Green march to the other side of economic fence

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By Sheng Fulai (China Daily)
Updated: 2009-10-09 08:09

The concept of green economy has gained currency of late, especially after the global economic crisis, but it is yet to be defined precisely.

Roughly speaking, a green economy can be described as one in which three things grow, while three others decline. The growth should be in investments into green industries - such as renewable energy, energy and resource efficient buildings, organic agriculture - the number and quality of jobs in these sectors, and their share in GDP. And the decline should be in the use of traditional sources of energy and other resources, social and environmental costs - including pollution and greenhouse gas (GHG) emissions - stemming from production and consumption, and wasteful consumption.

A green economy is good because it would facilitate economic growth, create jobs, alleviate poverty and help to achieve the UN's Millennium Development Goals. It is a misconception that "green" is an obstacle to growth and development.

A green economy is also good because it seeks to promote eco-friendly sectors to become new growth engines, especially because the established economic structure is reaching its limit in creating more jobs and added value in a carbon-constrained world.

More importantly, a green economy has the potential to address the multiple challenges facing humanity: food and energy security, arresting the degradation of the ecosystem, climate change, and the global financial crisis and economic slowdown.

The UN Environment Programme (UNEP) launched a green economy campaign amid the collapse of major financial houses on Wall Street last fall. Its aim is to encourage and enable governments to invest in green sectors as a way out of the crisis in the short term and lay the foundation for a new economic structure for this century.

A number of the governments that announced stimulus packages to overcome the global financial crisis have already built in investments for green industries. HSBC has estimated that by the end of July 2009, China had invested $218 billion of its fiscal stimulus package to green industries, followed by the $118-billion green recovery scheme of the US, $60-billion Green New Deal of South Korea, $36-billion green stimulus of Japan and the $25 billion spent by the European Union.

The global green stimulus is estimated to be $512 billion, or 16 percent of the $3.13-trillion total stimulus funds. Based on the expected multiplier effect, it is estimated that the impact of the total green spending is now above $1 trillion.

The green components in the stimulus packages have sent a signal that the governments of a few leading economies have started appreciating the untapped economic potential of green industries. The projected global investment of $630 billion by 2030 is expected to raise the number of workers in the renewable energy sector from 2.3 million at present to 20 million.

In the US, the $100 billion to be invested in green buildings over the next four years is projected to generate 2 million jobs. On the other hand, South Korea's green growth plan for 2009-13 is expected to generate an output of $140-160 billion a year.

Although the specific economic contribution of the green stimulus in China is yet to be quantified, it is likely to be quite significant. Its renewable energy sector, for example, already generates $17 billion worth of output and employs 1 million workers.

So far, mostly G20 economies have announced stimulus packages to emerge out of the economic crisis, some of which contain green components. The challenge now is to help the 170-odd non-G20 countries to acquire the necessary finances and technologies to start their own green economy programs.

UNEP is working with other UN bodies, as well as the Bretton Woods institutions - the World Bank, IMF and WTO - to find practical ways of helping these countries to move toward green economies.

Apart from external financial and technological support, institutional reforms both at the international and national levels are also needed to help many developing countries to adopt a green economy.

The major areas of reform include incentives, such as an annual $200-300 billion fossil fuel subsidy for the development of renewable energy, and other subsidies to discourage excessive fishing that has dwindled many fish stocks, balance the lopsided tax structure that penalizes jobs and income but not pollution and GHG emissions, stop under-pricing of scarce resources such as water, and prevent trade protectionism and change the excessively stringent intellectual property rights system that hinders the spread of green technologies and products.

Additionally, many countries have to change their education systems to support the development of science and technology, and help the workforce to adapt to the new situation created by the move toward a green economy.

The author is a UNEP official. But the article expresses his personal views, which may not necessarily represent those of UNEP.

(China Daily 10/09/2009 page9)