People and Ecosystems Program - World Resources Institute
- Date submitted: 1 Nov 2011
- Stakeholder type: Major Group
- Submission Document: Download
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Purpose of this Framework Document
One of the two major themes of the 2012 Conference on Sustainable Development (Rio +20) is the green economy in the context of sustainable development and poverty eradication. In preparation for the conference, many countries have moved forward with developing national strategies or roadmaps to guide the transition. There is no one size fits all strategy for making the green economy transition because countries differ greatly in national capacities for economic governance, existing per capita consumption levels, states of technological and industrial development, economic composition, and incidence and severity of poverty.
Nonetheless, a significant outcome at Rio +20 would be broad consensus that the transition to a green economy is a global imperative complemented by commitments from governments at every level to move forward with making that transition happen. To expedite that process, stakeholders at the Rio +20 conferences could agree on a general framework document that provides guidance on what national or sub-national green economy roadmaps should look like so as to foster international coordination and policy coherence. This paper presents suggestions on how that framework document could be structured, and what content it may contain.
Roadmap documents should be prepared with transparent, multi-stakeholder participatory processes that develop evidence-based policy prescriptions. In preparing green economy roadmap documents, it would be useful to include at least seven major elements:
1. Imperative to act
2. Defining the green economy
3. Guiding principles
4. Pathways to the green economy
5. Policy toolkit
6. Financing strategy
7. Enabling conditions
I. Imperative to Act ? An Economy Out of Balance
An effective way to introduce roadmap documents is by asking ?What problems are green economy reforms trying to solve?? and, as a corollary, ?What opportunities for economic growth and prosperity do green economy reforms seek to leverage?? Clearly identifying worrisome economic conditions and trends and how the pattern of economic growth has failed to advance the environmental and social pillars of sustainable development is key. Providing a remedy for these conditions and thereby opening the door to new opportunities for simultaneously advancing all three pillars thus becomes the key motivation for undertaking green economy reforms.
Problems with the prevailing economy
At the global level, conventional economic development pathways that have been followed for most of the last century have improved lives for billions of people but have generated a number of worrisome conditions and trends that can be synthesized into three fundamental aspects: (1) inefficiency, (2) unsustainability, and (3) inequity.
Inefficiency is manifested in tremendous quantities of waste, in products with short life spans, in production processes that consume far more energy, water, and materials than necessary, in prices that do not reflect true environmental and social costs, in economic activity that does not advance human well-being and in misallocation of capital by public and private actors to investments that fail to yield sustainable development returns. Inefficiency is also manifested in vulnerability and volatility of economies that are overly specialized and trade dependent and thus exposed to price and supply shocks and international financial, economic, and political crises on a regular basis.
Sustainability is jeopardized by the depletion or degradation of the stocks of natural, human, built and social capital on which all economic activity ultimately depends. The Millennium Ecosystem Assessment found that approximately 60% of the world?s ecosystem services are being degraded or used unsustainably.6 Our ability to produce food from the land and food from the sea faces multiple threats in the form of nutrient pollution, climate change, urban sprawl and harmful agricultural and fishery practices.
Local and indigenous ecological knowledge is being eroded as nature-based cultures and language disappear. Proliferating slums are a stark indication of underinvestment in the built capital of cities ? vital sanitation, water, energy, and transportation infrastructure on which an increasingly urbanized world must depend. The number of people living in slum conditions has risen from 657 to 828 million since 1990. Investment in all types of capital is hindered by extraordinary levels of both consumer and public debt.
Gross inequalities in income, wealth, and opportunity have steadily worsened for several decades. The U.N.?s World Institute for Development and Economics Research finds that the richest 2 percent of adults now own more than half of all global wealth, with the richest 1 percent alone accounting for 40 per cent of global assets. The vast bulk of the world?s wealth, the study concludes, sits ?highly concentrated? in the pockets of a relative few. Persistent poverty, measured through a multi-dimensional lens affects nearly 3 billion.
Roadmap documents should also strive to identify the root causes of inefficiency, unsustainability, and inequity. Some have traced these shortcomings to a series of market and institutional failures inherent to the neo-classical growth models such as externalities, inadequate investment in public goods, competitive barriers, and asymmetrical access to information. Others cite key barriers in the areas of finance, fiscal policy, skills, innovation, public procurement, and planning. Others trace the origins of economic crises to the lack of democratic oversight in the institutions of global and national economic governance.13 Still others assert that an economy which requires growth in its physical dimensions is doomed to fail on a planet with finite resources.
All or perhaps just a few of these shortcomings and causes may be relevant for any particular country, state, or city. The important point, however, is for roadmap documents to begin with an articulation of the problems green economy reforms are designed to address.
II. The Green Economy ? What It Is, and What It Is Not
What is the green economy? In the run-up to Rio +20 there has been a wide divergence of opinion on what the green economy actually is and whether or not it provides a useful basis for collective action. To dispel these concerns, roadmap documents should clearly articulate what the green economy is and is not. The United Nations Environmental Program (UNEP) defines the green economy in functional terms: ?one that results in improved human well-being and social equity while significantly reducing environmental risks and ecological scarcities.? The green economy has also been described in terms of an overall strategy for growth, one that fosters economic growth and development, ?while ensuring that natural assets continue to provide the resources and environmental services on which our well-being relies.? The green economy has also been described in relation to sustainable development, as an economy that corrects the market and institutional failures of the prevailing economic model and thereby makes the economy a more efficient vehicle for advancing the neglected pillars of sustainable development.
Key attributes of the green economy
Regardless of the varying definitions, perhaps the most important task of roadmaps is to draw a distinction between the green economy and the prevailing economy that currently exists. In contrast with the prevailing economy the green economy can be described in terms of three overriding attributes:
1. Efficient ? an economy whose growth is decoupled from use of energy, water, and materials in production, includes social and environmental costs in pricing, allocates investment to its highest and best use, and minimizes the stream of harmful wastes and pollutants, including greenhouse gas emissions.
2. Sustainable ? an economy that builds rather than depletes natural, human, built and social capital and that is resilient to natural disasters, climate change, political strife, and financial and economic volatility.
3. Equitable ? an economy that significantly reduces inequalities in the distribution of wealth, income, and opportunity and ensures that the benefits of growth are distributed fairly and leave future generations as least as well off as the current one.
Characterizing green economy attributes in terms of these three overriding themes would help advance a consistent vision of what a successfully greened economy looks like.
In roadmaps, it is also important to identify what the green economy is not, and what risks green economy reforms seek to avoid. The green economy is not a new playing field for competition amongst nations, rather, a framework for cooperative action. The green economy is a pathway to and not a substitute for sustainable development. Green economy reforms are not tools for further increasing disparities in technological capacity, concentration of wealth, income, or market share. The green economy is not a one size fits all solution but a framework for solutions appropriate to particular country situations. Nor is the green economy a new basis for conditionalities on aid or international investment or for trade barriers against developing world products. By articulating these safeguards in roadmap documents, countries can help alleviate concerns about business-as-usual strategies disguised as green economy reforms.
III. Guiding Principles of the Green Economy
What are the principles of the green economy? To establish a basis for evaluating policy and holding decision makers accountable it may be useful for roadmap documents to articulate a concise set of guiding principles of the green economy. The forty year history of major summits and conferences on sustainable development provide a rich body of literature from which to draw, and include principles related to beneficial management of both renewable and non-renewable resources, improving quality of life through economic and social development, protecting natural habitats for their economic values, common but differentiated responsibilities and respective capabilities, sustainable production and consumption, fair trade, liability for environmental damages, full-cost accounting and many others green economy roadmaps can reiterate.
More recently, the Earth Charter and proposed green economy principles by various civil society organizations also provide guidance. Some common principles address:
? Economic democracy ? The green economy transition should be planned and implemented through inclusive and transparent participatory processes consistent with Principle 10 of the Rio Declaration.
? Full cost accounting ? Prices, public investments, and policy decisions should fully account for all market and non-market benefits and costs so as to promote decisions that maximize net public benefits.
? Qualitative growth ? Growth in the green economy is more about growing the qualitative dimensions of well-being rather than economic activity for its own sake.
? Restoring capital ? Stocks of natural, human, social and built capital should be restored rather than depleted to maintain quality of life for the next generation.
? Cooperation ?Greater cooperation amongst nations, corporations, workers and communities is key to ensuring that green economy benefits are broad based.
? Resiliency ? Diversifying production processes, sources of supply, and employment opportunities is critical for maintaining adaptability in the face of change.
? Fair distribution of benefits ?The green economy should place a priority on improving quality of life for those least well off.
IV. Green Economy Pathways
What are the pathways to the green economy? The core of green economy roadmaps are the pathways countries adopt to make the transition from brown21 to green. Green economy pathways are cohesive sets of policies and practices implemented to achieve specific green economy goals like replacing inefficient processes with resource efficient ones. Pathways can be sector specific or economy-wide in nature or based on geography or critical issues. Examples include:
? Low-carbon development
? Livable, walkable cities
? Transforming agriculture
? Investing in natural capital and ecosystem services
? Sustainable production
? Sustainable consumption
Appendix 1 provides a template for describing major attributes of some green economy pathways referenced in roadmap documents and the green economy literature. Differences in initial technological conditions, stage of industrial development, economic composition, geographies, and political systems all make the selection of which pathways to adopt or prioritize somewhat unique to each country. For each pathway selected, roadmap documents should:
1. Define the nature of the transition
For each pathway, the precise nature of the transition ? or what needs to change ? may vary greatly from country to country. For example, for low-carbon development, the amount of renewable energy in a country?s electrical generating mix may already be at a maximum, so low-carbon development may mean transitioning predominant transportation fuels from petroleum to biofuels or electricity or significantly reducing personal vehicle use.
Small island developing states may have limited capacity for local agricultural production, so the transition to food security may be more about securing local benefits of commercial fisheries and reducing overfishing rather than replacing a certain amount of crops for export with crops for local consumption.
2. Set goals, targets and timelines
An important step in further refining the nature of the desired transition along any particular pathway is to express that pathway in terms of goals, targets, and timelines. To foster accountability, quantitative targets should be developed rather than qualitative goals if possible. The final declaration issued at the 64th annual UN DPI/NGO conference in Bonn contains examples of both quantitative targets and qualitative goals for the green economy that may prove useful in preparing roadmap documents. These include goals and targets for 2020 or 2030 related to sustainable consumption and production, sustainable livelihoods, climate sustainability, clean energy, biodiversity, water, healthy seas and oceans, healthy forests, sustainable agriculture, green cities, subsidies and investment, and indicators.
3. Describe current conditions
Pathways have beginning points and end points. End points consist of goals and targets with specific dates for attainment. As beginning points, roadmap documents should characterize current conditions with respect to those same goals and targets. For example, in its Green Economy Report, UNEP noted a current rate of recycling for e-waste of 15% but suggested a worthwhile green economy target of 100%. Qualitative descriptions may also serve as benchmarks for evaluating improvement. For each pathway in its national green growth roadmap, for instance, the Kingdom of Cambodia explains current conditions qualitatively in terms of challenges the green economy transition seeks to address. With respect to transportation, these current challenges include ?increase of vehicles on the streets leading to traffic congestion; lack of affordable and convenient public transport options; violation of traffic rules; little or no control over the number of vehicles; high single occupancy and insufficient provision of facilities for pedestrians (sidewalks, traffic lights, etc.).?
4. Identify, prioritize, and sequence policy interventions
For each pathway, roadmaps should identify policy interventions and how those interventions will be sequenced over time. It may be useful to rank and prioritize policy interventions based on cost and impact. Take low-carbon development as an example. Conservation and efficiency improvements may present high impact options that can be implemented at a low cost, while carbon capture and storage or new biomass plants may have much less impact and cost far more. It would make sense, then, to sequence policies to implement low cost-high impact solutions first.
V. Policy Toolkit
What policies could help shift a country toward a green economy? Stimulating the green economy may require a major overhaul of economic policies and incentives. Roadmaps can include an in-depth evaluation of current policies to identify those that promote economic activity that is inefficient, unsustainable, and/or inequitable. Roadmaps could then discuss a strategy for phasing out or converting those policies into ones that foster resource efficiency, more sustainable use of natural resources, and more equitable distribution of income and wealth. Policy options can generally be grouped into four major categories ? regulatory based, taxation based, expenditure based, and institutional based.
Regulatory-based approaches rely on the authority of governments to set standards, control land use, and issue permits and authorizations through legislation or administrative actions. Taxation-based approaches include income, sales, property, value added and other traditional taxes but also taxes on resource use and pollution, tariffs, and impact fees. Expenditure-based approaches include all forms of government investments, loans, subsidies, contracting, procurement as well as expenditures on programs that affect economic development such as research and development. Institutional-based approaches are ones related to government and corporate accountability, public participation, and property rights.
The table below identifies some policy tools that roadmap documents can identify and discuss in each major category. As with other roadmap elements, such policies will vary with initial technological conditions, stage of industrial development, economic composition, geographies, and political systems. Policy tools can be mapped into green economy pathways to provide clarity on how the green economy transition will actually be implemented over a specified time period.
Sample of Policy Options in the Green Economy Toolkit
(Please reference full submission for Sample)
VI. Financing Strategy
How can the green economy transition be financed? Transitioning to the green economy along any particular pathway will necessitate changes in how governments, banks, pension funds, corporations, and even individuals spend, loan, and invest money to build capital and create quality green jobs. It will also require changes in how money raised so that taxes, tariffs, and fees provide disincentives for wasteful, polluting, and unsustainable forms of economic activity. Roadmap documents should specify what those changes should be for both internal (i.e. raised through taxes or tariffs) and externally (i.e. borrowed or invested from abroad) leveraged funds. UNEP recently reported that roughly 2 percent of global GDP per year between 2010 and 2050 would be needed to finance a transition to a global green economy. There are many innovative financing strategies countries are pursuing to achieve their specific green economy financing goals. For example:
Redirect harmful subsidies
Subsidies play a significant role in perpetuating dependence on unsustainable goods and services by artificially depressing their prices relative to more sustainable alternatives. Subsidies fall into two major categories ? production and consumption - and come in a variety of forms, including preferential access rights, public spending on research, development and infrastructure, import and export restrictions, preferential lending, price controls, tax exemptions, and mitigation of risks. Redirecting subsidies has been widely noted as a promising strategy because it requires no new sources of revenue. Globally, fossil fuel subsidies are estimated to run $US 640 billion per year, so redirecting even a share of these towards renewable energy solutions may have a major impact. Roadmap documents could identify all the ways harmful activities are now subsidized and propose long-term strategies for redirecting them to promote the green economy transition.
Implement ecological tax reform
Eco-taxes are a strategy for internalizing the externalities associated with pollution, waste, and unsustainable consumption and resource use. Roadmap documents can identify priorities for policy experimentation. The number of successful eco-tax programs that have yielded broad sustainable development benefits is growing. In 1999, Germany introduced its Ökosteuer or ecotax which shifted the tax burden away from labor costs to tax the consumption of oil and electricity use. The revenue from the tax is used to lower pension contributions and promote renewable energy. The ecotax has led to reduced fuel usage, lower emissions, growth in renewable energy and the creation of new jobs.
Collaborate with patient capital
Pension funds, insurance companies, and mutual funds are often regarded as holders of ?patient capital? that could be an invaluable source of investment for the green economy. In the OECD alone, these investors held over $65 trillion as of the end of 2009. These entities are also sensitive to environmental risks, and have a business interest in reducing it. For example, in response to climate concerns, HSBC Insurance established a ?green insurance? program in Brazil, Argentina and Mexico that put a segment of the premium paid by insurance policy holders towards forest preservation. With an emphasis on the long-term, institutional investors are more open to investments that reap sustainable development benefits and not simply the highest financial return. Roadmap documents could identify ways policy-makers could collaborate with these investors to match patient capital with opportunities for green growth and sustainable development.
Develop micro-finance and micro-insurance programs
Green economy finance does not always need to be in large installments. Micro-finance and micro-insurance programs are often more appropriate and effective in improving economic conditions in impoverished areas and supporting clean drinking water, sanitation and energy access. For example, the Grameen Shakti bank in Bangladesh has successfully granted loans supporting solar home systems. The system has also helped to create new jobs (due to improved energy access for businesses) and improve income security for villagers.
Prepare green stimulus packages
In the wake of the 2008 economic crisis, many countries opted for stimulus packages that emphasized green technologies, green jobs, and ecological restoration. Globally, it is estimated that $US 512 billion out of $3.3 trillion in public stimulus funds were allocated to low-carbon and environmental infrastructure investments. Japan, for example, announced a $US 15.4 billion stimulus package in 2009 to foster environmentally-friendly technologies. Roadmap documents could include a long-term needs assessment that would serve as the basis for future stimulus spending.
VII. Enabling Conditions
What enabling conditions should be in place to expedite the transition to a green economy? Enabling conditions establish a general economic environment that makes green economy reforms possible, and effective. Key enabling conditions may include good governance, compatible trade regimes, technology transfer, regulatory authority, new indicators of progress, innovation, green workforce skills, education, and policy coherence. For state and local governments, the most important enabling conditions may be provided by national governments ? for example, the authority to implement certain kinds of taxes or impose certain regulatory constraints. For national governments, the most important enabling conditions may relate to supportive trade regimes or international programs for transfer and dissemination of green technologies. There has been a wealth of research on enabling conditions for the green economy that could be incorporated into roadmap documents.
For example, good governance is critical, and has been well addressed in the green economy literature. If a green economy is to be a tool for achieving sustainable development and poverty eradication governments need to highlight the importance of improving national environmental governance. Roadmap documents provide a forum for doing so. Achieving sustainable development will require making policy decisions that involve balancing competing interests and reaching environmentally sustainable, economically sound and socially equitable outcomes. If decision making processes are secret, non-participatory and unaccountable, a few selected and powerful interests will influence policy and developmental decisions. Principle 10 and good national environmental governance which recognizes coordination, efficiency, transparency, engagement and accountability becomes a foundational and enabling requirement for the success of a green economy and sustainable development.
As another example, research on new sustainable development and green economy indicators has been ongoing for decades and provides a basis for roadmap documents to establish metrics that ?measure what matters? and hold decision makers accountable for monitoring the effectiveness of green economy reforms. The OECD has proposed a set of indicators capturing major aspects of green growth. These include socio-economic attributes, environmental and resource productivity, natural asset base, environmental quality of life, and economic opportunities and policy responses. The World Bank has launched an ambitious initiative on wealth accounting that incorporates changes in stocks and flows of natural capital and ecosystem services. In the U.S., the State of Maryland recently adopted a Genuine Progress Indicator to supplement GDP, guide policy and provide an indication of how well the state was growing with respect to sustainable development by taking economic costs associated with depleting natural capital, carbon emissions, and inequality into account.
Fostering green innovative capacity is another enabling condition that is considered a high priority. Innovative capacity is defined as how well entrepreneurs are supported in their efforts to find new business models, create new technologies and develop new processes. The key is to find ways to create an environment that maximizes the potential for innovations in either products or processes that result in an environmental gain by way of reduced material, water, or energy use. Policymakers and international agreements are critical for setting the stage for innovation as they can support targets for energy and resource efficiency as well as waste reduction. An innovation is more likely to succeed when the rules of the game are clear and consistent. These rules tell the innovator the bounds within which they must work and the characteristics his solution must include. For example, efficiency standards drive innovators to create and provide products that meet a set of criteria. Japan?s Top-Runner program sets energy-efficiency standards for appliances and vehicles higher than the best performance value of each product currently on sale in the market.40 By encouraging a global ?race to the top?, the international community can challenge innovators and entrepreneurs to think outside the box.
By explaining the imperative to act, what the green economy is and is not, what principles on which it operates, pathways, policies, financing approaches and enabling conditions, green economy roadmap documents will provide clear signals that governments are making long-term commitments to make the green economy transition occur. This, in turn, will provide a measure of certainty with respect to future regulatory and policy environments that may help motivate equally longer-term investments by both public and private actors. Preparing roadmaps through inclusive, transparent, and participatory processes will ensure that the transition to a green economy receives widespread public support. For these reasons, a global framework for preparation of green economy roadmaps should be a priority outcome for the Rio +20 process.
Please reference full submission for Appendix