’ (Hinterberger et al., 2009: 5). The green economy may not appear be radical enough an approach for some (Aşici & Bünül, 2012). However, it is currently the most effective strategy for beginning to foster greater understanding and appreciation for the environmental and social problems facing us. Also, the green economy can generate support for the sometimes hard choices and interventions needed to address these issues.

It is unreasonable to dismiss the green economy and green growth as mere ‘tweaking’ of the system and ‘fiddling while Rome burns’ (Kosoy & Corbera, 2010). All of these reports stress the importance of environmental policies being long-term, goal-orientated national strategies, and not simply superficial change. The World Bank proposes bringing the environment into core government operations, such as the budget. This would require extensive changes in how governments currently operate and their focus.

The green economy calls for much more than simply superficial change. Each report discusses a set of instruments that governments and decision-makers can employ to help green the economy. However, there is no ‘one’ solution. As each report states, there is no one-size-fits-all green growth strategy as contexts differ: developed vs. developing country; global, regional or local scale; most pressing environmental needs differ.

The multitude of pricing, policy and other options, as well as the need to adapt them to different contexts, makes it difficult for governments and businesses to choose the appropriate interventions. In discussing policy and other intervention options, the OECD's Towards Green Growth often refers to another OECD document, Tools for Delivering on Green Growth (Organisation for Economic Co-operation and Development (OECD), 2012). There is an additional OECD document to help construct and implement greening strategies, A Framework for Assessing Green Growth Policies (de Serres et al., 2010). Furthermore, each of these organizations has numerous publications on the evaluation, selection and implementation of the available policies and other tools for greening growth. The World Bank tries to give step-by-step instructions on how to craft green growth strategy; however, the guide is brief and lacks detail. It is not surprising that organizations, such as the UNEP's Green Economy Initiative have been established to help companies and governments navigate their way through the complex maze of solutions to environmental and social problems to facilitate the transition to a greener economy.

Presumably, these reports on the green economy are not intended to constitute instruction manuals on how to implement greening policies and instruments. Rather, the OECD, World Bank and UNEP present a raft of pricing mechanisms, funding options and policy suggestions in these reports, along with numerous examples from all over the world, from both developing and developed countries, of how these regulations and initiatives have worked, as well as where they have not succeeded and why. It is the extent to which these tools are adopted that will determine how much change is achieved in individual countries.

Adoption of the comprehensive range of tools presented in these reports for greening the economy could result in not merely incremental change but transformative change of an economy. The green economy does not represent superficial change to the current system, but a complex set of solutions that must be carefully combined to lead a country, region or city on a path to a more sustainable future. It is in the choosing and implementing of these solutions that political will plays a critical role. If government is timid, it will only achieve incremental change. Arguably, the lack of commitment to greening growth and the concomitant limited impact of green policy seen in many parts of the world constitutes no more than ‘green-washing’. Conversely, if government embraces the bold vision for a green economy, with the full array of instruments presented in these reports, and follows through with their implementation, the current economic system could in due course be transformed into one which is not intrinsically environmentally damaging and is much more sustainable. Political will is key to achieving the transformative change necessary to green the economy and make substantive progress towards sustainability.

Conclusions

  1. Top of page
  2. ABSTRACT
  3. Introduction
  4. A Bold Vision of the Green Economy
  5. How Can the Green Economy Achieve Sustainability?
  6. Steps to greening the economy
  7. Short-comings of the green economy and green growth strategies
  8. ‘Green-washing’ or a paradigm shift?
  9. Conclusions
  10. References

The OECD, World Bank and UNEP reports present the vision of the green economy as the means to achieving sustainable economic growth. This means economic growth that does not lead to environmental degradation, but an improved environment. The green economy is also portrayed as the means to alleviate poverty. To these ends, an assortment of policies and their potential outcomes are discussed.

Arguably, if the vast array of policies presented in these reports are implemented, the current economic system could be transformed to a more environmentally friendly and sustainable one. Issues addressed range from natural resource protection to greener infrastructure and service provision. The green economy approach is intrinsically multidisciplinary, offering solutions from psychology (to adjust behaviours to more efficient energy use) to technological innovation (to produce energy from renewable sources). Thus, a wide array of solutions to environmentally unsustainable practices is offered.

The green economy makes a convincing argument for continued economic growth, but in a way that does not harm the environment. This is especially important for alleviating poverty and addressing the job losses associated with the financial crisis. Models estimating green job growth have shown very promising predictions. Of particular importance to developing countries is the emphasis in the reports on the social pillar of sustainability and poverty reduction through the green economy. Added to this is the growing concern over global climate change. The proposition that the green economy can limit and/or reverse environmental degradation while not slowing economic growth makes it attractive to governmental and business leaders alike.

There are, however, caveats to the green economy. Political will is of critical importance in the formulation and implementation of policies that encourage green growth. Whether this will exists could be questioned in many countries. Valuing ecosystem goods and services is also a complex process. Market imperfections exist in correctly valuing natural resources and the costs of environmental degradation. Models of green growth tend to include what seem like overoptimistic assumptions in their predictions.

What the green economy does provide is a set of policies and incentives to help steer economic activity towards a low-carbon state (Ban et al., 2008). The vision of the green economy is bold and the goals and ideals lofty. Whether these goals are achieved rests largely with government and depends on its willingness to fully embrace and implement the tools of the green economy. Rather than providing the path to sustainability, the green economy can help transform the current system of unsustainable economic activity into a future with a healthy environment and a more inclusive economy.

References

  1. Top of page
  2. ABSTRACT
  3. Introduction
  4. A Bold Vision of the Green Economy
  5. How Can the Green Economy Achieve Sustainability?
  6. Steps to greening the economy
  7. Short-comings of the green economy and green growth strategies
  8. ‘Green-washing’ or a paradigm shift?
  9. Conclusions
  10. References