Green growth strategies: a framework for the future, and the present
Today is the second day of the OECD Green Growth Strategy Workshop. We asked Nathalie Girouard, the Green Growth Strategy Co-ordinator, for her views on some of the topics being discussed.
What is a green growth strategy and why do we need one?
Nathalie Girouard: The aim of a green growth strategy is to provide a clear framework for how countries can achieve economic growth and development while at the same time preventing costly environmental degradation, climate change and inefficient use of natural resources.
We need green growth because risks to development are rising as growth continues to erode natural capital. This is occurring more rapidly in the developing world, but much of the demand driving it is in the developed world. These tensions may undermine future growth prospects for at least two reasons.First, it’s becoming increasingly costly to substitute physical capital for natural capital, for instance as fish become rarer, you need more sophisticated boats to catch them.Second, change doesn’t necessarily follow a smooth, foreseeable trajectory. To stay with fishing, some fish stocks have suddenly disappeared after declining only slowly for years.So if we want to make sure that the progress in living standards we’ve seen these past fifty years doesn’t grind to a halt, we have to find new ways of producing and consuming things. And even redefining what we mean by progress and how we measure it.
But we can’t just start from scratch. Changing current patterns of growth, consumer habits, technology, and infrastructure is a long-term project and we’ll have to live with the consequences of past decisions for some time. This “path dependency” may continue to exacerbate systemic environmental risks even after basic issues such as incentives have been addressed.
We have to be aware of possible path dependency in green growth strategies too. They should be flexible enough to take advantage of new technologies and unexpected opportunities for example, and be able to abandon one approach if a better one becomes available.
How do you put a value on natural capital?
NG: Ideally, policies should try and mimic markets or provide price signals that are integrated into market decisions. The reason for this is that market-based instruments, such as environmentally-related taxes, tradable permits, and subsidies for reducing pollution, can provide the right incentives for broadly-based actions that reduce environmental damage with the least resource cost, and also promote and guide “green” innovation.Broadly speaking, we can’t say whether pricing is best achieved through permits or taxes. Permit systems tend to work well when the control of emissions can be done at the level of relatively large emitters. Taxation is likely to be more appropriate for small and diffuse sources of pollution such as households, farmers and small businesses.
How will we know that growth is green?
NG: For that, we need objective data and indicators to compare them. The OECD measurement framework explores four inter-related groups of indicators reflecting the environmental efficiency of production and consumption; the natural asset base; the environmental quality of life; and describing policy responses and economic opportunities.
Overall, we’ve identified around thirty possible indicators for monitoring green growth and defined a small set of “headline‟ indicators to track the most central elements of the green growth concept and represent a broader set of green growth issues.
The data have given us at least three indications already. First, environmental pressure is still growing, but each extra unit of growth now puts less pressure on the environment than previously. Second, there is some evidence of displacement of CO2 emissions from OECD to non-OECD countries. Third, the environmental goods and services industries accounts for a modest share of value-added and employment.
How is green growth different from sustainable development?
NG: Sustainable development represents a grand paradigm linking economy, society and environment, whereas a green growth strategy proposes an a policy framework. In that sense, green growth is more concrete. The principles of sustainable development reflect long-term aspirations, while green growth combines efforts to exploit opportunities to shape a more robust economic recovery in the short-term with promoting new, greener sources of growth over the longer-term.
Importantly, green growth policies highlight the complementarities between economic and environmental challenges to identify the best conditions for growth. But there’s no conflict between the two: a green growth strategy contributes to sustainable development by providing an actionable policy framework to generate these conditions.