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OPINION: Green growth – paradigm shift or just spin?


by Alex Bowen and Sam Fankhauser
Grantham Research Institute on Climate Change and the Environment

There is much talk at the moment about green growth – environmentally sustainable, biodiverse, low-carbon and climate-resilient growth in human prosperity. Policy makers are attracted by the fact that green growth allows environmental protection to be cast as a question of opportunity and reward instead of costly restraint.  Analysts like the green growth idea because it abandons the narrow focus on emission reduction costs for broader, more nuanced and richer strands of economics.

Green growth enriches the policy debate in four important ways.

First, green growth reconnects long-term environmental sustainability with the understandable concerns of politicians about short-term macroeconomic issues like debt, unemployment and the performance of the economy.  The calls for a green fiscal stimulus, which started at the height of the world economic crisis, draw on this perspective.  A continuing weak economy, low interest rates and high unemployment mean that this aspect of the agenda is still relevant.  Where government budgets allow, timely and targeted investment in environmental projects could boost GDP and ensure an environmentally sound recovery.

Second, green growth espouses a much wider view of how and why markets fail. The problem is not just that markets ignore the value of the environment. Markets also malfunction if there are information problems, if firms have monopolistic power or if innovation is not properly rewarded. These market failures can interact and reinforce each other.   Large welfare gains are possible from well-designed taxes, subsidies and regulatory measures that deal with them comprehensively. However, if green growth measures are ill thought out, they could also dent the effectiveness of policies.

Third, green growth recognises that the economic changes required are not mere meddling at the margin.  New inventions and social changes in response to environmental imperatives could trigger a new industrial revolution. This would open up huge opportunities for innovative new firms in areas like renewable energy, low-carbon transport and sustainable forestry management. However, it also imposes enormous challenges for established firms .

One can foresee other obstacles.  If there is to be a new green industrial revolution, novel, credible, strong and persistent policies will have to be implemented around the world.  Although modern economies depend heavily on energy, the energy sector itself may not be big enough to  trigger the same economy-wide transformation and wave of innovation as earlier economic revolutions, such as that in IT.

Fourth, green growth recognises the constraint that increasingly scarce resources may impose on growth in the very long run.  So far, human ingenuity and good governance have allowed humanity to escape the fate foretold by the Club of Rome and many others – that the world is running out of essential resources.  Economies have managed to generate new products and production techniques before resource constraints have begun to bite.  The challenge is for ‘green growth’ policies to repeat this feat, by replacing exhaustible resources like fossil fuels with renewable ones like solar energy.

How will all this affect economic policy?  Green growth requires both public policy and private initiative. It will be private entrepreneurs that start the new industrial revolution. But they need to be incentivised through well-designed – though not necessarily more – regulation.  Policies need to be applied within transparent, credible and ethically acceptable frameworks of governance, monitored and assessed by informed citizens. Perhaps most importantly, green growth  reinforces the need for collective action. The green industrial revolution will only happen if enough people decide this is the way to go.

Alex Bowen is principal research fellow at the Grantham Research Institute on Climate Change and the Environment at London School of Economics and Political Science. Sam Fankhauser is co-director of the Grantham Research Institute on Climate Change and the Environment and a member of the UK Committee on Climate Change, an independent body that advises the UK Government on carbon targets and on preparing for climate change.

The blog above is based on a technical article for Global Environmental Change.


One response to “OPINION: Green growth – paradigm shift or just spin?”

  1. Thiago says:

    Really? “Green growth can be a eailrty if we so wish”? What’s Nick Stern been drinking? The Secret kool-aid? Just wishing for something doesn’t make it materialize out of thin air against all physical probabilities.It’s a simple equation really. Our growth of the last couple of centuries was based on our consumption of the energy concentrated in fossil fuels over many millennia of geological development. As the supply of that precious energy nectar wanes, we won’t have anything with remotely that high EROEI to keep the highly efficient, highly complex, tightly coupled, energy-expensive operations of a growth based industrial civilization going. We would need to contract.There might be local bubbles of “green” growth and job creation, essentially instances of delayed contraction, or outsourced greenhouse gas emission, but to focus on such would be to go against your earlier observation of cultivating a global outlook.The facts are these;There is no technology, or combination of technologies that has been demonstrably proven to replace fossil fuels as a cheap and abundant energy source. At current EROEI rates, most renewable technologies (with the exception of nuclear) don’t even come close. This is a scientific fact. In order to trounce this scientific observation we need references from scientific papers, not policy studies.Most policy studies whether conducted by governments, UN, or international donor and finance agencies, are biased towards the idea of perpetual growth. This is mostly because the “experts” writing these studies have been trained in an economic and financial model where growth is always positive. They lack the vision needed to visualize contraction. In their world, contraction is a black swan. Further, they have a vested interest in maintaining the status-quo. It pays the bills. Not to mention the hefty bonuses and consultancy fees.Therefore, trumped in the court of facts, they rely on quasi-religious intonations to support their baseless arguments; the invisible hand of the market will somehow provide a solution through innovation, spreading the pixie-dust of subsidies over existing renewable technologies will somehow make these technologies more energy efficient. New age quasi-mentalism seems to be an emerging trend as well amongst the proponents of growth as shown by the Nick Stern quote. Green growth can be eailrty guys; all we need to do is wish for it really, really hard.The fact is, there is no scientific evidence to suggest that in a post peak-oil world of shifting climate, global, holistic, net-positive growth –green or otherwise- can be a possibility. The sooner we realize this, the better it will be for us.