Green Growth: Challenges for Governments and Businesses
Address by Ms. Angela Cropper, Deputy Executive Director
United Nations Environment Programme (UNEP)
I am honored to be asked to present to this ASEAN-Korea CEO Summit on the theme of Change, Challenge and Cooperation.
The need to remodel economic development
The world is in the middle of an economic crisis, which has arrived as we only start to recover from the recent food and fuel crises. These already daunting challenges are being exacerbated by another greater looming crisis: climate change. These global challenges are severely impacting our ability to sustain prosperity in developed countries and achieve the Millennium Development Goals in the developing world.
The financial and economic crisis that led the world into recession is not only indicative of imperfections in our global economic system. It is also the result of a yet inadequate balance in the way we leverage natural capital, human capital and economic capital in the pursuit of sustainable development. The situation calls for nothing short of a remodeling of economic development.
Looking back, we realize that global economic growth over the past 50 years has been achieved at a huge cost to the environment and ecosystems - the natural capital that forms the very basis of wealth creation, human well being and security. While global GDP more than doubled between 1981 and 2005, 60 percent of the world's ecosystems meanwhile have been degraded or exploited unsustainably. Whether we look at forests, water, fisheries, mangroves, coral reefs, any other dimension of the natural world. (See Report of the Millennium Ecosystem Assessment, 2005).
Clearly, our current patterns of growth and development, that consume rather than renew natural capital, will eventually undermine the source of our security, livelihoods and well-being. Poor people and most vulnerable segments of our societies will be worse affected.
These interrelated challenges require bold, mutually supportive and transformative responses by the international community. They require equally visionary approaches at the national level and unprecedented political commitment to achieving the goals that have repeatedly been expressed in reports and rhetoric the world over.
Our ability to respond to current economic challenges will not only be judged by success in restoring economic fundamentals. It will also be weighted on our ability to reorient economic growth and development towards a more sustainable path.
Governments and business leaders are at a branch point and must make fundamental choices: do we simply reboot the so-called "brown economy" as we seek economic recovery, or rather jump start a transition to a green economy that will set the world economy onto a more ecologically sustainable path of growth, deliver decent jobs, and address climate change for the sake of present and future generations?
A Green Economy does not consume natural capital. It seeks to remove the juxtaposition between Economic Growth and Environmental Integrity. It seeks to make investments in Environment the engine of economic growth in and for a new era.
To the richest countries of the world, natural capital accounts for only 2 per cent of their wealth; but to the poorest, natural capital accounts for 26 per cent of their wealth. Countries in this situation have much to gain by leading the way of transformation. There are many societies in which we see today the evidence of the close link between ecosystem degradation and poverty. In the way in which we currently measure growth, i.e. classical GDP, the services of ecosystems account for about 7.3%. If we measure the value of ecosystem services for poor people, this rises to about 57%.
The key question is how to make the shift to green growth? How to give substance that a crisis creates an opportunity? How to enhance that opportunity given the convergence of multiple crisis? How to make this time a historic moment in economic history?
Here we are talking not just about economic sustainability; but about sustainable development.
The road onto the green economy may be long and fraught with challenges, but we see that first steps are being taken now in a journey that could be the greatest journey of the 21st century. To walk confidently along this pathway requires of us innovative and transformative responses to a set of key questions such as: What is the potential for environmental industries to become drivers of future economic growth? What financial, policy and institutional barriers currently inhibit a shift towards a green economy? What research and development, technological innovations, and entrepreneurial initiatives are required? What national experiences currently exist?
A look at early initiatives in some sectors which offer great potential for greening gives reason for optimism. Just to mention a few examples which have been highlighted in a Policy Brief on the Global Green New Deal published by UNEP in March 2009:
(a) Renewable energies
Between 2004 and 2007, global new investment in sustainable energy increased from US$33.2 billion to US$148 billion. Countries and industries in East Asia are emerging as important players in these markets. About 2.3 million people have in recent years found new jobs in the renewable energy sector, even though these provide only 2 per cent of global primary energy. In comparison, total employment of the oil and gas, and oil refining industries in 1999 was just over 2 million jobs (UNEP 2008). Globally, projected investments of US$630 billion in the renewable energy sector by 2030 would translate into at least 20 million additional jobs: 2.1 million in wind energy, 6.3 million in solar photovoltaic (PV), and 12 million in biofuels related agriculture and industry.
Apart from its higher direct job creation potential, renewable energy is also expected to secure jobs in downstream industries by reducing related emissions and by reducing the costs of production in the future amidst the carbon constraint and reduced supply of oil and gas, thereby contributing to the competitiveness of final products.
(b) Green buildings
Buildings are responsible for 30-40 percent of all energy use, greenhouse gases and waste generation. This is an area with the highest potential for improved efficiency as well as for job creation. Globally the construction sector has a turnover of US$3 trillion annually. A worldwide transition to energy-efficient buildings would create millions of jobs as well as "greening" existing jobs for the estimated 111 million people employed in the sector. Using current building technology, we can already cut energy use by around 80 percent compared to traditional designs. Retrofitting of the existing building stock could provide large investment opportunities and jobs in the immediate future.
(c) Sustainable transport
Given current patterns of energy use, world transportation energy demand is expected to grow by 2 percent per year, with energy use and greenhouse gas emissions at 80 percent above 2002 levels by 2030. New investment and financing should be directed towards developing an integrated approach to transportation planning and financing, particularly at the urban level, with priority given to investment in energy efficiency and low carbon mobility that is also cost effective, e.g. rail and bus rapid transit systems, and integrated public and non-motorized transport.
It is anticipated that between now and 2050 the global car fleet will triple, and more than 90 percent of this growth will take place in non-OECD countries. The Intergovernmental Panel for Climate Change (IPCC) has indicated that the global fleet's vehicle fuel economy needs to improve by 50 percent by 2050 to stabilize emissions from road transport. This can be achieved with existing technologies - the efficiency of light duty vehicles in OECD countries can already improve by 30 percent over the next 15-20 years. A 50 percent global improvement will require the widespread adoption of this efficiency in non-OECD countries and greater hybridization and electrification of fleets.
More than 3.8 million jobs could be created globally through the increased production of low emission vehicles. Up to 19 million additional ancillary jobs worldwide could be created in fuel refining and distribution, sales, repairs, and services. Investment in clean and efficient public urban transport also contributes secondary employment effects, with a multiplier of 2.5 to 4.1 per direct job created. (These potential employment figures are based on a Green Jobs Report published in 2008 by UNEP and ILO.) We could do the same kind of analysis for Agriculture, Water, Forests, Oceans…
Looking now at this region, we might say that a low carbon green growth in East Asia is central to the emergence of a global green economy. East Asia has become an engine for global economic growth and this region is poised to remain at the centre of global economic change in the coming decades. The remarkable economic performance of countries of the region comes with a central responsibility, as the world seeks to move away from fossil-based and nature consuming economic systems, towards a low carbon green path of development. East Asia's interests are indisputably bound up with those of the rest of the world.
To illustrate this, I must make a brief foray into the realm of Climate Change. The convergence of the needs to address climate change and to stimulate the economies presents great challenges to the world as it does to the Asia Pacific region:
Projected temperature increase:
By 2050: 1.3 – 2.3% degree C (IPCC, 2007)
By 2100: 2.4 – 5.0 degrees C (ADB Study)
What are the projected effects on Asia-Pacific region including SE Asia:
- precipitation decrease in many parts;
- increasing variability of rainfall in time and space (floods, droughts); changes in river flow patterns
- sea level rise of 1 to 8 mm. per decade
- extreme weather events increasing in intensity and frequency: causing loss of life, loss of value; loss of investment
Almost all sectors are expected to be severely affected, leading to costs in billions of dollars.
All the above impacts are likely to be very significant for S.E. Asia, given:
- its 575 million people
- of whom close to half live below $2.00 per day;
- vulnerability, exposure and lack of options for poor people
- the concentration of population, economic activity and infrastructure in coastal zones
- its extensive coastline and large number of islands
- its dependence on agriculture, fisheries, and forest products - which together employ 60% of Asia's working population – all of which are sensitive to climate disruptions;
- its status as a net exporter of food.
Under one IPCC scenario, global average loss in GDP by 2100 is estimated to be about 2.83%; for the ASEAN region, the average is about 6.7%.
Clearly SE Asia needs to make deep cuts in greenhouse gas emissions. Happily, doing so requires the same kinds of responses as are required for greening their economies. There is great synergy here, revealing co-benefits for climate and economy, for environment and poverty.
We are firm in our belief that the opportunities outweigh the challenges. There is increasing evidence of the potential for environmental industries to become drivers of future economic growth. At the same time, we remain aware of the necessary financial, policy and institutional reforms that governments, together with business leaders, workers and society at large must resolve to subscribe to, and to deliver, in order for change to happen.
What are the challenges and opportunities for Governments and Businesses?
Making the required responses does pose some Challenges for Governments who are required to design and implement enabling conditions for the transformation to happen. Governments need to take the long view. This may indeed be the greatest challenge for them. And given such an approach by them, all else could be technically, technologically, and institutionally possible.
Some examples of areas for their leadership:
- holistic planning for economic activity that maximizes resource efficiency, minimizes waste and pollution, avoids environmental deterioration, and increases employment and human dignity;
- legislative revision, regulatory framework conducive to greening the economy;
- fiscal policies and measures that are compatible with those goals (incentives to the positive contributions; penalties for the negative contributions);
- standards for products and processes;
- recognition of the true cost of 'externalities' to the environment which today are ignored or minimized, perpetuating the fallacy of GDP as an appropriate measure of growth;
- mainstream climate change into development plans and policies to reduce vulnerability, ensure adaptation, and contribute to reduction in emissions;
- educate to achieve poplar understanding of why consumption patterns and behaviour need to change with a focus on technical education as well;
- provide incentives to change public behaviour;
- manage the demand side in order to move to sustainable consumption;
- formulate policies and measures for sustainable land use, water management, and forest management;
- catalyse and orient private capital to the above objectives through policies that would transform industry, investment, and technology towards a green growth pathway.
For Business, the challenges are equally evident:
- invest more into R&D for renewable technology, cooperate more in technology transfer and support;
- increase the levels of partnership with the Public sector;
- increase resource efficiency by reducing energy input and waste output per unit of production
- use low carbon energy sources;
- elevate corporate responsibility through green procurement; worker security; rewards for innovation for green products and services; contribution to the public good as well as to private profits;
- create global markets for environmentally sustainable goods and services.
Responses by both Governments and Business along the lines of the above would mitigate carbon emissions while adapting countries to the impacts of climate change, moving to long term security, and at the same time putting economies on a green and sustainable pathway. Together they must forge strong public-private partnerships, enlisting also civil society contributions that will provide an environment for confidence in the rule of law, transparency, monitoring and accountability.
The corporation of the future that is not environmentally and socially pro-active will not be competitive. We need higher standards for corporate responsibility, and adequate popular education with regard to sustainability. This is the next bridge for businesses to cross: that is, to install the public interests alongside its private ones.
Fortunately, have by the day examples from East Asia and around the world that give us confidence in our belief that the required change can be made:
We are impressed by the initiative of the Republic of Korea to establish an "East Asia Climate Partnership" along with a fund of US$ 200 million over the next five years to spur regional efforts towards delinking economic growth and development from growing carbon emissions and set the stage for decarbonisation. We are encouraged by Thailand's concept of moving towards a Culture of Sufficiency; by China's announcement of wanting to build a Circular Economy.
We welcome Korea's example of adopting a national vision for "Low Carbon, Green Growth" over the next sixty years – clearly a vision not for the next election, but for the next generation.
We admire its commitment of 80 percent of its stimulus package to green spending, the highest percentage of green stimulus of all countries. UNEP is privileged to be invited to work with the Korean government in its process of rolling out its Low Carbon Green Growth vision.
We are aware of the ESCAP-led Green Growth Strategy for Sustainable Initiative for the Asia-Pacific region.
In UNEP, we have been coordinating a global effort to bring together the many contributors and contributions in a Green Economy Initiative, comprising (i) a Green Economy report to provide an overview of how public policy can help markets to accelerate the transition to a green economy; (ii) a study on the Economics of Ecosystems and Biodiversity focusing on a much neglected need to properly value these resources and services; and (iii) a Green Jobs analysis, that focuses on potential for green jobs. These are all available to provide guidance towards formulating green economy models.
Meanwhile – and here I make a plea to Governments and Business alike - don't waste the resources in stimulus packages on business as usual, on the development approach of the past; when all the evidence calls for a new and different approach. That would be a travesty. Such a departure will not slow down your economies but will enable you to move consciously onto a different pathway for economic growth – a pathway of green growth, that would unify and sustain the triple bottom line of development, the need to live within the Earth's ecological capacity, and the need to enhance human wellbeing by reducing poverty and increasing equity. And in ways that might be able to sustain the immediate gains of such investment if suitably employed! Surely a win/win/win solution; the early beginnings of that are illustrated by the plans of our host country for this event!
The challenges present an exciting opportunity for the peoples of the ASEAN countries, together with their immediate partners – Japan, Koera, China – to bring to bear their long-recognised industriousness, adaptive capacity, innovativeness, entrepreneurship and technological leadership on charting the road ahead. With that approach, we are confident that you could be an example to the rest of the world, while working to realize ASEAN's vision 2020 which – may I remind you - calls for "a clean and green ASEAN, with fully established mechanisms for Sustainable Development to ensure the protection of the region's environment, the sustainability of its natural resources, and the high quality of life of its peoples".
NN and AC
June 01, 2009
Jeju Island, Korea