Introductory Briefing Note: The Green Economy

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1 Introductory Briefing Note: The Green Economy The Situation The pursuit of global economic growth has advanced the living standards of millions of people all over the world, and in pursuit of such growth both developed and developing countries look to GDP figures as a critical indicator of success and prosperity. Yet the pursuit of economic growth and the drive towards ever-increasing consumption has had devastating impacts on the global environment, exploiting natural resources with little regard for environmental impacts, and valuing short-term financial gains over the long-term benefits of preserving some of our most precious and valuable ecosystems. The Millennium Ecosystem Assessment concludes that in the past 50 years, human beings have changed ecosystems more rapidly and extensively than in any comparable period in human history 1.Though conceding that many of these changes have come hand-in-hand with improved human wellbeing, the report states that the level of ecosystem degradation, if left unchecked, poses a major threat to the wellbeing of future generations. There are a number of options for reversing and reducing ecosystem degradation, outlined in a range of studies including the Millennium Ecosystem Assessment what they all have in common is an understanding that our global economic system needs to value and invest in the environment and ecosystem services upon which all human and economic activity ultimately depends. In other words, we need to build a green economy. Earth Summit 2012 and the Green Economy Recognizing the potential of investing in and protecting the Earth s natural capital, the UN General Assembly resolution endorsing the UN Conference on Sustainable Development or Rio+20 Earth Summit in 2012 has identified the green economy in the context of poverty eradication and sustainable development as one of the key themes of the Summit. The notion of a Green Economy is not a new one. It has gained momentum in recent years due to the increasing global attention afforded to environmental issues, and the emergence of climate change as a major global priority. It is widely recognized that a global economy driven to a large extent by the ever increasing burning of fossil fuels for energy is simply not sustainable. Increasing Greenhouse Gas Emissions combined with the destruction and degradation of ecosystems is dramatically increasing the likelihood of human exposure to major climatic shifts, whilst simultaneously reducing our resilience. If our future is to be in any way assured, our economies 1 Millennium Ecosystem Assessment, Synthesis Report, p

2 need to shift to achieve human wellbeing without ultimately destroying the environment upon which that wellbeing depends. This basic fact has spawned a diversity of research, movements and schools of thought, all with the intention of proposing economic solutions and systems that simultaneously achieve human wellbeing whilst operating within the ecological constraints of the planet. Green Growth and Green Jobs Sustaining economic growth, whilst also devising plan to avert widespread environmental degradation and climate change, is currently on the top of the agenda for many national governments and businesses. Investment in green jobs and green industry, thereby creating economic growth through green activities, is proposed as a win-win solution to achieve both social and environmental benefits. Much of the literature on the green growth explores the notion of decoupling, outlining the opportunities that exist to decouple economic growth from resource use and environmental impact, thus continuing with the growth model but acknowledging the natural limits of the earth s biosphere. Proponents of growth within limits suggest that with increased productivity and investments in ecosystem conservation, future environmental degradation can be limited with only modest economic impact. A report by Netherlands Environmental Assessment Agency, Growing within Limits, shows that a business as usual policy scenario would lead to large-scale environmental problems by In order to prevent this scenario, a number of policy changes must be adopted. These must predominantly be focused on limiting temperature rises and halting biodiversity loss. The task is immense, but the report suggests it can be achieved thought the implementation of policies aimed at zero-carbon energy options, energy efficiency, ecosystem conservation, higher agricultural yields and lifestyle changes. 2 There are a number of proponents of Green Growth the Green New Deal Group, convened by the new economics foundation, examines the possibilities of re-engineering the economy and achieving economic growth in line with averting environmental degradation. Its initial Green New Deal 3 publication outlined solutions to the triple crunch of a credit-fuelled financial crisis, accelerating climate change and soaring energy prices. Other organisations including the World Resources Institute, the OECD and a range of research institutes and NGOs also highlight the potential for sustainable manufacturing and eco-innovation, achieving economic growth that does not cost the planet. A fundamental component of Green Growth is the creation of green jobs keeping people in employment through creating jobs that have a positive impact on the environment. There is no accepted definition of a green collar job, though a UNEP report has described green jobs as work in agricultural, manufacturing, research and development (R&D), administrative, and service 2 Vuuren, D.P. van and Faber, A. - Netherlands Environmental Assessment Agency (2009) Growing within Limits 3 Green New Deal Group (2008) Green New Deal. 2

3 activities that contribute substantially to preserving or restoring environmental quality 4. Specifically, but not exclusively, this includes jobs that help to protect ecosystems and biodiversity; reduce energy, materials, and water consumption through high efficiency strategies; de-carbonize the economy; and minimize or altogether avoid generation of all forms of waste and pollution 5. The potential for green jobs is attractive with governments who are responsible for retaining high levels of employment, and who are reluctant to commit to more radical environmental reforms due to feared impacts on the economy and people s jobs. As such, the emergence of green jobs as a policy objective has led to the establishment of a number of movements and alliances that seek to bridge the gap between workers and environmentalists the Blue Green Alliance in the United States is just one example. De-Growth The Club of Rome Limits to Growth report in the 1970s began to explore the interaction between exponential growth of the world population, industrialization, pollution, food production and resource exploitation with the ecological reality of finite resources. Though it was more of an exploration than a plan of action, it represented one of the first major explorations of its kind, and has since been built upon and referenced by a number of other studies. Since then a number of schools of thought have emerged that suggest that economic growth is not viable at all, and that the global economy needs to adopt a de-growth model in order to be truly sustainable in the long-term. De-growth economics, or decroissance, rejects the notion of an economic system based on growth as fundamentally unsustainable. The traditional objective of economic growth is to bring higher incomes and therefore prosperity, better choices and improved quality of life for all of us. Yet, it is argued that inspite of the fact that the global economy has doubled over the last quarter of a century, an estimated 60% of the world s ecosystems have been degraded; global carbon emissions have risen by 40% since 1990; and significant scarcity in key resources such as oil may be less than a decade away. For decades the de-growth movement operated on the far margins of accepted contemporary economic doctrine. Yet recently it has been generating more mainstream attention, perhaps most significantly due to the publication of a challenging report entitled Prosperity Without Growth in 2008 by the UK Sustainable Development Commission a UK government agency. Tim Jackson, a Sustainable Development Commissioner and author of the report, subsequently went on to write a book with the same name. Other leaders in this field include the new economics foundation (nef) whose report Growth Isn t Working, published in 2006, was followed by a sequel entitled Growth Isn t Possible in World Watch Institute for UNEP (2008) Green Jobs: Towards Decent Work in a Sustainable, Low-Carbon World. 5 World Watch Institute publication for UNEP includes a detailed classification of green collar jobs areas (WWI, 2008, p. 42) 3

4 Beyond GDP Alongside much of the research about the inherent problems of an economic system based on growth, there has also emerged a movement calling for a shift to Beyond GDP. This approach complements much of the analysis of the relative merits of economic growth by suggesting that GDP is simply one indicator among many, and that economic growth alone cannot be an adequate measurement of the success and wellbeing of a nation. That growth is also environmentally destructive is significant, but the Beyond GDP movement moves beyond the economics and suggests that there are other important factors that are equally, if not more important in measuring progress. Economic growth indicators (such as GDP) cannot be considered as comprehensive measures of well-being as after a certain point the relationship between growth with social progress starts to decline. Complementary indicators that are as clear and appealing as GDP but more inclusive of other dimensions of progress are needed. Adequate indicators for the assessment of environmental and social impacts in particular are required to address global challenges such as climate change, poverty, resource depletion and health. The Beyond GDP concept was championed during a conference in 2007 organized by the EU institutions, Club of Rome and the OECD. Since then, the European Commission has produced a roadmap containing five key actions to improve indicators of progress in line with meeting citizens concerns, whilst making the most of new technical and political developments. These five key actions are to a) complement GDP with environmental and social indicators, including a comprehensive environmental index; b) assure near real-time information for decision-making to become more responsive to fast-changing development, such as climate change, air or water quality; c) provide more accurate reporting on distribution and inequalities; d) develop a European Sustainable Development Scoreboard, to stimulate the exchange of experience between Member States and among stakeholders on policy responses; and e) extend national accounts to environmental and social issues to establish a solid information base for decision making in these areas 6. Ecosystem Evaluation and the Payment for Ecosystem Services A fundamental complement to all approaches to a green economy is the notion that the Earth s ecosystems need to be valued and incorporated into all economic activities. The approach of ecosystem services valuation is subtly different to many of the other approaches outlined in this briefing note. Rather than growing the economy in areas that are less environmentally damaging, or de-growing the economy altogether, ecosystem valuation places a value on ecosystem services with the objective that the market will then respond accordingly. Encouraging investments in positive environmental activities and discouraging economic pursuits that damage the environment in this system can also be determined by market price signals that are set through the internalization of the true value of ecosystems services into production this is also known as the valuation of and Payment for Ecosystem Services (PES). 6 European Commission (2009) GDP and beyond: Measuring progress in a changing world. 4

5 The Economics of Ecosystems and Biodiversity study, an initiative under UNEP, highlights the economic importance of biodiversity and emphasizes the threats posed by biodiversity loss and ecosystem degradation. Its work in the form of various reports for policymakers, businesses and citizens, shows why valuing ecosystem services and measuring natural capital make economic sense and how investment in ecosystems provides high returns. 7 Way Forward It is evident that there are a diverse range of perspectives that all broadly come under the banner of a green economy, and that whilst many of the schools of thought have a lot in common, there are also some diverging trends. Where many of these ideas have failed to gain traction is in the ability to demonstrate that they can lead to an equal if not better standard of living than our current system. All-too-often the social benefits of green economics have either been lost or not effectively communicated. The Beyond GDP movement has managed to bring in broader social indicators, and Tim Jackson s work with its focus on prosperity has shifted the focus away from the environment as an economic component, and instead re-cast the debate with human prosperity firmly in the centre, indivisible and inextricably linked to the wellbeing of the planet, our host. Nef s extensive work on wellbeing and its pioneering of an interdisciplinary Green New Deal group in the UK has been important for demonstrating that green investment is good for employment, and that a shift to a low-resource economy where, for example, shopping is not the main driver of our apparent success, has benefits for all of us. This focus on the economic, social and environmental co-benefits of less resource-intensive economic systems needs to be articulated more firmly at a global level. The achievement of collective global prosperity rests upon an economic system that has human and environmental wellbeing at its heart, rather than the blinkered pursuit of profits and wealth. 7 The Economics of Ecosystems and Biodiversity - 5

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