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Influencing Firms, Consumers, and Policy Makers through Market and Nonmarket Mechanisms

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Key Messages • Because economic incentives promote efficient solutions, “getting the prices right” is key to greening growth without slowing it. Complementary policies will be needed to mitigate negative distributional impacts. • Economic incentives cannot induce all of the

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he starting point in greening growth is an understanding of why so much of traditional economic growth has been “non-green”—that is, why the world is not using environmental assets efficiently, a reality that is harming economic growth and the environment. For economists, achieving greener growth is fundamentally about changing the incentives that have led to environmental degradation and depletion—that is, “getting the prices right.” The reasons markets are failing to appropriately price the environment and thus create incentives to encourage greener growth are many (Sterner 2003). They include institutional and policy failures; market failures, such as externalities,

changes needed to protect the environment, given market failures, behavioral biases, and political economy considerations. • Other tools—such as information judiciously deployed to influence economic actors, and norms and regulations—are also needed.

the public-good nature of many environmental goods; and missing or incomplete property rights (box 2.1). With a common pool resource like a fishery or a shared aquifer, for example, the lack of property rights (such as individual quotas) can lead to overexploitation and ultimately a collapse of the resource. For psychologists, achieving greener growth is about compensating for behavioral biases, tailoring information and messages to the way people learn, and improving the way in which environmentalists and economists communicate the costs and benefits of greener behaviors. Examples include social marketing campaigns that changed social norms around water usage in Australia or 45

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...