11 May 2017

Greening economic growth and development

Anniek writes:*

Economic growth and development are two key terms that governments strive for. But given rising environmental challenges, where does the green economy fit in? The World Economic Forum (WEF) believes that slowing down climate change could add $19 trillion to the global economy and increase global GDP with 0.8% by 2050. So what is preventing governments from greening the economy and achieving green growth?

Lets first briefly revisit the green economy. The green economy refers to the results in improved human well-being and social equity, while significantly reducing environmental risks and ecological scarcities. In doing so, it shifts traditional economic growth and development towards green growth and sustainable development. The former refers to the fostering of economic growth and development while ensuring that natural assets continue to provide the resources and environmental services on which our well-being relies. Whilst the latter refers to development that meets the needs of the present without compromising the ability of future generations to meet their own needs.

The WEF believes that tackling global warming will result in an economic boost, thereby adding $19 trillion to the global economy and increasing global GDP with 0.8% by 2050. A green economic transition is thus good for the environment, through low carbon, but also good for the economy through investment and the creation of 6 million jobs.

Despite the WEF’s estimate, there is no indicator to illustrate the socio-economic and environmental benefits of a green growth. Hence, many politicians and policy makers remain skeptical and believe that decarbonizing the economy through leaving oil and gas in the ground would present significant costs to the economy. Even though this is a factor to consider, the WEF believes that this loss would be compensated by the offset of new sectors and the creation of employment.

Many Nordic countries like Iceland are transitioning towards a green economy; however, numerous countries are still lagging behind. One example of such a country is the United States, where President Trump even overturned Obama’s policy to reduce emissions, and may potentially even exit from the Paris agreement.

Even though existing indicators of economic growth (Gross Domestic Product) and development (Human Development Index) already exist, these do not represent green growth. Thus, a new indicator has to be established in order to show politicians and policy makers the vast socio-economic as well as environmental benefits associated with green growth.

Such an indicator should further frameworks already presented by the the Organization for Economic Co-operation and Development and Green Knowledge Platform thereby helping countries to assess and compare their green growth progress.

Bottom Line: The WEF believes that slowing down climate change could add $19 trillion to the global economy but many countries like the US remain skeptical given the void of a green growth indicator. So we will not get green growth until we measure it.

* Please comment on these posts by students in my growth & development economics course. It really helps if you highlight unclear analysis, alternative perspectives, better data, etc.

1 comment:

Max Bloem said...

Hi Anniek, thank you for your blogpost. I agree with you that it is important to create a new indicator of green growth. However, I am skeptical of the effects of the introduction of such an indicator. In economics, we often assume people to be rational, utility seeking actors. Therefore, a green growth indicator might steer political actors and policy makers in to a more sustainable direction. Unfortunately, research has shown that this is not necessarily the case.
It might be interesting for you to take a look at the vast literature on science communication. For example, Kahan (2010) shows in his article that cultural values influence what and whom people believe. He argues that ‘protective cognition’ is a major cause of political conflict over the credibility of scientific data on, inter alia, climate change. Furthermore, he argues that people with individualistic values, who prize personal initiative, and those with hierarchical values, who respect authority, tend to dismiss evidence of environmental risks, because the widespread acceptance of such evidence would lead to restrictions on commerce and industry, activities they admire. Trump, and other conservative politicians, seem to fit this description perfectly. Therefore, the introduction of a new indicator might not necessarily change the viewpoints of the politicians who dismiss climate change. More likely, they would find a scientist that proposes a view in line with their values. Let’s not forget Trump nominated Scott Pruitt, a man who opposes the scientific consensus on climate change, to be Administrator of the Environmental Protection Agency. In sum, I agree a new indicator of green growth would be helpful to make the effects of government policy on the environment more insightful. However, I do not think it would sway the hardcore climate change deniers, unfortunately. If you would like more literature on scientific communication, hit me up.
Kahan, D. (2010) Fixing the communications failure. Nature. 463, pp. 296-297. Available at: http://www.nature.com/nature/journal/v463/n7279/full/463296a.html

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