Much of the attraction of ‘green’ growth to politicians and policy-makers is the apparent promise of job creation. Many developing countries face the prospect of rapidly growing labor forces, so measures that stimulate labor demand look attractive. But is the promise justified? That depends on how labor markets work and how ‘green’ growth policies are implemented.
Small but sometimes radical new steps toward greener energy and green growth are happening on our stressed planet, but we don’t hear enough about them, nor do we sufficiently explore and share policy lessons.
Examples include ‘smart grid’ R&D activities that deploy sensors to gather data on incoming electricity from wind, solar and other renewables with varying power outputs, better management of outages, factoring in the needs of electric vehicles, and installing more energy-efficient power meter usage in homes and offices. At the other end of the spectrum, Husk Power Systems, a company operating in Bihar, India has devised a novel single fuel gasifier for rural electrification based on discarded rice husks – one of India’s most common waste products. Thanks to the risk husks, 60 mini-power plants have now been installed. They power about 25,000 households in more than 250 villages in rural India.
One of those small but important agreements that would mean that Durban had moved the ball forward in the search of an international, comprehensive approach to climate change is a forum to discuss trade issues.
As countries seek lower emissions development, and plan out pathways to greener growth, they are considering introducing different forms of “green subsidies”, border tax arrangements, embedded carbon footprint standards which many in the developing world feel will be exclusionary.
A new generation of new tariff and non-tariff barriers is feared.
This is complicated by the question of where to resolve this - in the WTO or the UNFCCC. So, in order to move forward, start looking at the issues in a practical way, learn lessons from different approaches: the idea of a forum.
The success of such a forum could be an important input to the growing body of work around how to make greener growth for all, or as Ban Ki Moon said today at a meeting of heads of UN agencies and minister of environment, “sustainable green growth.”
We are keeping up the pressure for inclusion of language that would allow a work program on agriculture to start up. While some delegations object to agriculture’s inclusion for fear it dilutes the agenda, others fear the carbon content of agri-products and green standards, on top of existing phyto-sanitary standards and other aspects of agriculture trade.
While today only 15% of the global food supply is subject to international trade, that is expected to double as the world population rises from 7 to 9 billion.
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East Asia has shown us how economies can grow at a pace unparalleled in human history. What made it happen? Key ingredients included high savings rates and a willingness to invest them for the long term in people and infrastructure, leaders who kept their eyes on the long-term transformation of the economy, and a lot of serious attention to how investors respond to incentives.
But aren’t these some of the same ingredients we’ll need to make growth green?
This was one of the topics we discussed this week at the first Annual Conference on East Asian Development in Singapore organized by the Bank’s East Asia Pacific region and Singapore’s Institute for Policy Studies. This brought together senior policymakers and academics from throughout the region. Is it possible that the Region that brought us growth, could also be the leader in making that growth green?
But first, just how green has East Asia’s growth been so far? To over-simplify, the region has made pretty good progress in reducing the environmental damage per unit of output, but this hasn’t been able to keep up with the astonishing growth of the output. So, real GDP is up by near 400% since 1990, while energy use is up by 150%, sulfur dioxide emissions up by about 60%, and carbon dioxide up by nearly 200%.
This is a lot better than it might have been – but the environment is still getting worse at a serious rate. And this says nothing about water stress, loss of biodiversity and a host of other issues. (On a positive note, particulate emissions are down by 50%, and lead in fuel has almost disappeared).
Does East Asia need to lower its growth to ensure that the environment doesn’t deteriorate further? No, but it will require the same degree of commitment and long term focus that inspired the strong growth in the first place – but this time by internalizing environmental costs.
Green growth has been in the news lately with much talk about greening the fiscal stimulus for a triple bottom line. Yet there are worries and the question remains as to whether green growth means slower growth with resources diverted to cleaning up the growth process. And what would happen to countries who unilaterally decide to impose domestic environmental regulations and/or a carbon price?. Will this lead to jobs moving abroad—to poorer or less-green countries that would become pollution havens?
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Unfortunately much of the green growth discussion has been of the proselytizing or the scare-mongering kind, with not enough analysis of the potential trade-offs between greening and growing, and not enough thought devoted to ways of minimizing these trade-offs.
In this context, a new paper by Philippe Aghion, Daron Acemoglu and two Harvard graduate students, on “The Environment and Directed Technical Change” (pdf) is a much needed contribution. It also makes for a fascinating read: do not let the large number of equations scare you off! As in all of Aghion’s work, the key insights of the papers are fully captured in crisp writing in the first few pages of the paper.
In his presentation at the World Bank on March 8, Aghion explained the motivation of the paper: most economic models looking at the trade-offs between acting aggressively or not on climate change assume technical change is exogenous—i.e., does not respond to changes in energy prices (for example through a carbon tax) nor to environmental regulation (like a cap on emissions). This results in green growth being slower than dirty growth, at least if the negative impacts of climate change are small, and/or results in the need for permanent subsidies.