Global Trends by Martin Khor

Monday 24 January 2011

Global debate on “green economy”

The concept of a “green economy” and especially how to move towards it is stirring a global debate, especially at the United Nations which is organising a 2012 conference on environment and development.

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The “Green Economy” is emerging as a significant concept, though also a controversial one, that will be part of the international environmental debate this year.

At the United Nations in New York earlier this month, I took part in a panel discussion on this topic, together with the head of the UN Environment Programme, Achim Steiner and others.

The green economy has become a major theme of the “Rio Plus 20” --  a conference to be held in 2012 in Brazil to commemorate the 20^th anniversary of the historic UN conference on  environment and development, better known as the Rio Summit held in 1992.

At first glance, the “green economy” appears to be a simple idea, whose time has come.  Surely we all want to conserve natural resources and minimise pollution and Greenhouse Gas emissions.  What better way than to turn the economy “green”?

There is, however, no scientific agreement yet on how to achieve a “green economy”, nor is there an international consensus on what it means and how to move towards it.

A “green economy” gives the impression of an economy that is environmentally-friendly, sensitive to the need to conserve natural resources, minimise pollution and emissions during the production process, and promotes environmentally-friendly lifestyles and consumption patterns.

The difficult questions are whether the attainment of such an economy constrains other aspects, including economic growth of poor countries and social goals such as poverty eradication and job creation.

How do we identify and deal with the trade-offs?  What is the role of the state and regulation, and what is the appropriate way to address the market and private sector?  How can we build an economy that is more environmentally-friendly, and how should we handle the transition to a greener economy?  

The Rio Summit had partially answered these questions by providing a basic framework – that the environment must be integrated within development, and not be taken separately.  Thus the need to protect the environment should not be at the expense of the developing countries' right to development.

From this sprang the concept of “sustainable development”, with its three pillars of environmental protection, economic development and social development.

It recognised the need not only for international policies and actions, especially finance and technology transfer,  to support developing countries to move towards a sustainable development pathway.

The Rio Summit established the principle of “common but differentiated responsibilities”.   The rich countries, having contributed most to global environmental damage, have the responsibility to take the lead in changing their own economic model and in providing developing countries the finance and technology to move to an environmentally friendly system.

The developing countries want the “green economy” concept to be placed well within this sustainable development framework of the Rio Summit – and not to replace it.  While acknowledging the positive aspects of developing the green economy concept, they also point to the risks.

The first risk is that the “green economy” is defined in a one-dimensional manner, and promoted in a purely “environmental” manner, without considering fully the development and equity dimensions.

The second risk is that a “one size fits all” approach is taken, in treating all countries in the same manner.   This would lead to failures either for environment, development or both.  The levels and stages of development of countries must be fully considered.

The third risk is that the “green economy” is inappropriately made use of by countries for trade protectionist purposes.  In particular, rich countries may use this to justify unilateral trade measures against the products of developing countries, or to impose standards that have not been agreed to.

A fourth risk is that the “green economy” is used as new conditionality on developing countries for aid, loans, and debt rescheduling or debt relief.  This may pressurise affected developing countries to take on one-dimensional environmental measures rather than sustainable development policies.

Other issues in considering the “green economy” include what is the role of the pubic sector and the private sector, and the role of regulatory mechanisms and market mechanisms. 

There is a long and large debate on these issues.  Many believe that the environmental crisis is a result and sign of “market failure”, that the private sector and markets left to themselves have generated the resource depletion, pollution and Greenhouse Gas emissions characterise the environmental crisis.

Thus, regulation of the private sector is important.  Regulatory mechanisms such as limits to pollution and emissions, pesticides in food, water contamination, and use of environmental taxes and fines, are thus seen as crucial policy instruments, that should be major or central components to promoting the “green economy”. 

However, there is instead an increasing trend of relying on “markets” whereby companies and countries can pollute beyond their assigned limit by buying pollution or emission certificates from other companies or countries. 

Such markets for buying and selling “pollution rights” is seen in developed countries as an alternative to companies or countries having to take their own adequate action, and to allow them to pass the action on to others.   This has aroused increasing criticisms.

While there is an interest in learning about the use of pricing mechanisms, taxes and payment for entrance of cars into urban centres, there is also a debate on the appropriateness and effects of the use of “markets” for pollution permits or for “offsetting” in the implementation of environmental commitments.        

Finally, there are many challenges facing developing countries in moving their economies to more environmentally friendly paths.  

On one hand this should not prevent the attempt to urgently incorporate environmental elements into economic development.  On the other hand, the various obstacles should be recognised and the developing countries should be supported internationally.

The conditions must be established that make it possible for countries, especially developing countries, to move towards a “green economy.”  

Thus, what seems to be a simple idea, the “green economy”, is actually complex in terms of policy prescriptions and especially when it is the subject of international negotiations.  We will be hearing more about the concept and the debate around it.