Opportunities and Uncertainties Towards Green Economic Recovery
Seoul, 22 April 2010 -Ladies and gentlemen,
B4E returns to Asia amidst an international landscape that is on the one hand full of optimism as some economies seize the sustainability agenda.
And on the other, perhaps more opaque; more uncertain and more fractured than in 2009, not least on the challenge of climate change.
The global economy is certainly now showing signs of recovery perhaps and in particular in Asia.
The question is whether this will be a Green Economy Recovery in 21st century with an emphasis on low carbon, clean tech, resource efficient sectors and services.
Or whether it is one that, despite some notable national exceptions, looks backwards or at the very least maintains the vacuum of the status quo.
Good News for the Green Economy
First the positive news: Some economies have put the financial and economic crisis to good use.
Last year, UNEP presented its Green New Deal policy brief to its annual gathering of environment ministers.
It recommended that one per cent of GDP, invested in green investments, could go a long way to revving-up the global economy while stimulating low carbon, resource efficient sectors; generating employment and setting the stage for a more sustainable development path.
Professor Edward Barbier, one of the authors of the UNEP brief and a leading environmental economist, has assessed how far countries have so far gone.
- Of the $3 trillion spent or earmarked globally for the fiscal stimulus, just over $460 billion is aimed at green investments.
- This is equal to around 15 per cent of the total fiscal stimulus or around 0.7 per cent of the G20's GDP.
China and the Republic of Korea lead the way at three per cent of GDP, followed by Saudi Arabia, 1.7 per cent; Australia, 1.2 per cent and Japan, 0.8 per cent.
This is followed by the United States, with 0.7 per cent of GDP; Germany, 0.5 per cent; France 0.3 per cent and Canada, South Africa and the United Kingdom, 0.2 per cent.
Both China and the Republic of Korea are embedding these policy choices in medium-term planning.
For example the government here has a five-year green-growth investment plan.
It will spend $60 billion to cut carbon dependency with the aim of boosting economic growth to 2020 and generating up to 1.8 million jobs.
Copenhagen Provides Cooperation, Economic and Forest Stimulus
The UN climate convention meeting also provided an 'economic stimulus' with developed economies pledging immediate funding of $30 billion over three years.
This could rise to $100 billion a year by 2020.
The funds will assist developing economies to not only adapt to climate change but to also assist in a transition to a low carbon economy.
Some of the funds will also be earmarked for investments in forests under the Reduced Emissions from Deforestation and forest Degradation (REDD).
UN-REDD, of which UNEP is a key part, is preparing some nine countries including Papua New Guinea, Panama and the Democratic Republic of Congo for this new opportunity.
All in all, business opportunities in areas such as renewable and clean or cleaner energy generation alongside ones in natural resource management.
The Copenhagen Accord, to which over 100 countries have now associated themselves, is also the first cooperative climate document bringing together developed and developing economies on emission reductions and constraints.
If all the pledges and intentions outlined are fully met, then this too can provide Green investment opportunities.
Meanwhile some countries are pressing forward with new technologies in the field. Only a few days ago the US Department of Energy announced a carbon capture and storage project linked to a big pulverized coal-fired power station in Alabama.
Increasing numbers of financial institutions and lenders are requesting companies to disclose their carbon footprints, the latest being the Securities and Exchange Commission in New York.
Meanwhile, the lending criteria of banks including the World Bank are also coming under increasing scrutiny.
The recent row over South Africa's planned coal-fired power station-its first in 15 years-is a case in point.
While the World Bank voted in favour of the close to $4 billion loan, concern by several countries did secure provisions on improved energy efficiency and investments in renewables in South Africa.
Reality Checks in a Rapidly Changing World
But distinguished delegates, there are also some reality checks here and some underlying assumptions that can flip the glass to being either half full or half empty.
Copenhagen failed to deliver an international regulatory framework or legally binding treaty.
There remains debate as to the pace and scale of the $30 billion investment alongside concerns as to how much of this will be new and how much will old, or re-packaged money.
Meanwhile there is a sense of increasing bilateralism in the air.
Only a few weeks ago General Electric of America and the state of California announced cooperation with China's Ministry of Railways.
The plan is to use Chinese railway technology to assist in the development of the state's high speed rail links.
A fascinating reflection of the way geopolitics are shaping the current world.
But also underlining that while the big and rapidly growing economies have the finance, know-how and capacity to receive and to invest significant sums.
Green Economy: Future, Fracture Points and Fairness
So while some may board the high speed train to future Green Growth, others may be left at the platform without a ticket.
What are the prospects for small island states and for many smaller economies on continents such as Africa, Latin America and Asia?
Many of these still require pre-investment assistance and capacity building if they are to also enjoy economic growth, and more importantly sustainable Green Growth.
Business, in partnership with the UN, governments and public finance houses has an important role to play in assisting the realization of a fairer and more equitable world.
It also has a vested interest in seeing markets for low carbon, high tech investments flourish everywhere and not just in a few nations.
A vested interest too in seeing the sustainable and more intelligent management of increasingly scarce natural or nature-based resources-these will be constraints over the coming decades if not addressed.
Some Litmus Tests for Climate and Cancun
In respect to climate change, all eyes are now on the UN climate convention meeting in Cancun, Mexico.
What are some of the elements that can assist in ensuring the meeting is a success.
The $30 billion-worth of pledges need to be operationalized and operationalized fast.
UNEP, working with nine leading modeling centres, estimates there remains a gap between the pledges and intentions linked to the Copenhagen Accord and the science.
Emissions in 2020 need to be somewhere just over 40 billion tones (Gt) of C02 equivalent if we are to realize emission reductions by 2050 that keep a temperature rise to 2 degrees C or less.
So, this gap needs to be bridged between now and Cancun or in Cancun itself.
Options include some countries increasing their pledges upwards to bringing sectors such as maritime and shipping and aviation into the carbon and emission trading markets.
Is Business Out in Front?
Business, either through persuasion at the political level or through actions on the ground-for example greening their operations and their supply chains-can contribute to such aims and the wider sustainability challenge.
Indeed in some ways, business is out in front.
It was suggested that a failure to secure an international regime in Copenhagen would be the death knell for the carbon markets.
But the latest assessment of the European emissions trading market shows that despite this and in spite of a fall in emissions linked with the recession, the markets have proved remarkably resilient.
This should strengthen the resolve of others contemplating such markets with the ultimate aim of securing a higher carbon price.
Indeed a recent assessment of the proposed Kerry-Graham-Lieberman Senate bill in the United States, says if it were enacted in full the emissions trading market there could be worth over $250 billion.
The price of carbon could be over $30 a tonne between 2013 and 2020.
Green Growth-its Not Just Climate Change
The role of business and the link between more creative and intelligent markets and the wider sustainability agenda, is not confined to climate change.
Towards the end of 2010-the UN's International Year of Biodiversity-a landmark report by The Economics of Ecosystems and Biodiversity, hosted by UNEP, will be published.
Already some of the figures are emerging: An investment of $45 billion could secure a global network of protected areas whose services are worth close to $5 trillion annually.
A return of 100:1.
Some companies, including some in this room today, are making the business case for investing in natural resources whether they be in productive soils or biodiversity.
Climate and Natural Resource Scarcity-the Defining Challenge
Business and its experience will be key as to whether governments are persuaded to support new kinds of markets-for example in water and nature-based services-that bring value to these natural assets in order to conserve and sustainably manage them.
REDD may be the first, but eventually markets or funds could transform the economics of other terrestrial ecosystems via greater incentives for, for example, sustainable agriculture.
And what about marine: there is an urgent need to capture the true value of coastal ecosystems in terms of their role as nurseries for fish and coastal defense but also for also carbon storage.
The Green Economy is emerging, in part driven by the financial and economic crisis.
And in part because of a growing realization that the blunt and limited markets of the past are unlikely to sustain six billion people, rising to nine billion by 2050.
From its day-to day operations, to its ecological footprint and across its supply chains, managing environmental risks like climate change and the scarcity of natural resources, will increasingly define a company's business and political life in the 21st century.
Sustainable development is not a choice, but an imperative and the only course possible in our 21st century world.
A Green Economy will happen, either by design or default.
I am sure that any prudent and forward-looking business man or woman, would back a well-thought out, design-led path rather than the alternate one.
By its very nature, pressing the default button rather than the design route will be disruptive, unpredictable and bad for business.