Key issues to ensure a transition towards green economy

1

Joy KimEconomic and Trade Branch

Division of Industry, Technology and Economics

UNEP

2

Key concerns surrounding green economy?

Can developing countries afford this given that the global community is still in the wake of the global financial crisis?

Would a transition to a Green Economy hinder economic growth and the ability to reduce poverty?

Would countries lagging in green technology know-how lose the competitive disadvantage in the race for future markets?

How to avoid "green protectionism"?

3

Mobilizing public finance through green fiscal policy reforms

In the US, $25 per ton of Co2 could bring in about 1 percent of GDP or over $1 trillion over a decade

Removing $500 billion of FF subsidies could boost the global economy by around 0.3%

In November 2010, Vietnam passed its first law on environmental taxation, which is expected to generate between US$ 757 million to US$ 3 billion.

Fossil fuel subsidy reforms (Indonesia, Nigeria)

Many countries consider revenue-neutral taxes (e.g. use eco-taxes to reduce labour taxes) or green ear marking (e.g., use carbon taxes to support RW)

4

Seizing the moment for green fiscal policy reforms

External crisis-fiscal, economic or environmental-often played a role as a catalyst for environmental policy reform

Higher political acceptability of green fiscal policy reforms when they were introduced as part of broader fiscal reform.

Thus the key question is ‘how to ensure cost-effectiveness and envisage green fiscal policy reforms in the overall fiscal reforms?’

Key finding: A green economy stimulates growth, exceeding BAU over time…

5

Key findings of Kenya green economy assessment: GDP and income

Annual real GDP growth rates with and without intervention are 4-5% and 3.7% respectively in the 2010-2030 period on average.

Real per capita national income would rise to Ksh 57,000 – 64,000 in 2030 compared to Ksh 40,000 in 2010 and Ksh 53,000 in 2030 under the BAU scenario.

The MDGs composite indicator is projected to improve to 0.67-0.72 in 2030 compared to 0.63 in a BAU scenario.

The proportion of population below poverty line is expected to be about 3% points lower than the baseline, at 23% by 2030.

Key findings of South African green economy assessment: GDP and income

The growth in real GDP in the green economy scenarios is projected to reach 2867 billion Rand and 2907 billion respectively in GE2% and GETS respectively.

These exceed the projections in the BAU scenarios, which were projected as 2850 billion Rand in BAU and 2879 billion Rand in BAU2%.

The lower growth in the GDP in BAU and BAU2% scenarios relative to GETS and GE2% is because the natural resources are strained, depleted or polluted.

Key findings of South African green economy assessment: GDP and income

• Inextricable link between poverty alleviation and wise management of natural resources and ecosystems.

• Ecosystem services and other non-marketed natural goods account for 47 to 89% of the so-called ‘GDP of the Poor’

• Hence need to invest in natural capital as a source of growth and well-being

Natural-resource dependent sectors and ESS (2005)

Brazil Indonesia

India

Original share of GDP (%): agriculture, forestry, fisheries

6% 11% 17%

Adjusted share of GDP (%): including non market/ESS

17% 15% 20%

Share of ESS/non market goods of total income of the poor (%)

90% 75% 47%

Technology innovation for Green Economy

Green economy policies improve resource efficiency and induce domestic companies to innovate, which may provide them with a competitive edge – first mover advantage – vis-à-vis their competitors.

Diffusion and technology transfer is the key to success for developing countries to benefit from green innovation.

The priority for developing countries should be to invest in their capacity to adapt green technologies, and to encourage diffusion.

By designing appropriate policies, developing countries can strengthen their capacity to adapt green technologies according to their national

context and hence become receptive to a flow of benefits from the green economy.

Trade implications of green economy policy and actions

A green economy transition entails some degree of economic restructuring.

Various green economy policy measures need to be put in place: standards, fiscal measures (e.g. carbon taxes or subsidies).

Competitiveness concern (e.g. boarder measures)

The challenge in developing standards is to ensure a balance between the need to safeguard market access and harvesting benefits of green economy.

National level actions to address trade related concerns

helping exporters meet environmental and social standards, both private and public;

setting nationally appropriate and ambitious targets for cleaner energy provision, including removal of obstacles such as subsidies for energy sources and technologies that are not environmentally sound;

engaging in “smart” industrial policy, including diversification and measures in favour of Resource Efficient and Cleaner Production (RECP), geared towards the green economy of the future;

creating and promoting national systems of innovation through, for instance, investment in education and training, support for research and development, and establishing facilitative IPR protection;

identifying and removing non-tariff barriers to imports of environmental goods and services.

International level actions to address trade related concerns

agreement at the WTO on the reduction or elimination of tariffs and non-tariff barriers to trade in environmental goods and services

agreement on government support to “green” products, services and technologies, which would reduce the risk of lengthy and costly trade disputes;

agreement that IPR regimes should be sensitive to the country’s level of development, respecting the reality that strong national-level innovative capacity and broad dissemination of ESTs are in the global interest;

agreement on environmental standards and labelling, with due regard for full life cycle (environmental and socio-economic) criteria.

13

http://www.unep.org/greeneconomy/

Thank you