Shared analysis
Embedded Scribd iPaper - Requires Javascript and Flash Player
Why we need Green Economy – a Shared Analysis
1
There are many reasons why the Coalition wants to accelerate progress towards a green economy. The following is an attempt to crystallise our initial analysis of the problems which ‘green economy’ efforts need to address, in a form that is both brief and reflects the views of diverse Coalition members.2
Our understanding of the problem
1 Economic security and human wellbeing are fundamentally dependent on environmental goods and services – every person on earth depends upon the ability of healthy ecosystems to sustain food, fibre and freshwater provision, climate regulation, nutrient recycling, and waste assimilation. Farmers, fishers and others – including a majority of poor people in developing countries – are especially dependent for their livelihoods and income. Many waged workers depend upon good environmental conditions but have little control over those conditions, or legal protection. Too many decision-makers do not recognise these facts, or act on them. 2 Much current economic behaviour is harming the environment – straining nature’s productive
1
3 Economic behaviour is not succeeded in bringing benefits to large parts of society. Despite major social benefits from much economic activity to date, poor people are suffering insecure access to resources, markets, basic goods and services, and dignified work – and richer people suffer psychological and community costs of positional consumption. The incessant drivers of consumerism need to be addressed. Systemic and unjust material inequality is a key driver of social ills and environmental degradation. 4 Thus we now find ourselves in a loop in which environmental degradation is in turn causing economic problems. These include: destruction of property and agricultural land caused by severe weather conditions, increases in insurance premiums, and long-term rises in the prices of goods based on resources which are being depleted, such as oil, metals, fish, and many foodstuffs derived from land increasingly under pressure from demand for nonfood uses. This has profoundly negative feedbacks on people in terms of food insecurity, poor health, insecure shelter, insecure livelihoods and job losses.
MAY 2010
Based on substantial inputs from IIED,
Philips, WWF and TUAC, and references from other members.
2
resources and waste assimilation capacities beyond their limits for renewability. Three of nine ‘planetary boundaries’ – climate, biodiversity and the nitrogen cycle – have already been breached; the global ecological footprint already exceeds the Earth’s capacity by 30%.
This paper forms Part 1 of a Coalition
core script. Part 2 will offer ‘glimpses of a green economy’ (current initiatives that work), and Part 3 will suggest a ‘roadmap’ of enabling conditions and activities that will accelerate progress.
www.greeneconomycoalition.org
5 Consequently there is inadequate progress towards the prosperity of all humanity. Economic practice and governance are poorly serving national and international commitments on poverty reduction, social progress and environmental sustainability. A billion people still live on less than a dollar a day, and their environmental needs for sanitation, clean water and clean energy, etc, are not met. Many lack Decent Work as defined by ILO. 6 Particular economic policies are clearly to blame – and halting them would have immediate benefits. Subsidies for fossil fuels, some agricultural products and water, plus much fiscal policy, create incentives to degrade nature. Financial deregulation, debt and other policies cause the misallocation of capital to short-term speculation; and consequent wild price fluctuations in natural resources. 7 Current stock market practice favours shortterm profit maximization. Business models have been optimized towards cash flow management and maximization of return on investments. Businesses’ key performance indicators do not reflect true value generation, but rather cost minimization and resource exploitation (knowledge, materials, production equipment, etc.). This has resulted in a shortening of reporting cycles, the externalisation of environmental and other full costs, and a shift from long-term ‘disruptive innovation’ (where investments had been good in the 1970s and 1980s) to risk-averse shortterm incremental innovation. 8 Some recent economic innovations may help – but have not yet achieved scale. Resource efficiency improvements are welcome, but are failing to keep up with growing demand for energy and resources, leading to humanity’s rapidly expanding ecological footprint. Several recent innovations value environmental goods and services and incentivise their production (certification, payments for environmental services, public procurement). But more needs to be done to stabilise markets e.g.
for carbon, and to work at large scale e.g. rewarding whole countries. 9 But the prevailing economic paradigm – debtfuelled, consumption-based growth with insecure jobs – and associated metrics and targets, is entrenched. Tweaks are not enough when governmental or business economic metrics and targets (respectively GDP and shareholder value, and associated balance sheets) externalise environmental limits, long-term effects and the breadth of wellbeing – and yet are used to make key economic decisions. They mean environmental and social goals remain secondary, growth remains material/carbon-intensive, jobs remain unsatisfactory, and short-term shareholder value overrides long-term stakeholder value. 10 This economic paradigm is entrenched globally – but we still rely on it to solve the very problems it is creating. Neo-liberal economics put too much faith in the free market to deliver wellbeing, and too much store in growth: ‘economic growth is key for poverty reduction’; ‘LICs need to become MICs before environmental investment is warranted’. Economic regulation has been eroded and prevented, with recent financial crises now adding to the environmental and social damage. The comfortable lifestyles of economically powerful majorities entrench this, and consequently values and mindsets are not challenged effectively. 11 The confluence of crises in different systems is escalating – so that it is now critical to put ‘people’ and ‘planet’ back into economic thinking. We have been living beyond our means, with crises in climate, energy, food, water, poverty, jobs and finance linked closely to economic activity. It is time to transform the economic paradigm, not only the plans and instruments that currently get most of our attention. The economy must be nested within society, within environment – and not the reverse. Economic goals cannot continue to be elevated over environmental goals.
MAY 2010
Accelerating progress
12 The recent escalation of government and business ‘green economy’ initiatives is promising – but will be conditioned by managerial capacities and political will for more radical changes. The fiscal stimulus packages and post-Copenhagen mechanisms offer a 2-3 year window of opportunity’ although the former are less ‘green’ than they suggest, and all are becoming constrained by a new era of fiscal austerity. Weak leadership, accountability and incentives continue to entrench the economic paradigm. Yet government action is unavoidable where an unregulated market will not forge transformational changes and guarantee performance. Work on ‘green jobs’ deserves more prominence. 13 The public is increasingly concerned – but lacks a secure understanding of benefits of change, and how they can make a difference. Environmental and social problems are becoming more visible, and are leading to increased public appetite for greater economic regulation, reform and oversight to ensure more sustainable outcomes. But lack of a clearly articulated, appealing and credible alternative vision, combined with low levels of trust in many institutions, is leading to inertia. 14 Much ‘green economy’ academic work exists from the last 3 decades – but it has not been used by the ‘mainstream’. It shows how to value and account for environmental goods and services, and sustain revenue streams. Until now, political and business incentives mean this thinking has been submerged. It is time for it to influence all economic and financial training. Arguments for and against ‘no-growth’ and ‘cut-consumption’ need to be resolved. 15 To date, the ‘green economy’ debate has been dominated by the G20, scientists and big business – with the global South, informal economy, poor groups and civil society less prominent. But there are many players and initiatives in these other fields, which already offer ‘glimpses of a green economy’ or at least ‘field labs to develop good practice soon’. If empowered, they could and should become key in forging a more shared vision of a green economy.
16 A new innovation paradigm is emerging – one which is inclusive and not merely technology-driven innovation. Sustainable development needs to facilitate system changes. In many cases, innovation will need to be radical, involving many different stakeholders and industries. Next to the technological dimension of these innovations, new business models will be crucial, with new marketing approaches facilitating changes in consumer behaviour enabling e.g. recycling and or re-use. Many bottom-up, community or workplace innovations reveal pathways for reorganising society, and demonstrate how innovation is rooted in plural contexts.
Towards a vision
17 The Green Economy Coalition can help to create a compelling vision and open up just and sustainable paths for achieving real prosperity – working in the ‘disruption zone’ between old and new paradigms. As a multi-sector, multi-stakeholder group with global and local reach, and credibility in environmental, social, business and economic spheres, the Coalition is in a good position to: l improve communications between stakeholders and among diverse ‘green economy’ initiatives l forge a coherent new economic vision, with a just transition that works for all l encourage scale-up of best practice l promote realistic ways to halt bad practice l encourage innovation to explore prosperity options within ecological limits – building environmental, social, human, financial and physical capital together l influence key decision-makers, creating confidence and generating enabling conditions for a rapid transition to the green economy – a ‘race to the top’. Part 2 of the Coalition’s core script will offer ‘glimpses of a green economy’ (current initiatives that work): this will be available soon. Part 3 will suggest a ‘roadmap’ of economic policies, critical activities, and other enabling conditions that will accelerate progress and lead us towards the GEC’s vision: this will be generated by October 2010, through Coalition engagement, especially through national and thematic dialogues.
www.greeneconomycoalition.org
Key references
Adams, W. M., Jeanrenaud, S. J. 2008: Transition to Sustainability: Towards a humane and diverse world. IUCN, Gland, Switzerland. Barbier, E. 2009. A Global Green New Deal. University of Wyoming Bass, S. 2007. A New Era in Sustainable Development. IIED, London, UK Bass, S., Geoghegan, T. 2009. Road to Recovery: mapping a sustainable economy. Discussion paper to inform the 2009 Commonwealth Heads of Government Meeting Daly, H. 1972. The Steady State Economy. London: W H Freeman and Co Ltd. Green, J. 2007. Democratizing the Future: Towards a new era of creativity and growth. Phillips Electronics NV Hamilton, K. et al. 2009. Fortifying the Foundation: state of the voluntary carbon markets 2009. Ecosystem Marketplace, Washington and New Carbon Finance, New York Hawken, P. Blessed Unrest: How the largest movement in the world came into being, and why no-one saw it coming. Viking Press, New York HSBC Bank plc. 2009. A Climate for Recovery: The Colour of stimulus goes green IIED. 2009. Road to Recovery: Mapping a Sustainable Economy. Discussion paper to inform the 2009 Commonwealth Heads of Government Meeting IPCC. 2007. 4th Assessment Report Jackson, T. 2008. Prosperity without Growth: Steps towards a sustainable economy. UK Sustainable Development Commission, London McKibben, B. 2007. Deep Economy – The wealth of communities and the durable future. New York: Henry Holt & Co.
Millennium Ecosystem Assessment. 2005. Ecosystems and Human Well-being: Synthesis. Island Press, Washington DC Mountford, S. 2010. Global public opinion briefing. Green Economy Coalition, London New Economics Foundation. 2008. A Green New Deal. nef, London Pearce, D.W. 2005. Investing in Environmental Wealth for Poverty Reduction. UNDP, New York Pearce, D, Markandya. A., Barbier, E. 1989. Blueprint for a Green Economy. Earthscan, London Porritt, J. 2005. Capitalism – As if the world matters. London, Earthscan Rockstrom, J. et al. 2009. Planetary Boundaries: Exploring the safe operating space for humanity. Nature 461, 472-475, 2009 Sen, A. 1999. Development as Freedom. Oxford: Oxford University Press. Stern, N. 2007. The Economics of Climate Change: The Stern Review. Cambridge University Press UN DESA. 2008. Report on the Millennium Development Goals. UNDESA, New York UNEP. 2009. Global Green New Deal: Policy brief. United Nations Environment Programme, Nairobi Victor, D. 2009. The Politics of Fossil Fuel Subsidies. IISD, Winnipeg World Bank. 2005. Where is the Wealth of Nations? Measuring Capital for the 21st Century. World Bank, Washington DC World Business Council for Sustainable Development. 2010. Vision 2050: The new agenda for business. WBCSD, Geneva World Resources Institute. 2005. The Wealth of the Poor: Managing ecosystems to fight poverty. World Resources Report 2005. WRI, Washington DC
TheInternational GEC is supported by a secretariat hosted Institute for by IIED in London. For further information on the Environment and GEC please contact: sally.jeanrenaud@iied.org Development tom.bigg@iied.org or steve.bass@iied.org IIED, 4 Endsleigh Street, London WC1H 0DD, UK www.greeneconomycoalition.org
MAY 2010
www.greeneconomycoalition.org
Why we need Green Economy – a Shared Analysis
1
There are many reasons why the Coalition wants to accelerate progress towards a green economy. The following is an attempt to crystallise our initial analysis of the problems which ‘green economy’ efforts need to address, in a form that is both brief and reflects the views of diverse Coalition members.2
Our understanding of the problem
1 Economic security and human wellbeing are fundamentally dependent on environmental goods and services – every person on earth depends upon the ability of healthy ecosystems to sustain food, fibre and freshwater provision, climate regulation, nutrient recycling, and waste assimilation. Farmers, fishers and others – including a majority of poor people in developing countries – are especially dependent for their livelihoods and income. Many waged workers depend upon good environmental conditions but have little control over those conditions, or legal protection. Too many decision-makers do not recognise these facts, or act on them. 2 Much current economic behaviour is harming the environment – straining nature’s productive
1
3 Economic behaviour is not succeeded in bringing benefits to large parts of society. Despite major social benefits from much economic activity to date, poor people are suffering insecure access to resources, markets, basic goods and services, and dignified work – and richer people suffer psychological and community costs of positional consumption. The incessant drivers of consumerism need to be addressed. Systemic and unjust material inequality is a key driver of social ills and environmental degradation. 4 Thus we now find ourselves in a loop in which environmental degradation is in turn causing economic problems. These include: destruction of property and agricultural land caused by severe weather conditions, increases in insurance premiums, and long-term rises in the prices of goods based on resources which are being depleted, such as oil, metals, fish, and many foodstuffs derived from land increasingly under pressure from demand for nonfood uses. This has profoundly negative feedbacks on people in terms of food insecurity, poor health, insecure shelter, insecure livelihoods and job losses.
MAY 2010
Based on substantial inputs from IIED,
Philips, WWF and TUAC, and references from other members.
2
resources and waste assimilation capacities beyond their limits for renewability. Three of nine ‘planetary boundaries’ – climate, biodiversity and the nitrogen cycle – have already been breached; the global ecological footprint already exceeds the Earth’s capacity by 30%.
This paper forms Part 1 of a Coalition
core script. Part 2 will offer ‘glimpses of a green economy’ (current initiatives that work), and Part 3 will suggest a ‘roadmap’ of enabling conditions and activities that will accelerate progress.
www.greeneconomycoalition.org
5 Consequently there is inadequate progress towards the prosperity of all humanity. Economic practice and governance are poorly serving national and international commitments on poverty reduction, social progress and environmental sustainability. A billion people still live on less than a dollar a day, and their environmental needs for sanitation, clean water and clean energy, etc, are not met. Many lack Decent Work as defined by ILO. 6 Particular economic policies are clearly to blame – and halting them would have immediate benefits. Subsidies for fossil fuels, some agricultural products and water, plus much fiscal policy, create incentives to degrade nature. Financial deregulation, debt and other policies cause the misallocation of capital to short-term speculation; and consequent wild price fluctuations in natural resources. 7 Current stock market practice favours shortterm profit maximization. Business models have been optimized towards cash flow management and maximization of return on investments. Businesses’ key performance indicators do not reflect true value generation, but rather cost minimization and resource exploitation (knowledge, materials, production equipment, etc.). This has resulted in a shortening of reporting cycles, the externalisation of environmental and other full costs, and a shift from long-term ‘disruptive innovation’ (where investments had been good in the 1970s and 1980s) to risk-averse shortterm incremental innovation. 8 Some recent economic innovations may help – but have not yet achieved scale. Resource efficiency improvements are welcome, but are failing to keep up with growing demand for energy and resources, leading to humanity’s rapidly expanding ecological footprint. Several recent innovations value environmental goods and services and incentivise their production (certification, payments for environmental services, public procurement). But more needs to be done to stabilise markets e.g.
for carbon, and to work at large scale e.g. rewarding whole countries. 9 But the prevailing economic paradigm – debtfuelled, consumption-based growth with insecure jobs – and associated metrics and targets, is entrenched. Tweaks are not enough when governmental or business economic metrics and targets (respectively GDP and shareholder value, and associated balance sheets) externalise environmental limits, long-term effects and the breadth of wellbeing – and yet are used to make key economic decisions. They mean environmental and social goals remain secondary, growth remains material/carbon-intensive, jobs remain unsatisfactory, and short-term shareholder value overrides long-term stakeholder value. 10 This economic paradigm is entrenched globally – but we still rely on it to solve the very problems it is creating. Neo-liberal economics put too much faith in the free market to deliver wellbeing, and too much store in growth: ‘economic growth is key for poverty reduction’; ‘LICs need to become MICs before environmental investment is warranted’. Economic regulation has been eroded and prevented, with recent financial crises now adding to the environmental and social damage. The comfortable lifestyles of economically powerful majorities entrench this, and consequently values and mindsets are not challenged effectively. 11 The confluence of crises in different systems is escalating – so that it is now critical to put ‘people’ and ‘planet’ back into economic thinking. We have been living beyond our means, with crises in climate, energy, food, water, poverty, jobs and finance linked closely to economic activity. It is time to transform the economic paradigm, not only the plans and instruments that currently get most of our attention. The economy must be nested within society, within environment – and not the reverse. Economic goals cannot continue to be elevated over environmental goals.
MAY 2010
Accelerating progress
12 The recent escalation of government and business ‘green economy’ initiatives is promising – but will be conditioned by managerial capacities and political will for more radical changes. The fiscal stimulus packages and post-Copenhagen mechanisms offer a 2-3 year window of opportunity’ although the former are less ‘green’ than they suggest, and all are becoming constrained by a new era of fiscal austerity. Weak leadership, accountability and incentives continue to entrench the economic paradigm. Yet government action is unavoidable where an unregulated market will not forge transformational changes and guarantee performance. Work on ‘green jobs’ deserves more prominence. 13 The public is increasingly concerned – but lacks a secure understanding of benefits of change, and how they can make a difference. Environmental and social problems are becoming more visible, and are leading to increased public appetite for greater economic regulation, reform and oversight to ensure more sustainable outcomes. But lack of a clearly articulated, appealing and credible alternative vision, combined with low levels of trust in many institutions, is leading to inertia. 14 Much ‘green economy’ academic work exists from the last 3 decades – but it has not been used by the ‘mainstream’. It shows how to value and account for environmental goods and services, and sustain revenue streams. Until now, political and business incentives mean this thinking has been submerged. It is time for it to influence all economic and financial training. Arguments for and against ‘no-growth’ and ‘cut-consumption’ need to be resolved. 15 To date, the ‘green economy’ debate has been dominated by the G20, scientists and big business – with the global South, informal economy, poor groups and civil society less prominent. But there are many players and initiatives in these other fields, which already offer ‘glimpses of a green economy’ or at least ‘field labs to develop good practice soon’. If empowered, they could and should become key in forging a more shared vision of a green economy.
16 A new innovation paradigm is emerging – one which is inclusive and not merely technology-driven innovation. Sustainable development needs to facilitate system changes. In many cases, innovation will need to be radical, involving many different stakeholders and industries. Next to the technological dimension of these innovations, new business models will be crucial, with new marketing approaches facilitating changes in consumer behaviour enabling e.g. recycling and or re-use. Many bottom-up, community or workplace innovations reveal pathways for reorganising society, and demonstrate how innovation is rooted in plural contexts.
Towards a vision
17 The Green Economy Coalition can help to create a compelling vision and open up just and sustainable paths for achieving real prosperity – working in the ‘disruption zone’ between old and new paradigms. As a multi-sector, multi-stakeholder group with global and local reach, and credibility in environmental, social, business and economic spheres, the Coalition is in a good position to: l improve communications between stakeholders and among diverse ‘green economy’ initiatives l forge a coherent new economic vision, with a just transition that works for all l encourage scale-up of best practice l promote realistic ways to halt bad practice l encourage innovation to explore prosperity options within ecological limits – building environmental, social, human, financial and physical capital together l influence key decision-makers, creating confidence and generating enabling conditions for a rapid transition to the green economy – a ‘race to the top’. Part 2 of the Coalition’s core script will offer ‘glimpses of a green economy’ (current initiatives that work): this will be available soon. Part 3 will suggest a ‘roadmap’ of economic policies, critical activities, and other enabling conditions that will accelerate progress and lead us towards the GEC’s vision: this will be generated by October 2010, through Coalition engagement, especially through national and thematic dialogues.
www.greeneconomycoalition.org
Key references
Adams, W. M., Jeanrenaud, S. J. 2008: Transition to Sustainability: Towards a humane and diverse world. IUCN, Gland, Switzerland. Barbier, E. 2009. A Global Green New Deal. University of Wyoming Bass, S. 2007. A New Era in Sustainable Development. IIED, London, UK Bass, S., Geoghegan, T. 2009. Road to Recovery: mapping a sustainable economy. Discussion paper to inform the 2009 Commonwealth Heads of Government Meeting Daly, H. 1972. The Steady State Economy. London: W H Freeman and Co Ltd. Green, J. 2007. Democratizing the Future: Towards a new era of creativity and growth. Phillips Electronics NV Hamilton, K. et al. 2009. Fortifying the Foundation: state of the voluntary carbon markets 2009. Ecosystem Marketplace, Washington and New Carbon Finance, New York Hawken, P. Blessed Unrest: How the largest movement in the world came into being, and why no-one saw it coming. Viking Press, New York HSBC Bank plc. 2009. A Climate for Recovery: The Colour of stimulus goes green IIED. 2009. Road to Recovery: Mapping a Sustainable Economy. Discussion paper to inform the 2009 Commonwealth Heads of Government Meeting IPCC. 2007. 4th Assessment Report Jackson, T. 2008. Prosperity without Growth: Steps towards a sustainable economy. UK Sustainable Development Commission, London McKibben, B. 2007. Deep Economy – The wealth of communities and the durable future. New York: Henry Holt & Co.
Millennium Ecosystem Assessment. 2005. Ecosystems and Human Well-being: Synthesis. Island Press, Washington DC Mountford, S. 2010. Global public opinion briefing. Green Economy Coalition, London New Economics Foundation. 2008. A Green New Deal. nef, London Pearce, D.W. 2005. Investing in Environmental Wealth for Poverty Reduction. UNDP, New York Pearce, D, Markandya. A., Barbier, E. 1989. Blueprint for a Green Economy. Earthscan, London Porritt, J. 2005. Capitalism – As if the world matters. London, Earthscan Rockstrom, J. et al. 2009. Planetary Boundaries: Exploring the safe operating space for humanity. Nature 461, 472-475, 2009 Sen, A. 1999. Development as Freedom. Oxford: Oxford University Press. Stern, N. 2007. The Economics of Climate Change: The Stern Review. Cambridge University Press UN DESA. 2008. Report on the Millennium Development Goals. UNDESA, New York UNEP. 2009. Global Green New Deal: Policy brief. United Nations Environment Programme, Nairobi Victor, D. 2009. The Politics of Fossil Fuel Subsidies. IISD, Winnipeg World Bank. 2005. Where is the Wealth of Nations? Measuring Capital for the 21st Century. World Bank, Washington DC World Business Council for Sustainable Development. 2010. Vision 2050: The new agenda for business. WBCSD, Geneva World Resources Institute. 2005. The Wealth of the Poor: Managing ecosystems to fight poverty. World Resources Report 2005. WRI, Washington DC
TheInternational GEC is supported by a secretariat hosted Institute for by IIED in London. For further information on the Environment and GEC please contact: sally.jeanrenaud@iied.org Development tom.bigg@iied.org or steve.bass@iied.org IIED, 4 Endsleigh Street, London WC1H 0DD, UK www.greeneconomycoalition.org
MAY 2010
www.greeneconomycoalition.org
