Support for green economy surges but crucial gaps remain

Governments, businesses, investors and others are embracing the ‘green economy’ idea, but differences in the way they interpret it pose barriers to sustainable development.

This is according to a report published by the International Institute for Environment and Development (IIED) and the Green Economy Coalition.

The Green Economy Barometer report, produced for a three day conference on ‘real green economies’, provides a current analysis of who is doing what, where, and why.

“The green economy concept is an antidote to the prevailing brown economy, which is a major driver of environmental degradation and inequality,” says Oliver Greenfield Convenor of the Green Economy Coalition. “Its purpose is to improve both society and the natural environment. Right now though, the most powerful players are backing a narrower goal of ‘green growth’, which risks being discredited unless it more effectively tackles inequality.”

The report outlines ways to bridge this and other gaps that could jeopardise the transition towards inclusive, sustainable development.

Who are the players?

While the United States and most Latin American countries have not pursued the green economy or green growth concepts, many other nations have. They include: China, Denmark, Ethiopia, Indonesia, Mauritius, Mexico, Morocco, Peru, Vietnam, Philippines, South Africa, South Korea, Thailand, Rwanda and the Caribbean region.

Other emerging leaders include research institutes, civil society organizations, consultancy firms (such as McKinsey and PWC), the ‘B Team’ group of business leaders, investors, development banks and bilateral donors.

What are they doing?

Development banks are providing billions of dollars to support green growth and encourage private sector investment, whilst countries – rich and poor – are developing national green economy strategies and legislation.

Companies and international institutions such as the World Bank and UN agencies are also developing ways to measure the social and environmental performance of economies, with metrics that go beyond tradition GDP and shareholder value.

New ‘green financial products’ — such as green insurance bonds — have also come onto the market. Some of the world’s largest investment banks have drafted voluntary guidelines for the development and issuance of green bonds.

While the players are beginning to align their views and activities, there are important gaps.

A question of equity

Although governments and international institutions have stressed the benefits of ‘inclusive green growth’ for poor people, they have ignored the emerging crisis of rising inequality – which is undermining our economies and our political systems. The nascent global and national architecture for a green economy is ill equipped for delivering more equitable outcomes.

“The challenge is to marry a broad concept of green with equity and inclusion, creating growth at all levels of the economy and ensuring that everyone shares in the benefits” says lead-author Emily Benson. But while the gap between “green economy” and “green growth” has narrowed, it still poses challenges.

Most ‘green growth’ models still envisage that welfare gains will trickle down through existing channel, rather than resulting from progressive economic and social policy.

“In contrast to green growth, which has focused on attracting investment, green economy targets wider and deeper reform to create an economic system that better serves society,” says Steve Bass, head of IIED’s sustainable markets group. “A green economy should start where the majority of people are, tackling poverty and helping them to develop their assets and meet their needs and aspirations. So it should actively include the informal economy, small and medium enterprises, and locally owned and run solutions — not just big business.”

As the brown economy stumbles out of recession, the opportunity of ‘green growth’ is bringing ministries of finance, development banks, businesses, and the capital markets to the table for the first time. But the narrow project of ‘green growth’ alone cannot cope with today’s global environmental challenges or respond to societal needs.

Issues of equity and ecological limits must start to shape the emerging architecture for greener economies. For that to happen, the transition needs to be defined, managed and owned by people and their communities.

At a human level: Transforming our economies will only become politically feasible when we are able to connect the opportunities of a green economy to people’s lives. In short, that means better jobs, health, energy, food, education, housing, being able to afford old age, not being flooded (etc.).

At a country level: Scale up in-country dialogue and accords, emphasising equity, learning, shared commitment between stakeholders. Our current economic system has been framed and governed by elites, corporations and external bodies. National dialogues need to recognise country specificities including power, location and time. They also need to help stakeholders bridge opposing ‘world views’ and explore facets of the systemic change required.

At a global level: Connect global policy goals across the transition. This requires connecting the financial system reform agenda to the goals of a green economy; accelerating ‘circular economy’ policies to transform our sectors; scaling up natural resource management strategies in economic planning (via natural capital valuation, certified resource management, and payment for ecosystem services tools); and redefining our indicators of success to account for ecological limits and equity.

Build on the international regimes that actively manage both global and public goods and global risks. Powerful countries and players have ‘externalised’ social and environmental issues, which have now accumulated and interacted so much that they form major systemic risks to the world economy. Economic governance must now evolve, more rapidly and strategically, to manage the global economy within planetary boundaries and social and environmental risks.

Foreign and international relations on green economy need to extend beyond ODA and global initiatives. Issues such as trade reform, subsidies, technology transfer, tax co-operation, financial system reform, investment transparency need to be considered alongside and within green economy approaches.

Green economy goals, indicators and metrics, including the post-15 framework, should track progress towards economic reform. Measuring economic reform needs to be relevant to metrics at global (post-2015), national (beyond GDP), corporate (triple bottom line), and local. This is not just a technical task; a process is needed to share and reframe world views about what matters to people.