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.
To ensure that green growth policy recommendations are relevant to countries’ needs, the OECD is organising a consultation to review the first draft of the Green Growth Strategy Synthesis Report on 10-11 February 2011. The workshop will bring together policymakers and experts across OECD and partner countries, as well as a range of stakeholders from international organisations, business, and civil society.
In today’s post, OECD Secretary-General Angel Gurría looks at the issues workshop participants will be discussing.
Since the economic and financial crisis, efforts to promote green growth have been intensifying. The crisis provided the impetus, but green growth is not a short-term response. The dynamic will persist over the coming years with a number of initiatives being rolled out by governments and international organisations, including the OECD.
The Green Growth Strategy Workshop is unique in bringing together expertise from so many different areas inside and outside government. One of the key issues we will be discussing over the next two days is that green growth is a core economic concern. It has implications for finance, employment, consumption, innovation and training, in addition to the environment. It therefore needs to be tackled with a high degree of co-ordination across the whole of government.
We also need to determine how to re-frame growth beyond GDP in a way that can help governments hold themselves accountable for performance. Our traditional definitions of “performance” and “progress” will need to be called into question.
The green growth narrative will have to resonate with a truly global audience. That means clarifying environmental risks and their implication for future economic growth across different countries.
We cannot content ourselves with identifying and analysing issues and goals. We must propose an agenda for action, including a practical policy framework and a set of tools to measure progress. This will also need to recognise the key barriers and trade-offs that the transition to green growth will present.
We have set ourselves ambitious targets, but I am confident that this Workshop and future initiatives will help us reach them.
This week the WWF’s Living Planet Report on the health of the planet and the impact of human activity was published. In this post, OECD Secretary-General Angel Gurría, who contributed the report’s foreword, argues that we need to shift our economies onto greener growth paths.
The fight against climate change and the protection of biodiversity and ecosystems must be a priority in our quest to build a stronger, fairer and cleaner world economy. Rather than an excuse to delay further action the recent financial and economic crisis should serve as a reminder of the urgency of developing greener economies.
“Business as usual” is not an option. That’s why the OECD is developing a Green Growth Strategy to help governments design and implement policies that can shift our economies onto greener growth paths. Central to this is identifying sources of growth which make much lighter claims on the biosphere. This will require fundamental changes to the structure of our economies, by creating new green industries, cleaning up polluting sectors and transforming consumption patterns.
If they are to promote this change, policy makers and citizens will need reliable information on the state of the planet and objective analyses of the various options proposed. The OECD will continue to refine green growth indicators and improve the way in which we measure societies’ progress.
An important element will be discussions with other stakeholders to explore common ground, and ways to co-operate in educating and motivating people to adjust their lifestyles. That is why the OECD has invited governments, civil society organisations and experts with a wide range of views to join us in shaping the policies and identifying the actions that will enable us to leave a healthier planet to future generations.
The grooviest car I ever owned was an Aston Martin DB5, as driven by James Bond. My brother preferred the Batmobile, but for me, machine guns and an ejector seat outweighed the kudos of muttering “atomic batteries to power, turbines to speed” before you zoomed off across the carpet.
So I was pleased to see that Aston Martin has just been voted the coolest brand in Britain, while the Caped Crusader doesn’t get a mention among the 500 names listed, not being sleek, polished and sexy.
The list is interesting for other reasons too. It’s dominated by stuff like watches that are waterproof to a depth where whales implode, expensive ice-cream, fancy phones, and the like. Practically none of the top brands actually make anything you really need. (The Plain People of Blogland, spluttering fair trade coke all over their Facebook wall: Criminey, dude, my iBerry has literally saved my life a million times this week already!)
You could object that the cool list is purely subjective and doesn’t really say much about how important these firms actually are. Another list, drawn up by Forbes magazine, ranks firms by their assets. Unlike the cool brands list, practically none of Forbes’ top 100 companies make anything, apart from money, and some of them, such as RBS, have failed spectacularly to do even that.
And yet, nine of the top ten have assets valued at around $2 trillion or more. To put that in perspective, only seven countries in the world had a GDP of $2 trillion or more in 2008 before the worst of the recession hit, including the UK, with a GDP of $2.6 trillion – almost a trillion less than the assets of RBS, the bank British taxpayers bailed out. So most of these assets were probably worthless at best, and some were probably liabilities.
What’s the link between these lists? All the firms featured are highly innovative in one way or another. And they illustrate how increasing wealth means the economy can shift away from supplying the basics to fulfilling desires to fuelling fantasies.
How long can it last though? There are disturbing parallels between what happened in financial markets and what’s happening in the world’s ecosystem. The financial crisis didn’t come out of the blue. There were warnings not to assume that asset values would rise indefinitely. There are warnings that natural resources and the services provided by nature are not infinite.
When the financial system crashed, the living standards of millions of people dropped. But governments stepped in to save the day, and the economy has started to recover. If the natural systems our wellbeing depends on crash, through climate change, biodiversity loss or whatever, nothing will save them.
That’s one reason the OECD has launched a “green growth strategy”. 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.
Towards the end of the 1933 King Kong movie, one of the pilots sent to kill the upwardly mobile but soon to be downwardly plummeting ape helpfully points out the target to his dimwitted gunner, who otherwise may not have recognised the world’s most famous skyscraper and the world’s most infamous monkey.
The movie has been interpreted as everything from a parable of the Great Depression to a return of the repressed, but everyone agrees that the Empire State Building, completed two years before the film, was an inspired choice for the final symbolic showdown.
The building itself embodies the rivalry between its main financer, John Jakob Raskob, creator of General Motors, and rival automaker Walter Chrysler, whose Chrysler Building had been the world’s tallest building.
But it was also intended to represent modernity, and the architects actually carried out a long-term forecasting exercise to make sure the design would meet the needs of future generations.
Today, this could no doubt be presented in terms of sustainability, as could a just-completed $20 million retrofit to make it more energy efficient and environmentally friendly. The new approach uses technology (such as better insulation and continuous monitoring and control of temperature and other conditions) as well as changes in tenants’ behaviour, such as moving desks to allow in more daylight or not over-using air conditioning.
Payback time for the retrofit is calculated at around three years and it is expected to reduce the building’s carbon footprint by 100,000 tonnes over 15 years – the equivalent of taking 20,000 cars off the road.
The “sustainability” incorporated in the original thinking was there to make sure the building remained a good business proposition for many decades to come. Likewise, the latest changes were carried out: “not because it’s the right thing to do, but because it makes business sense. If we don’t reduce our energy consumption, we will lose money and be less competitive against China, India, Brazil and the other expanding economies” according to owner Anthony Malkin, speaking to the The Guardian.
This echoes the thinking behind the OECD’s Green Growth Strategy: “Together with innovation, going green can be a long-term driver for economic growth, through, for example, investing in renewable energy and improved efficiency in the use of energy and materials”.
The green growth link will take you to a number of resources, including an interim report published in May. The Green Growth Strategy Synthesis Report to be presented to the 2011 OECD Ministerial Council Meeting will propose tools and recommendations to help governments identify the policies for the most efficient shift to greener growth.
Energy is obviously a major aspect of this, and with IEA projections showing that cities will consume nearly 75% of world energy in 2030 compared with around 66% today, the Empire State Building’s example is worth following. The Guardian article claims that if just a fifth of the largest buildings in America replicated the Empire State Building’s performance, it would save 2.3 billion tonnes of carbon emissions, equivalent to the amount of greenhouse gas pollution produced by the whole of Russia each year.
Declaration on Green Growth adopted at the Meeting of the Council at Ministerial Level on 25 June 2009
Taxes can provide a clear incentive to reduce environmental damage. Businesses need to be convinced that innovation and investment to reduce environmental damage brings rewards. Similarly, clear and sustained price signals can provide an important incentive for households, for example to reduce their energy consumption or to increase the extent to which they recycle waste. They underpin other policy instruments such as information campaigns (e.g. on the fuel efficiency of new cars or white goods) or the wider use of ‘smart’ meters for water, gas and electricity.
The use of environmentally-related taxes, charges and emission trading schemes is spreading across OECD and emerging economies. Across OECD countries, revenues from environmentally-related taxes amount to about 1.7% of GDP, ranging from about 0.7% on average in North America to 2.5% in Europe. Over 90% of these revenues come from taxes on fuels and motor vehicles.
The photo below from the Wildverband web site sums up a lot of the issues debated in this wide-ranging session.
These children are recycling waste. Are they doing a green job? If we admit that they are, then that prompts another question. Does defining this as green make it any better?
The second question is easier to answer. Nobody would justify child labour on a rubbish dump by saying it’s good for the planet. Another way to look at it is to say that underlying the notion of green jobs is the idea that they’re “better” than other jobs from the standpoint of sustainability, and that means not just the environment, but social and economic aspects too.
One idea on which there was consensus was that if green jobs means anything, it’s as part of a revolutionary change in the way the economy is organised – in how goods are produced and how they are consumed.
In Denmark, for instance, the government decided to promote the windpower industry, and the country is now a world leader in windmills. So you could say that the workers building them are in green jobs. But what about the steelworkers who make the masts and other parts? Their factories may be highly polluting, but their end product is designed to reduce pollution.
One suggestion was that the real debate is not about green jobs, but about what progress means, and the fact that this involves tradeoffs, perhaps of material wealth for other forms of well-being.
As I said at the start, the session was wide-ranging, with more questions than answers:
Will the fact that the babyboom generation is retiring make the economy greener?
Will all the green jobs go to China, and does it matter?
Can policy makers promoting green jobs be smarter than the markets or will green jobs just be white elephants?