Green Economy Workshop – A research agenda for a transition to a green, inclusive economy

The workshop has been financed by MISTRA – The Swedish Foundation of Strategical Environmental Research.

Prestudy for Mistra: The Green Economy

— minor adjustments or a paradigm shift?

THE TEAM

The Swedish think tank Global Challenge’s working group on the Green Economy:

• Eva Alfredsson• Anders Wijkman• Kristina Persson • Sandro Scocco• Kristian Skånberg• Thomas Hahn• Karl Hallding• Magnus Lindmark

MAJOR ASSUMPTIONS • The prevailing economic paradigm is unsustainable in

ecological, social and economic terms alike.• Business as usual represents major risks and costs, and

would be untenable in the long run. • Sustainable development will require the alignment of

the economy - the most powerful engine in society – with sustainability objectives

• The Business community is a major player; unless the incentives guiding business are conducive with sustainability a transition is not possible

OUR MISSIONInspired by Rio+20, we set out to analyze:

1. What characterises a green, inclusive economy and how does it differ from the prevailing one?

2. Scientifically oriented economists – What can they offer?

3. The Green economy – a minor adjustment or a paradigm change? Is a transition to a green, inclusive economy (sustainable economy) possible by adjustments within the present policy framework or are changes on a larger scale — a paradigm shift — required?

4. Research topics - knowledge gaps – for a transition to a green economy?

‘Key Issues for a Green Economy’ - a seminars series in 2012 and 2013

• New measures for progress — implications for policy and economics • The role of energy in development and the green economy• Peak Oil Postponed?• How do we value Nature? • The role of efficiency in the green economy: from labour

productivity to a multidimensional measure of productivity • Biophysical economy: understanding the boundary conditions for

the green economy • Towards a circular economy: driving forces, obstacles and policy

challenges • What do we need the financial sector for? • Financial reform for a sustainable economy • Transforming business for tomorrow’s world

KEY FINDINGS/CONCLUSIONS

The Green economy discourse - a paradigm change

Current economy Green, inclusive economy

GDP growth: more economic activity the aim

‘Beyond GDP’: prosperity the aim

Short-termism Long-termism

Maximisation of return Safeguarding of long-term incomes

Shareholder value Stakeholder value: benefit to society

Extraction of natural resources Management of natural resources

Linear production systems Circular production systems

Short-life products for sale Long-life services

Efficiency measured in monetary terms (CBA)

Multidimensional efficiency (e.g. multi-criterion analysis, MCA)

Not confusing the means with the goals

Socially sustainable development is the aim, ecological sustainability is a fundamental requirement and the economy is a tool.

Social sustainability • The overarching aim and • A necessity for a transition to a green economy

Broad consensus among economists on a range of economic principles

• Need for long-termism, taking future generations into account

• The ‘polluter pays principle’

• Internalising externalities - Negative effects on the environment must be internalised and reflected in the price

• Competitive markets - Neither sellers nor buyers should be so large and dominant that they can exercise strong influence on market prices

• A well-functioning market requires symmetrical information, i.e. both sellers and buyers must be fully informed about the content of transactions

• The need for institutions (societal aims, rules and regulations) to reduce the difference between what is rational for the individual and what is most beneficial to society

• GDP is not a measure of prosperity, and has distinct shortcomings as an objective of economic policy

but also crucial differences• The importance of natural capital and energy and its valuation

• The discounting of future values

• ‘Strong’ versus weak ‘sustainability’ definitions of sustainability

• Scientifically oriented economists believe that continued material (GDP) growth - and a further rise in the aggregate throughput of energy and material - is incompatible with sustainable development; whereas mainstream economists seem to view continued material growth, not only possible but a prerequisite for sustainability

• The primacy of the price mechanism, especially for natural resources and ecosystem services and for valuing nature

• Scientifically oriented economists are critical of the inability of current economic theory to capture and deal with non-linear phenomena

• The financial system and its role

• The principle of shareholder value vs stakeholder value

The crucial role of politics

• Economic theory itself will not lead to a transition to a green, inclusive economy

• The transition will require a robust political discourse, based on the principles of sustainability – notably the principles of inter- and intergenerational equity as well as the planetary boundaries

• How can we develop a framework in politics that respects the key principles of sustainability, notably the planetary boundaries?

There is no lack of ideas and potential solutions

• A key challenge is the inadequacy of the interdisciplinary dialogue; another is the lack of political will.

• There is an urgent need for an in-depth discussion on a number of concrete proposals made by science-oriented economists for a transition to a green, inclusive economy – and their implementation.

RESEARCH TOPICS FOR A TRANSITION TO A GREEN, INCLUSIVE ECONOMY

A green, inclusive, economy is a major challenge to the research community

• Calling into question parts of the existing economic discourse, on the basis of the conditions required for a transition to a green, inclusive economy

• Using the economy as a tool for sustainable development, i.e. developing decision support for a transition towards a green economy, based not only on neo-classical economic theory but also on natural science-oriented economics.

• Developing an interdisciplinary approach that comprises subjects like economics, ecology, biophysics, behavioural sciences, ethics and political science to develop theoretical frameworks, knowledge and solutions to address the more complex aspects of sustainable development.

Examples of research topics1. A democratically supported transformation - How can we

pave the way for a democratically supported transformation that respects the pre-conditions for sustainable development as laid down by science?

2. An institutional framework for growth that is economic, not uneconomic - How can we achieve development that boosts wealth in terms of all kinds of capital (physical, human, social and natural)? How can we create an institutional framework that ensures that growth is not uneconomic? What indicators do we use?

3. A shift from quantitative growth towards qualitative development - How can the economy be shifted in this way, with consumption affording greater marginal utility without a constant increase in the throughput of energy and materials?

4. Truly sustainable entrepreneurship - How can regulatory systems and incentive structures be shaped in such a way as to reward the businesses that confer the greatest benefits to society - in terms of all relevant forms of capital — physical, human, social and natural?

5. A long-term sustainable energy system - What are the prospects for achieving such a transformation? How can a system based on sun, wind, water and efficient biomass be set up and renewed? What level of net energy, or energy return on energy invested (EROEI), is required to retain current societal functions?

6. Societal functions designed to optimise welfare and development without the economy growing quantitatively. - How are employment issues managed?- How are resources and incomes distributed?- How are welfare services funded?

How do we win the war - achieving a green, inclusive economy in support of sustainable development - and not just the individual battles?