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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

mover in the race toward greener production processes and products. China is not the only such country. Brazil, Indonesia, Mexico, Morocco, and Tunisia are greening their growth process or looking to use green industries as sources of growth. Ethiopia is developing a green growth strategy. Kenya is investing heavily in geothermal power. And many other countries are hoping to better balance the environment and the economic imperative of rapid growth. The reality is that the world needs green growth, and it needs it now. But what exactly does “green growth” mean? Green growth can be thought of as economic growth that is environmentally sustainable. More specifically, it aims to operationalize sustainable development by enabling developing countries to achieve robust growth without locking themselves into unsustainable patterns. The World Bank’s environmental strategy defines green growth as growth that is efficient, clean, and resilient—efficient in its use of natural resources, clean in that it minimizes pollution and environmental impacts, and resilient in that it accounts for natural hazards and the role of environmental management and natural capital in preventing physical disasters. Importantly, green growth is not inherently inclusive. Its outcome will likely be good for the poor, but specific policies are needed to ensure that the poor are not excluded from benefits and are not harmed in the transition. The welfare impacts of green policies will be greater if efforts are made to make the policies inclusive. Greening growth is essential to achieving sustainable development and its objectives of social, economic, and environmental sustainability (figure 1.1). Economic growth and social achievements are widely recognized as complementary, but growth and environmental sustainability are often perceived as antithetical. Greening growth would reconcile the need for environmental sustainability with that for economic growth and social improvement. Fortunately, many policies provide both environmental and economic benefits. Informal settlements can pose economic,

environmental, and social problems. Utilities often refuse to serve them and insecure property rights discourage residents from investing in establishing connections to water or electricity networks. Creating functioning land markets with secure land tenure helps informal settlers access solid waste removal, sanitation and drainage, and drinking water. It also increases welfare and labor productivity, both directly and indirectly, by giving such settlers greater access to credit and by allowing them to invest in small businesses, thereby increasing aggregate output. One example of the environmental benefits of a green growth policy is the World Bank– financed water quality and pollution control project around the Lake of Guarapiranga in Brazil. Urban renewal and slum upgrading were critical to improving water quality, which in turn provided a reliable water supply source for the city of São Paulo. Most green growth policies are environmental policies in the sense that their primary objective is to preserve the environment. But not all of them are. Policies that improve energy security or reduce urban congestion, for example, may yield substantial environmental benefits even if doing so is not their primary objective. Many observers have argued that environmental issues will “solve themselves” with economic development. This chapter examines the flaws in the “grow now, clean up later” argument and discusses what growth theory and evidence reveal about the compatibility of environmentally sustainable policies and growth. It investigates whether green growth is in fact feasible—beginning with the analytical case for green growth before reviewing the implications for welfare, the ultimate goal of economic policy—and explores how to identify trade-offs and synergies implied by a green growth strategy.

Why not grow now and clean up later? The “grow now, clean up later” argument is based on the idea that environmental quality first deteriorates with growth and

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...