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I N C LU S I V E G R E E N G R O W T H: T H E PAT H WAY TO S U S TA I N A B L E D E V E LO PM E N T

extent to which other forms of capital can substitute for natural capital is bounded, because people require water, food, and air to live, and demand for water and food will increase as population and incomes rise. How can better management of natural capital lead to green growth? Sustainable management of capture fisheries can increase economic returns. Restoration and enhancement of watershed services can enhance agricultural productivity. Conservation of biodiversity can generate economic returns through nature-based tourism and bioprospecting. Rents accrued from mineral extraction can be invested in infrastructure and human capital, thus generating economic returns. But achieving these outcomes is not easy, given the myriad market and institutional failures at play. What is needed, therefore, is a package of measures encompassing both price and nonprice interventions to enhance the management of natural capital. Reaping higher economic returns from natural forests, for example, requires aligning policies, incentives, capacity, and governance. Reaping higher returns from mineral extraction requires policies that increase production efficiency, fiscal policies that are fair to both the government and investors, and public expenditure policies that encourage the reinvestment of income for broader development gains. This chapter explores how better managing natural capital can promote green growth. It looks at four broad categories: (1) extractable renewable resources (capture fisheries, natural forests, soil, and water); (2) cultivated renewable resources (crops, livestock, aquaculture, and forest plantations; (3) nonrenewable resources (oil, gas, coal, and minerals); and (4) ecosystems that provide regulating services (watershed management, climate regulating services, and nature-based tourism). The fi rst three categories provide “provisioning” services (those that directly produce goods and services, such as food and water); the fourth embraces “nonprovisioning” services (those that provide regulating services, supporting services, and cultural services). 2

The key fi nding is that sustainable management of natural capital is essential for green growth in key sectors—such as agriculture, manufacturing, and energy—and is vital for resilience and welfare gains. The type of measure (both price and nonprice) needed will vary with the type of resource being targeted: • For extractable but renewable resources, policy should center on defining property rights and helping fi rms move up the value chain. • For cultivated renewable resources, policy should center on innovation, efficiency gains, sustainable intensification, and “integrated landscape” approaches that can lead to productivity gains without damaging the environment.3 • For nonprovisioning services, efforts should concentrate on increasing knowledge of the economic value of these services and incorporating these values in policy decisions. • For nonrenewable resources, the focus should be on minimizing environmental damage and recovering and reinvesting rent optimally for broader economic development. Second, the elements of natural capital cannot be regarded in isolation. Integrated landscape approaches can increase production of both “regulating” and “provisioning” services of natural capital—for example, by integrating the production of crops, trees, and livestock on the same land area or by managing animal waste to enhance soil fertility and produce energy rather than contributing to pollution. But solutions need to be adapted to local circumstances and need to include the right policy measures to provide incentives for innovation and adoption. Third, in some cases, growth and green outcomes—such as cleaner air, cleaner water, less solid waste, and more biodiversity—will involve tradeoffs. These tradeoffs are most common in current cultivation practices in agriculture, livestock, aquaculture, and plantation forests. But not all of these tradeoffs are inevitable: innovation, which can be supported through smart subsidies, can help minimize or eliminate some of them.

Inclusive Green Growth  
Inclusive Green Growth  

As the global population heads toward 9 billion by 2050, decisions made today will lock countries into growth patterns that may or may not b...