Is green growth just a fad?

“Green growth” is en vogue in the development and international affairs world.

The Republic of Korea has created a new Global Green Growth Institute, and a major UN Summit to be held in Rio de Janeiro in July 2012 will focus on two topics – one of which will be “green economy“. The OECD has an entire program of work devoted to green growth and both UNEP and Germany’s Development Ministry have published recent reports on the green economy. The think-tank WRI has put together a compendium of green economy policies, programs and initiatives from around the world. And that’s just a few initiatives…

Will green growth continue to grow? Credit: Stephen John Bryde, 2006

So when the Green Growth Leaders (GGL) and the University of California Berkley released yet another report on green growth just over a month ago, I was tempted to overlook it. But I’m glad I didn’t, because it made the best case I’ve seen so far that green growth is not just a fad, and something to take real notice of.

The Green Growth Leaders report systematically reviewed the literature on a particular definition of green growth (which UNEP and OECD also use) – best described as “resource efficient, low-carbon, climate-resilient and socially-inclusive” growth.

This kind of green growth has been subject to a great deal of economic analysis to date. It’s underpinned by the analysis in the Stern Review that the global costs of action on climate change will be lower than the costs of inaction – analysis which has now been replicated in many regions and countries, for example the DFID-funded studies in South East Asia and Tanzania. It is also underpinned by Marginal Abatement Cost Curves (i.e. charts that set out the costs of different options for reducing emissions) that show that increasing energy and resource efficiency – by installing energy efficient lighting or strict building codes – have positive economic benefits. Economic analysis also suggests that more costly measures, such as investment in low-carbon technologies like solar or Carbon Capture and Storage (CCS), will lead to extra growth because they stimulate extra innovation (this is known as “endogenous” growth). There is also emerging evidence that green investments generate new “green jobs”.

The Green Growth Leaders report eloquently summarised this evidence, then convincingly addressed detractors. For example, it countered a concern by many economists that green job increases will be offset by losses in non-green jobs. It carefully argued that most people will not use the savings they get from being more efficient to just increase their resource use (a phenomenon known as the “Jevons Paradox“). And it argued that the innovation gains from subsidising particular clean technologies will outweigh any inefficiency losses from doing so.

But there were two more points I’d have liked to see addressed in the report.

First, I’d have liked to have seen much more evidence from developing countries – some of which exists. For example, the IFC has collected evidence on the costs and benefits of implementing solar energy, and the Global Environmental Facility and Climate Investment Funds – which DFID support, have a great deal of information on how developing countries have implemented low-carbon options.

The reason it needed more evidence from developing countries is that some policy makers are still not convinced that the sorts of policies advocated in the Green Growth Leaders report will work well in developing countries. They worry that developing countries tend to have very different legal and economic structures, and that they do not have the time or resources to introduce new regulation and/or increase public and private investment in green activities. This is an important critique, and many developing countries are trying to avoid doing “extra” work by reducing subsidies in non-green activities or greening their growth paths from the very start. Latin America’s bus-rapid-transit boom – discussed in this excellent Brooking’s podcast is a prime example. The Climate and Development Knowledge Network will continue to collect such examples through its work on climate-compatible development.

Second, I’d have liked to see the Green Growth Leaders report more clearly take into account concerns about impending resource scarcity – such as of water, oil, land and food. Resources, as Alex Evans (a fellow at New York University) argues in this short presentation, could well end up being the key drivers for green growth in developing countries in the coming years.

Despite these shortcomings, I believe that the clear and objective evidence in the Green Growth Leaders report is exactly what is needed to give politicians the ammunition to move ahead. Barak Obama’s latest weekly address, made during a visit to an American hybrid car manufacturer, was testament to this.

So we now need a similar report focused on developing countries. The new UNEP report and paper by Bowen and Fankhauser, both focused on least developed countries and low-carbon growth, represent very useful contributions.

But my hunch is that we may need to use the systematic, Green Growth Leaders approach to be really game-changing. If this happens, I’ll gamble on green growth remaining en vogue, rather than a passing fad.

If not… well let’s not think about that.

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