Green Economy, Green Growth

Anders Ekbom

Sida Helpdesk for Environment and Climate Change

Center for Environmental Sustainability (GMV)

University of Gothenburg; Chalmers Univ of Technology

anders.ekbom@economics.gu.se

Purpose:

• Build capacity among Sida staff on green economy/green growth (GE/GG) issues

• Identify & Promote areas of work to operationalize Green economy in Sida (optional, follow-up)

Outline:

1. WHY Green Economy?

2. WHAT is it (conceptually, initiatives & scope)?

3. HOW do you do it (…or can do it)

4. Helpdesk-reflections on Sida’s GE-work

5. Joint Discussion, Follow-up/next steps

1900 1950 2000

Pollution: CO2, N2O, CH4

concentrations

Overfishing

Land degradation

Loss of Biodiversity

Water Depletion

Unsustainableconsumption

20

15

-20

30

Accelerating environm. pressures & urgencies

Global Pollution: e.g. Nitrogen

Global warming 1850-2015

Increased resource use: Projection 2030

Economic growth closely correlated withoil, coal & gas consumption

Economic growthbrings many benefitsbut it comes with a price

Developmenttrends 1990-2015(% change)

…human actions passing”planetary boundaries”

12

SDG Goal 8: Decent Work and Economic Growth – targets:

8.1: ”Sustain per capita economic growth in accordance with national circumstances and, in particular, at least 7% GDP growth per year in the least developed countries…”

8.4 ”…decouple economic growth from environmental degradation…”

De-couplingGDP

NR use,Pollution

Time

GDP

Pollution, Natural resourcedepletion

Green Economy a practical approach to attain the SDGs

15

Many Economy-Env. concepts

Bio-economy

Blue economy

They are all related

• Make economic policies & growth more envsustainable

• Close loops & material flows (reduce, re-use)

• Reduce pollution, inefficiencies & waste

• Economize on Natural Resource use

• Let pollutors pay

• Increase use of economic policies & instruments

• Identify & Use New indicators of econ progress

Green Economy/GG Initiatives• SDGs; Agenda 2030: Rio+20 2012: Key themes:

o Sustainable Economic Growth; Green Growth (+de-coupling)

• UNEP, UNDP, ILO, UNITAR, UNIDO: PAGE (Partnership for Action on Green

Economy) and PEI (Poverty-Env Initiative):

• Green Economy Coalition (NGO initiative; hosted by IIED)

• Global Green growth Institute (GGGI, S Korea)

• Green growth Knowledge platform (donor initiative, WB-hosted)

•OECD “Towards Green Growth”; DAC Task Force

• EU Green Plan 2020

• World Bank: “Inclusive Green Growth; Pathway to Sust. Development” (2012)

• Poverty-Env Partnership (PEP): Green Economy for Poverty Reduction

• 65 Country applications (National Green Economy strategies eg Cambodia,

Ethiopia)

Scope of Green Economy

1. Analysis: (driving forces, env damages; env management)

2. Valuation: ecosystem services, carbon, pollution, Natural

resources (NRs), env quality.

3. Govt Reviews: Public Env Expenditure reviews and Public

Env Revenue reviews

4. Designing & Implementing policy instruments: taxes,

fees, subsidies (incl. Green Investments), etc.

5. Measuring & follow up: GE/GG Indicators

3. How do you do it?

National strategic level:

• Strategy formulation; Analysis

• Design & Implement policy instruments: taxes, fees,

charges, (removing) subsidies etc.

• Measure & follow up: Identify/modify GE Indicators

• Investments: energy, transport, urban development, water

etc.; Ethiopia CRGE Strategy)

Operational level:

Project/plans/programs:

• Analyse economic driving forces to env degradation; NR

depletion in the project/plan/program area

• Design & apply economic policy instruments relevant &

useful for the project/plan/program

1. Analysis: Identify economic driving forcesbehind pollution & NR degradation

Analysis: Identify costs of environmental pollution

Identify economic benefits of env management

Carl Folke, Stockholm Resilience Centre 2016-04-21Carl Folke, Stockholm Resilience Centre

Swedish government report to Johannesburg 2002

Identify economic values of Biodiversity and Ecosystem Services => integrate in planning

Public Environm. Expenditure Review 25

Questions for departments:

Expenditure on env?

% of budget?

On what? (wasteful subsidies?)

To whom; The rich, industries?

Increasing, decreasing?

PEER in Tanzania led to env budget increase by 500%

Public Environm. Revenue Review 26

Questions for departments:

Revenues from pollution

Revenues from NR depletion? ($, % share)

Sources? Can they increase?

How? With what instruments? => Env Fiscal Reform?

3. Green Economy Policy instruments

Regulatoryinstruments

Economic instruments Voluntaryagreements

Price-based Rights-based

• Regulations• Emission standards• Product bans• Licenses, • Quotas, norms• Mandatorycertification

• Taxes, Levies• Fees• Royalties• Subsidies• Emission charges• Product charges• User fees etc.• Green bonds

•Tradablepermits: CDM, REDD+• Carbon credits• Offset schemes• Insurances (ex ARC)

• Information• Extension advice• Env certification• Eco-labeling• Codes of conduct• Info disclosure• Payment for ecosystem services

…implementation requires political will, institutional reforms & cap development

Incomes from pollution & NRs

What economic tools can reduce waste, resourcedepletion?

Econ tools to build envmanagement systems?

Subsidies: Invest in Green technologies

Applications of Green economicinstruments: Water Tariffs

1. No Charge; water is free

Price ($)

Litre,

m3

Advantages

• no meter, no administration

to collect charges needed

• Simple (for consumers)

• consumers love itDisadvantages

• no awareness on value of water

• no incentive to conserve water =>

water is used unsustainably

• No revenues; Cost recovery

impossible => deteriorating services

2. Fixed (uniform) charge - Monthly water

bill independent of water volume consumed

Price ($)

Litre,

m3

Advantages

• No metering system needed

• Easy to administer

• Provides stable cash flow if set

at appropriate level

• Advantageous for big consumers

Disadvantages

• no awareness on value of water

• no incentive to conserve water

• Cost recovery difficult

• Water might be sold at higher

prices by street vendors to

households with no access

3. Increasing Block Tariff – price on water increases as consumption volume increases

Price ($)

litr

e

Advantages

• Ensures cost recovery by well

designed blocks

• Poor households connected to

the network provided with

affordable water

• Promotes water conservationDisadvantages

• Tariff design is complex

• Difficult to implement, especially

if metering system not in place

• Consumers do not pay full cost of

water supply

• Penalises large poor families

and/or shared connections

20 40

4. Lifeline tariffs - Increasing Block Tariffs, Income-adjusted price

Price ($)

litr

e

60 10020

Non-qualified users

Qualified users

Near free

basic service

Energy reforms in E. Europe & Balkan Increasing price per kWh in real terms

…still, the prices are too low

Green economy – What can it imply

for a farmer in Africa?

Payments for

preventing

downstream

siltation

Higher fuel

prices

Cheaper

public

transport

Benefits from

agro-forestry

Payments

from avoided

deforestation

Payments for

agro-

biodiversity

Compensation

for carbon

sequestration

Phasing out of

open stoves

Higher

pesticide

prices

Tenure

security

Electrification

Stricter soil

conservation

regulations

Better market

access (ICT)

Better/more

extension

advice

New crops,

technologies

Water fees

Subsidized

improved stoves

Logging

bans

Eco-label

crops

Conservation

farming

incentives

Erosive

farming

disincentivesNew markets

(carbon)

Access to

credits

Indicators for Green Economy:Green GDP; Genuine Savings

FROM TO

Min of Environment in charge Min of Finance; Min of Planning

Reliance on Env rules, command &

control

Economic incentives (env taxes,

subsidies, fees)

Brown investments dominate (oil, gas,

coal) = winners

Green investments (solar, wind,

thermal, hydro) = winners

Victims pay Polluters Pay

Re-active to env pollution, end of pipe Prevention, ”green” dominates

planning; Transformation & Integration

GDP (misguided indicators) Green indicators (SDGs; Green GDP,

Genuine savings)

Focus on Environmental protection,

conservation

Sustainable management; sectoral

environmental integration

Wasteful subsidies (water, energy,

petrol, NRs)

Optimized subsidies (waste recycling,

re-use, resource minimization)

Low public spending on environment Green tax reform; env large source of

public income

The Green Economy transformation

Summary: Attaining Green Growth

Transform sectors by:

Increasing royalties on Natural resources

• Removing subsidies on fisheries, energy, fuel

• Charges & fees on air/water pollution (PPP!)

• Payments for soil & water conservation (PES)

• Compensation for climate mitigation & avoidingdeforestation (REDD)

• Taxes on petrol, oil, water for the rich, etc.

4. Helpdesk reflections in Sida’sGreen Economy work:

A) What is missing? Experiences; Demand today in the field?

B) Challenges, needs?

A) Limited demand; most demand at country /cooperation strategy level, increasing interest!

B) Green Economy an Unused opportunity- Need for capacity building; guidance- Action plan – how to work with it; strategically, practically- Enhanced economic analysis (PEER, PERR, valuation etc.)- Increased (support to) use of env economic policy instruments in operations- New Indicators; => monitoring & follow up.

5. Discussion, Follow-up/next steps:

- How do you perceive/understand Green

Economy from your own work? - Practical examples or reflection from own work?

- Would there be difference, what would be new?- Opportunities? Obstacles? Needs?