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CRAFTING A GREEN GROW TH STRATEGY

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TABLE 7.2 Channels through which green policies could contribute to growth Channel

Questions

Possible priorities

Increase in production factors (human, natural, and physical capital)

Which categories of capital (physical, natural, human) are important in limiting economic growth or in reducing population welfare?

Increasing transportation (and export) capacity, improving secondary education and population health

Enhanced efficiency (correcting market failures to move closer to the production frontier)

What are the greatest inefficiencies in the economic systems?

Reducing urban congestion and energy costs, increasing energy supply reliability, increasing employment of young qualified workers

Outward movement in the production frontier (correcting innovation and dissemination market failures to be able to produce more with less)

What are the obstacles to innovation and to innovation adaptation and dissemination?

Improving worker skills and property right protection, reducing entry costs for innovative firms, improving access to capital

Increases in economic resilience

Is the economy particularly vulnerable to exogenous shocks such as commodity price volatility, natural disasters, or competitor innovations?

Diversifying the economy, reducing energy intensity and dependency on imported energy, reducing vulnerability to large-scale disasters, improving food security

Increases in the job content and poverty reduction of growth (moving toward “inclusive growth”)

What are the major problems in the labor market and poverty reduction, and why have they persisted up to now?

Reducing rural or urban poverty, mitigating ethnic segregation, fighting poverty traps, improving access to capital for the poor

face different obstacles to growth and that growth-enhancing policies need to be targeted to address the specific obstacles. A study by the Organisation for Economic Co-operation and Development (OECD 2011a) proposes that green growth strategies be developed by first identifying specific obstacles to growth.

Step 2: Identify environmental objectives and lock-in risks Step 2 is to identify (1) the environmental improvements that are most likely to increase welfare and (2) the risks of irreversibility in both the environmental and economic domains. The idea is to focus on welfare-improving environmental objectives that preclude a “grow dirty, clean up later” pathway. Examples include improving water quality, reducing air pollution and flood losses, protecting soils, and avoiding irreversible destruction of coral reefs. Here (as in Step 1), the analysis should combine scientific and economic information from reports, local knowledge, and widely agreed priorities. It should rely on broad consultations to ensure consistency with population goals,

objectives, and preferences and to avoid conflicts between the green growth strategy and other planning initiatives.

Step 3: Consider six types of interventions and identify synergies Step 3 is to determine which types of policy interventions would help a country reach its environmental goals while also improving economic growth and social welfare. This report singles out six types of interventions. Pricing and fi scal policies: taxes, subsidies, or subsidy removal (chapter 2). Fiscal policies can be used to guide economic behavior and create environmental and economic benefits. Governments need to assess fiscal policies as a whole, taking account of the trade-offs between alternative ways to source and apply funds. Reallocating resources from fuel subsidies to spending on education, health, and infrastructure will help reach environmental objectives and increase economic growth. Reallocating these funds to services that are accessible to the poor will also help reduce poverty. Oil

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...