What is the green economy?
Is it good or bad for poor men
and women?
A CAFOD POLICY DISCUSSION BRIEF FOR RIO+20
MAY 2012
The Rio+20 conference has two themes, the headliner of which
is “a green economy in the context of sustainable development
and poverty eradication”1.
Green growth, climate-resilient growth, and low carbon
development have also become buzz words among policymakers in most institutions – notably the OECD, the G20 and
the World Bank – as well as at the national level.
Why are these concepts so appealing to policy makers? Can
they be as good as they sound? And how do the inherent
approaches to managing the economy and its social and
environmental impacts differ, if at all? As always with new
universally popular buzz words there is some fuzziness that can
mask important divergences.
This brief aims to unpick differences in approaches to the green
economy in order to identify which of them really matter for
concrete changes that will make the green economy work for
poor men and women.
1
The other is the institutional framework for sustainable development,
see http://www.uncsd2012.org/rio20/
1
1. Is the green economy about
green growth?
One of the main differences between the definitions employed
by the various protagonists is the presence or absence of the
word “growth”.
The role of growth in the green economy is one of the most
highly contested elements, but arguably something of an
unhelpful distraction.
On one side of the argument are those that emphasize the finite
nature of the earth’s resources and therefore the need to put an
end to ever-increasing consumption and production, and instead
turn to other forms of progress.
2
At the other end of the spectrum are most policy-makers who
see the green economy as an opportunity for new sources of
growth and who are optimistic about the ability of technology to
delink increased growth from its environmental impacts. These
groups frequently argue that, in fact, growth will be necessary
to finance the needed investment in technology and shifts in
production that greening the economy will require3.
Growth is quite an abstract concept, and it is perhaps more
useful to think of the diverse nature and the purposes of growth
to find a way around this apparent deadlock.
Growth is an increase in consumption or production of goods
and services. It encompasses diverse activities that can have
little, no or even positive environmental impacts. Some of these
might contribute to progress, development or increased wellbeing. For example increased consumption of those whose basic
needs are not met would be considered progress by most. On
the other hand, increasing the competitive consumption of
luxury goods among the rich would only be considered progress
by a few.
Growth generally does not occur only through increased
economic activity, but in structural and technological shifts in
2
New Economics Foundation, Growth isn't possible, January 2010
Boykoff, M., 16 January 2012, Economies must grow for the climate
change fight. The Guardian Newspaper
3
2
The role of
growth in the
green economy is
one of the most
highly contested
elements, but
arguably
something of an
unhelpful
distraction.
that activity – some growth is then likely, even in rich countries,
as part of greening the economy.
To say that we want no growth or growth only in certain
countries ceases to make sense in these contexts. Besides, it is
hard to conceive how policies to curtail overall growth could be
formulated.
Whilst planetary boundaries are real and must be respected, it
is not clear that “no growth” will be any more desirable than the
increased overall growth sought by growth optimists. Reducing
growth in low-cost rural renewable energy technologies is as
undesirable as increasing growth in unnecessary, highlypolluting activities, such as short-haul leisure air travel. Dealing
in meaningless growth aggregates is unhelpful. What we want is
some sectors to do better, some sectors to do less, most to do
greener. Similarly, we want some to consume more, some to
consume less, most to consume differently. As usual, it’s not so
simple – as more or less growth.
It seems that our key challenge is how to shift from an
economic system based on the notion of unlimited
growth to one that is both ecologically sustainable and
socially just. No growth is not the answer.
Qualitative Growth, Fritjof Capra and Hazel Henderson,
Outside Insights, ICAEW, October 2009
THE POLITICS OF GREEN GROWTH
Perhaps the reason the growth debate is so polarized, is not
only that it divides different schools of economic thought
(enough in itself) but also because the debate is complicated by
politics.
The persistence of growth in policy rhetoric is unsurprising
considering the context of the debate. In the wake of the global
economic crisis, governments are scrambling for growth to
impress credit markets and to reassure populations faced with
unemployment and hardship.
In addition, countries are keen to consolidate their own
potential wins – and avoid potential losses – from a shift to a
green global economy. For example, it is in industrialised
countries interest to be optimistic about the role of technology
in the green economy. Climate Change Mitigation Technology
Patenting is highly concentrated in 6 rich countries: Japan, USA,
3
Dealing in
meaningless
growth
aggregates is
unhelpful. What
we want is some
sectors to do
better, some
sectors to do
less, most to do
greener.
Germany, France, United Kingdom and Korea 4. They are keen to
promote their high-tech services and manufacturing sectors and
to consolidate their leadership in this area.
Emerging economies, on the other hand, are keen to safeguard
their own right to grow and to develop their economies. They
also want to use the shift to develop new, high value added
activities, not simply to become export targets for richer
countries technology exports.
Together with developing countries, they are keen that a green
economy will not simply reinforce existing patterns and
inequalities.
Developing countries have had only a limited presence in the
green economy debate so far. The focus has been largely on
compensating them for any costs the shift might involve. Again,
this reflects politics – developing countries are keen to
emphasize the responsibility of industrialised economies to
green their industries, as the biggest contributors to climate
change. However, this has meant the role of reducing poverty in
green economy debates is undervalued and under-explored. It
also means the specific needs, and indeed contributions of, poor
countries in greening their own economies has received too
little attention.
Although the rhetorical impasse around growth looks set to
remain, there is a surprising consensus on both sides that can
be use to progress a more constructive debate.
There is a consensus that economies need to:

Become more environmentally sound

Become more stable

Become better at meeting the needs of the poorest

Become better at generating jobs5.
Looked at from this perspective, the growth dilemma becomes
more manageable and a policy approach that can accommodate
growth optimists and pessimists emerges. CAFOD believes that
this should focus on:
1. Pursuing and measuring real objectives
The assumption that growth is a tool that automatically
achieves broader objectives outlined above, is recognised as
4
Ghafele and Gibert, A changing Climate: Statistical Evidence of
the Intellectual Property Landscape in Clean Technologies, Said
Business School, University of Oxford, October 2011,
http://works.bepress.com/roya_ghafele/5
5
See for example: http://www.un.org/ga/econcrisissummit/
4
There is a
consensus that
policy makers
need to focus on
real objectives,
supported by
better measures
of progress.
false, whether or not you are a growth optimist or pessimist.
There is a consensus that policy makers need to focus on
real objectives, supported by better measures of progress so
that policy makers can assess their success by things other
than an increase in GDP6.
2. Taking greater account of environmental costs
There is a consensus that traditional approaches to
economic policy have failed to adequately factor in
environmental costs. There are multiple proposals for tools
to better factor these costs into economic decisions:

Carbon pricing

Green accounting and better environmental reporting
for companies

Environmental taxes and border measures

Environmental standards and regulations
Whatever combination of policies is chosen according to
different economic, social and institutional contexts, it is
important to have a stable regulatory framework that sends
a clear signal that environmental costs will bear real
economic consequences. It is important that international
cooperation on these measures exists so that they are not
used to unfairly advantage domestic industries. It is also
critical that such measures do not mean that natural
resources simply become traded and valued only as
economic assets, potentially undermining rights, access and
ownership of local communities and particularly of poor men
and women.
3. Incentive structures for greener production and
consumption
Even with the right regulatory framework, is unlikely that
markets by themselves will deliver the necessary shift to the
green economy. High upfront costs and risks mean that
subsidies and other public support, such as mechanisms to
manage risk, will be required for fledging green industries.
Conversely, support needs to be withdrawn from the mostpolluting industries. Other policies can also help boost green
production, for example green procurement policies or
boosting public support to relevant research and
development. Consumers also need incentives to go green,
for example public education and environmental labelling.
6
See for example: http://www.oecd.org/document/32
/0,3746,en_2649_201185_47823328_1_1_1_1,00.html
5
It is critical that
such measures do
not mean that
natural resources
simply become
traded and
valued only as
economic assets..
Recognition of an emerging consensus around these policies
should not lead us to underestimate real differences between
parties and real hurdles to a global green economy. Regulations
and interventions by the state will always face criticisms of
increased costs and market distortions. In the short term there
will be trade-offs between greening the economy and
maximising competitiveness and growth. Policy makers will
need to overcome real political pressure to surmount these and
must work together internationally to ensure that green
protectionism or opportunism do not prevent real progress.
6
2. The Real Green Economy
Debate
The most neglected part of the green policy debate is the
necessity to reduce poverty and address development gaps as a
critical part of greening the economy.
UNEP’s definition of a green economy is “one that results in
improved human well-being and social equity, while significantly
reducing environmental risks and ecological scarcities.”
It is then a holistic concept encompassing economic, social and
environmental development and emphasizes the
complementarities of these objectives.
The OECD’s green growth strategy name checks all three
elements too, but has a very different approach. For example,
the social dimension is given far less weight. Its consultation
paper makes it clear that:
“It is narrower in scope, entailing an operational policy agenda
that can help achieve concrete, measurable progress at the
interface of the economy and the environment.”
It also envisages that poor countries and poor men and women
might need measures “in parallel” to be “compensated” for a
move towards green growth – rather than emphasizing the
complementarity of the three objectives7.
The need to make poverty reduction and social development an
integral part of any new development paradigm is important for
three main reasons:

Efficiency: Making growth more efficient at reducing
poverty and supporting social dimensions of well-being is
critical to greening the economy. Even if you believe in
the “rising tide” and that using the benefits of growth to
compensate losers and finance social progress is the
best route, it is clear that progress is more easily
achieved if societies are not too unequal. It is also
possible that tackling extreme inequality can help to
make the tide rise faster and more steadily8. Pockets of
7
OECD, Towards Green Growth a summary for policy makers”,
May 2011, p5, http://www.oecd.org/dataoecd/32/49/12345.pdf
8
Ramcharan, R. (2010) „Inequality is Untenable‟, in Finance and
Development’, September 2010, pp.24-25, International Monetary
Fund, Washington DC.
7
The most
neglected part of
the green policy
debate is the
necessity to
reduce poverty
and address
development
gaps as a critical
part of greening
the economy.
poverty, either geographical or social, can have very
important direct impacts on how green an economy is. It
is well documented that poor men and women can resort
to environmentally damaging coping and diversification
strategies in face of hardship9. Conversely, poor men
and women are active in sectors such as agriculture,
which can play a key role in environmental protection
and mitigating climate change. Less well-explored is the
impact of a lack of effective demand among these
groups in disseminating green goods and services to a
significant proportion of the world’s population. Whilst
poverty persists, market mechanisms will not deliver
technological innovations in green goods and services to
poor men and women.

Effectiveness: Even if historical responsibility for
climate change is low for developing countries, they do
and will increasingly contribute to environmental
degradation, as they develop new productive capacities
and consumers become better off. As well as this risk in
not developing solutions to suit their contexts and needs,
failing to consider them in the green economy debate
will also result in a lost opportunity. As many developing
countries still need to develop key industries and
infrastructure services, including energy, there is an
opportunity for them to leap-frog “dirty” development.

Political viability: Largely northern led debates to date
have demonstrated that unless developing countries
participate in the discussion, green economy debates will
mainly deal with industrialised countries interests and
needs – for example promoting exports of green goods
and services. This is not politically viable over the longterm and it will simply reinforce existing inequalities and
instabilities. The needs of developing countries in
adapting to the double challenge of tackling climate
change and reducing poverty will need to be more
central to the debate.
9
For example, small-scale deforestation (although richer groups
are by far more responsible for deforestation rates), see: Purnamasari
, R. (2010)Dynamics of small-scale deforestation in Indonesia:
examining the effects of poverty and socio-economic development In:
XIII World Forestry Congress ; Unasylva (FAO) , v. 61 (= no. 234-235)
Perlis, A. (ed.) / FAO, Rome (Italy). Forestry Dept. , 2010, p. 14-20
8
The needs of
developing
countries in
adapting to the
double challenge
of tackling
climate change
and reducing
poverty will need
to be more
central to the
debate.
3. What shifts in the approach
to the Green Economy are
needed?
Moving to a green economy debate that capitalises on the
complementarities of social, environmental and economic
development and that consequently pays greater attention to
the needs of developing countries would look very different
from the current approach of organisations, such as the OECD.
Whilst these focus on changing habits of wealthy consumers,
promoting exports of hi-tech goods and services and subsidising
fledgling green industries, the context of developing countries,
means that the following approaches should be more prevalent:
FOCUS ON AND INVEST IN KEY SECTORS SUCH AS
AGRICULTURE
Developing country economies are largely based on sectors that
are currently highly polluting, but which can make significant
contributions to stemming climate change, such as agriculture,
forests, tourism and low-grade manufactures.
Agriculture alone currently contributes thirty per cent of global
emissions10, but with the right investment and policy framework
(based on low-input and smallholder agriculture) could in fact
reduce green house gas emissions11.
Especially neglected are small-scale and informal enterprises
within developing country economies, even though they are
most numerous and tend not to observe the highest
environmental standards.
TRANSFERRING ISN’T SELLING: BETTER SUPPORT FOR
TECHNOLOGY DEVELOPMENT
The technology transfer debate has tended to emphasize the
importance of rigorous intellectual property protection regimes
to enable firms to take technology overseas and the usefulness
of liberalisation of environmental goods and services to help
disseminate that technology. This leaves developing countries in
10
World Development Report 2008, Agriculture and
Development, World Bank
11
Niggli et al (2009) Low Greenhouse Gas Agriculture: Mitigation
and Adaptation Potential of Sustainable Farming Systems, FAO, Rome
9
Developing
country
economies are
largely based on
sectors that are
currently highly
polluting, but
which can make
significant
contributions to
stemming climate
change, such as
agriculture,
forests, tourism
and low grade
manufactures.
the position of recipients or importers of technology, yet it is
imperative that they develop their own to ensure that
technologies appropriate to their contexts are developed and to
give them a greater stake in the green economy. Supporting
genuine technology transfer will require: encouraging joint
research and development, allowing governments to use
investment strategies that facilitate technology transfer,
allowing governments to adopt the right balance between
fostering innovation and promoting dissemination of technology
in their intellectual property regimes. It will also involve
developed countries resisting using the green economy debate
to unfairly advantage their own green industries, and to allow
developing countries to develop their own.
SUPPORTING DEVELOPING COUNTRY GOVERNMENTS
As has been seen, even in the case of industrialised countries,
governments will need increased finances and administrative
capacity to support the move to a green economy. Low income
countries have extremely limited government capacity, yet face
the more difficult double challenge of greening their economies
whilst promoting their structural transformation and reducing
poverty.
Financial and technical help in meeting these challenges will be
essential, as well as a supportive international policy
framework.
Developing country governments will need different policy tools
in promoting the green transition as their economic contexts are
very different – with imperfect markets, high transaction costs,
low levels of domestic demand and financial and capital
constraints. For example, consumer incentives and education
are much less helpful when the majority of the population has
difficulty meeting its basic needs.
Most developing country governments will lack resources to
subsidise development of green industries, and thus might need
other tools such as procurement and trade policies to develop
them.
They might also find it beneficial to require partnerships,
licensing or other forms of technology transfer from firms
investing in their economies.
10
Developing
country
governments will
need different
policy tools in
promoting the
green transition
as their economic
contexts are very
different..
Sectoral approaches to key developing country sectors such as
tourism are also required. This sector is currently dominated by
global firms that can have a devastating environmental impact
and provide few local economic benefits. Boosting sustainable
tourism and ensuring that local firms and workers benefits will
be a valuable investment for developing country governments,
provided initial support and policy cooperation to tackle
behaviour of global firms can be assured. Similarly in the
important agriculture sector, there is a need to tackle the
dominance of large agri-business firms that promote high-input
agriculture and can have a negative effect on the development
of sustainable small-scale agriculture, coupled with a need for
increased support – both technological and financial – to smallscale production, which will provide environmental, social and
economic benefits.
In general there is a need for greater cooperation between
developed and developing countries in information sharing so
that both sides can learn what works in different contexts and
share innovation; in policy coherence so that harmful market
practices and distortions are overcome; and in financial support
so that key sectors can be “greened” to the benefit of all.
11
In general, there
is a need for
greater
information
sharing so that
both sides can
learn what works
in different
contexts and
share innovations
4. Conclusions and
recommendations
The green economy debate needs:
A more grown-up approach to growth: That goes beyond
the arguments of growth pessimists and optimists that instead
identifies where and how growth needs to happen and how to
support these shifts. This will include new measures of progress
that deconstruct, as well as complement GDP.
A complementary approach to social, economic and
environmental development: There is increasing consensus
that growth policies cannot be formulated isolated from their
environmental impact. The green economy debate also needs to
take equal account of their social and poverty impacts if it is to
be efficient and effective at stemming environmental
degradation whilst delivering real progress.
More attention to the developing country green economy
agenda: so far the green economy debate is biased towards
the needs and interests of industrial economies. Developing
countries and their specific needs must become more central to
the green economy debate, including a focus on key sectors, a
new approach to technology transfer and supporting developing
country governments.
For further information, contact:
Christina Weller
Lead Economic Analyst
CAFOD
Email: [email protected]
12
The green
economy debate
needs to take
equal account of
social and
poverty impacts if
it is to be efficient
and effective at
stemming
environmental
degradation
whilst delivering
real progress.