How to trigger greener, smarter growth - while fighting poverty

Posted: 21 February 2011

Investing two per cent of global GDP into ten key sectors can kick-start a transition towards a low-carbon, resource efficient Green Economy, a new report launched today says.

The sum, currently amounting to an average of around $1.3 trillion a year and backed by forward-looking national and international policies, would grow the global economy at around the same rate if not higher than those forecast, under current economic models.

But without rising risks, shocks, scarcities and crises increasingly inherent in the existing, resource-depleting, high carbon 'brown' economy, says the study.

As such, it comprehensively challenges the myth of a trade off between environmental investments and economic growth and instead points to a current "gross misallocation of capital".

Global trends
This figure illustrates global trends in resource extraction, GDP, population and material intensity in indexed form (1980 equals a value of 100). Source: Sustainable European Research Institute (SERI), 2010.

The report sees a Green Economy as not only relevant to more developed economies but as a key catalyst for growth and poverty eradication in developing ones too, where in some cases close to 90 per cent of the GDP of the poor is linked to nature or natural capital such as forests and freshwaters.

It cites India, where over 80 per cent of the $8 billion National Rural Employment Guarantee Act, which underwrites at least 100 days of paid work for rural households, invests in water conservation, irrigation and land development.

  • This has generated three billion working days-worth of employment benefiting close to 60 million households.

Two per cent of the combined GDP of Cambodia, Indonesia, the Philippines and Vietnam is currently lost as a result of water-borne diseases due to inadequate sanitation.

  • Policies that re-direct over a tenth of a per cent of global GDP per year can assist in not only addressing the sanitation challenge but conserve freshwater by reducing water demand by a fifth by 2050 compared to projected trends.

The report has modeled the outcomes of policies that redirect around $1.3 trillion a year into green investments and across ten key sectors - roughly equivalent to two per cent of global GDP. To place this amount in perspective, it is less than one-tenth of the total annual investment in physical capital.

Currently, the world spends between one and two per cent of global GDP on a range of subsidies that often perpetuate unsustainable resources use in areas such as fossil fuels, agriculture, including pesticide subsidies, water and fisheries.

Many of these are contributing to environmental damage and inefficiencies in the global economy, and phasing them down or phasing them out would generate multiple benefits while freeing up resources to finance a Green Economy transition.

Incomes and employment

In addition to higher growth, an overall transition to a Green Economy would realize per capita incomes higher than under current economic models, while reducing the ecological footprint by nearly 50 per cent in 2050, as compared to business as usual.

Icelandic fishing boat
Icelandic fishing boat, with gulls following.

The Green Economy report acknowledges that in the short-term, job losses in some sectors - fisheries for example - are inevitable if they are to transition towards sustainability.

Investment, in some cases funded from cuts in harmful subsidies, will be required to re-skill and re-train some sections of the global workforce to ensure a fair and socially acceptable transition.

The report makes the case that over time the number of "new and decent jobs created" in sectors - ranging from renewable energies to more sustainable agriculture - will however offset those lost from the former "brown economy".

Solar PV array in China
Solar PV arrays in China now attract generous subsidies. Photo: Steve Willcox

For example, investing about one and a quarter per cent of global GDP each year in energy efficiency and renewable energies could cut global primary energy demand by nine per cent in 2020 and close to 40 per cent by 2050, it says.

  • Employment levels in the energy sector would be one-fifth higher than under a business as usual scenario as renewable energies take close to 30 per cent of the share of primary global energy demand by mid century.
  • Savings on capital and fuel costs in power generation would under a Green Economy scenario, be on average $760 billion a year between 2010 and 2050.

The report, Towards a Green Economy: Pathways to Sustainable Development and Poverty Eradication, also highlights enormous opportunities for decoupling waste generation from GDP growth, including in recovery and recycling.

  • The Republic of Korea has, through a policy of Extended Producer Responsibility, enforced regulations on products such as batteries and tyres to packaging like glass and paper, triggering a 14 per cent increase in recycling rates and an economic benefit of $1.6 billion.
  • Brazil's recycling already generates returns of $2 billion a year, while avoiding 10 million tones of greenhouse gas emissions; a fully recycling economy there would be worth 0.3 per cent of GDP.

The report, compiled by the UN Environment Programme (UNEP), in collaboration with economists and experts worldwide, takes meeting and sustaining the UN's Millennium Development Goals - ranging from halving the proportion of people in hunger to halving the proportion without access to safe drinking water - as one aim.

Bringing down emissions of greenhouse gases to the much safer levels of 450 parts per million by 2050 is another overarching target.

 View or download the report at www.unep.org/greeneconomy