Green growth means lead, follow or get out of the way

A new series of reports, “Towards Green Growth,” recommends ways in which governments can best make the transition to greener, more sustainable economies.

As they were released by the well respected Organisation for Economic Cooperation and Development (OECD), the reports will carry some clout in helping the 34 member countries move toward greener economies. The need for green growth took on new importance as the global economic crisis forced countries to rethink their priorities and strategies. Having been forced to take a few economic steps back, nations coming out of the recession now see an opportunity to build anew on a greener foundation.

“We need to make growth greener, to make out economic and environmental policies more compatible and even mutually-reinforcing,” said Angel Gurria, OECD Secretary-General.

The path toward green growth involves a number of transitional issues such as jobs and skills, investment, taxation, trade and development, and the OECD reports guide policymakers through the necessary changes to be made in the most efficient way. While the seemingly drastic fundamental changes needed for a green growth have to be swift, the report say, they must also be controlled, with many barriers expected along the way.

One point of focus is that many current environmental externalities are underpriced or not priced at all. For example, a carbon price can encourage innovation to tackle climate change, but current price levels are too low to provide the necessary incentives. The challenge is balancing the level of involvement from governments to allowing green markets to develop through self sustenance.

The reports provide wide-ranging advice for governments, as it is difficult to apply the same policies to, say, Chile, as to the United Kingdom. Ultimately, however, greener economies are necessary and the long-term benefits are clear, so it’s critical that the OECD’s suggestions be acted upon.

The known long-term benefits include the creation of new jobs, in particular skilled jobs in emerging and innovative green activities. While some traditional sectors — coal mining, for example — will see a loss of some jobs as a result, there will be ample opportunity for workers to move to cleaner employment elsewhere.

A number of countries have already sung the praises of the sizeable job creation potential of their green stimulus packages and broader green growth strategies, with Germany being a pioneer in many green technologies such as solar photovoltaics. Recent estimates suggest that up to 20 million jobs could be created worldwide by 2030 in renewable generation and distribution alone.
The OECD reports also stress the need to remove subsidies for fossil fuels, with a 2 to 4-per cent potential for real income gain by removing them.

In addition, two startling points stand out in the reports:

• In one generation from now, global greenhouse gas emissions need to be in decline, but …
• Two generations is the typical lifetime of an electrical power station

This poses a dilemma as increasing energy demand in developing countries, namely China and India, means rapid increases in the number of fossil fuel power plants, with a new coal-powered plant going up every week in China. Although these countries are also developing renewable energy installed capacity, the long-term nature of the power plants means the effect will be there to see even as emissions need to be in decline.

There is always the counter-argument that it is only fair that developing countries get the right to develop through the same ways in which already developed nations have. The development of commercially viable carbon capture and storage (CCS) could be one solution to this.

However, one key message to take from the OECD reports is that green growth needs to be made not just sustainable in the long run, but to rapidly become the most cost-effective form of growth. Only then can the world ensure that developing nations adopt greener development. The responsibility for making that happen lies with the OECD countries. Hopefully, at least some of them will realise this and adopt the recommendations outlined in the “Towards Green Growth” series.