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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

dependency, and thus vulnerability to oil price volatility, can be mitigated by imposing an energy tax, to favor energy-efficient technologies and equipments. Such policies would provide environmental benefits and enhance economic resilience. Political economy considerations will play an important part in determining the feasibility of a realignment of fiscal policies with green growth objectives. Interest groups will resist the withdrawal of subsidies and tax incentives. Nonetheless, as recent efforts by the Islamic Republic of Iran to reduce fuel subsidies illustrate, progress can be made. A phased approach supported by communication and complementary policies that reallocate resources to the poor can help build constituencies for reforms. In some cases, resources may need to be allocated temporarily to compensate losers, even if they are not the poor or needy. Building in sunset clauses to such compensatory programs may help prevent temporary relief becoming another permanent subsidy. Institutions, norms and regulations, and behavior-based policies (chapter 2). Economic incentives can be usefully complemented with other types of instruments. For instance, where low building energy efficiency contributes to high energy imports, introducing regulations or creating new mechanisms to make dwelling owners invest in insulation and efficient appliances could yield a double dividend, strengthening the economy and protecting the environment. Policy makers must consider how environmental policies affect businesses and individuals, taking into account their decision-making biases and the noneconomic incentives that affect behaviors. A strategy that takes these aspects into account—by, for instance, framing policy changes within a positive collective project and providing individuals with feedback on how they behave with respect to the project—will be more efficient than one based on an economic argument alone. Information disclosure programs that require firms to publish their level of pollutant emissions can be as efficient as and less costly than a norm.

Innovation and indu stri al policies (chapter 3). The greening of the economy requires growing new industries, along with developing and disseminating new technologies. This process can be eased with specific policies that target (1) the development and dissemination of technologies and innovations, by correcting the effect of a knowledge spillover, and (2) the development of new industries and sectors, by correcting the effect of nonenvironmental market failures (such as coordination failures and capital market imperfections). Green industrial policies can help disseminate new technologies (especially when they have been tested and demonstrated in developed countries) and develop new competitive sectors. Examples of green industrial policies that have been used include feed-in tariffs for solar electricity, or subsidies to research and development (R&D) in renewable energy. Countries with a latent competitive advantage in renewable energy (such as North Africa with solar energy) may want to pursue this advantage with the hope of creating a viable and competitive industry. However, support must carefully balance market failures and government failures given the risks of policy capture and rent-seeking, especially where institutions and civil society are weak (chapter 3). Education and labor markets policies (chapter 4). Green transitions are likely to involve structural change away from some industries and toward new ones. Experience with trade liberalization offers valuable lessons as to how to reduce the cost and length of such structural changes. In particular, policies that facilitate the movement of workers from one sector to another can accelerate the transition and reduce adjustment costs. Where such movement is impeded by skill issues, training programs can help—for example by training construction employees to efficiently retrofit buildings. Natural capital, agriculture, and ecosystem services management (chapter 5). An excellent way of greening agricultural production is through conservation agriculture, which simultaneously yields environmental benefits (by reducing pollution of waterways

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...