Not just for the rich: Green growth and developing countries
Today we publish the second in a series of articles on the OECD’s contribution to the RIO+20 UN Conference on Sustainable Development
A few years ago, I was invited to present the OECD’s International Futures Programme at a meeting on long-term issues organised by the UK’s Foresight project. Each of us outlined our group’s approach to strategic questions, explaining why we chose a particular time horizon. Mostly it was what you’d expect (50 years at least in the energy business, a minute or less for financiers). The most surprising contribution, for me at least, was from the chief economist of a big mining group who said that they didn’t bother with strategic planning and that, in essence, when the price of a mineral went up they got out their shovels and started digging and when it dropped, they leaned on their shovels until the price rose again. If there was nothing left worth digging out, they looked at their geological surveys and moved elsewhere.
That’s one of the factors behind the so-called “resource curse”, the idea that countries with abundant natural resources are less successful than others. The argument has its critics, but the price volatility of international commodity markets is clearly a problem for countries relying heavily on commodity exports. According to Green Growth and Developing Countries that’s the case for many non-OECD countries. The report identifies three “clusters”: fuel exporters, non-fuel commodity exporters and manufacturing exporters. Fuel exporters are strongly represented among high-income countries. The non-fuel commodity exporters are relatively over-represented in the low and lower middle-income groups. Manufacturing exporters are strongly represented among the middle-income countries.
Green growth is proposed for all three clusters as a way towards more balanced development that would also include the many people in the informal sector and who see little benefit from the economic progress of these past few years. It’s important for developing countries because the potential economic and social impacts of environmental degradation are particularly serious for them. Natural capital accounts for an estimated 26% of total wealth in low-income countries, compared with 2% of wealth in advanced economies.
As well as depending more than advanced economies on the exploitation of natural resources, many developing countries face severe economic, social and ecological threats, ranging from energy, food and water insecurity to climate change and extreme weather risks. They also face risks from premature deaths due to pollution, poor water quality and diseases associated with a changing climate.
There are international implications too. Although today most developing countries contribute only minor shares to global greenhouse gas emissions compared to the OECD and major emerging economies, they will increase their emissions if they follow conventional economic growth patterns. Green growth has emerged as a new approach to reframe the conventional growth model and to re-assess many of the investment decisions in meeting future needs.
OECD defines green growth as: “a means to foster economic growth and development while ensuring that natural assets continue to provide the resources and environmental services on which our well-being relies”. Green Growth and Developing Countries identifies three dimensions a national government should examine: a national green growth plan to create enabling conditions; green growth mainstreaming mechanisms to ensure opportunities are explored through existing economic activities; and green growth policy instruments to tap specific opportunities.
However, developing countries interpret green growth in different ways and the concept has generated some concerns. For example, the high initial costs for the transition to green growth appear to be beyond the reach of many, and even basic technologies are still lacking in most developing countries, particularly in wastewater treatment, waste management, energy efficiency and integrated water resource management. There is concern too that developing countries’ own technologies, including indigenous approaches, will not be able to compete, and they will need to import technologies from other countries.
Despite this, the majority of developing country governments are looking at different elements of a green growth strategy, such as carbon taxes, green energy funds, payment for ecosystem services, renewable energy, sustainable public procurement, and natural resource management. However green growth is rarely addressed in mainstream economic, budget and fiscal policies, and with a few exceptions, including Cambodia’s Green Growth Road Map and Ethiopia’s National Development Plans, there are few holistic policies, strategies and institutional systems in place.
That said, we started this article talking about time horizons, and we shouldn’t forget how recent the concept of green growth is and the fact that it is part of a long-term strategy seeking to change ways of doing things that have been used for decades if not centuries. Uncertainty and disagreement are to be expected at this stage and the OECD insists on the need for discussion and sharing of experiences.
A first consultation jointly organised by the OECD and the Global Green Growth Institute took place in Seoul, Korea in May 2012. The over-riding message was that unless green growth can speak clearly to poverty reduction and social and economic development in the near to medium term, it will make little progress. Most reaction was pragmatic – green growth should be seen as improving mainstream policies rather than as some radically new paradigm.
The next consultation with developing countries will take place at the Rio +20 conference on June 17th, and this effort will guide the articulation of a report that should be available by the end of 2012 and further refine the elements needed for a green growth policy framework.