Areas of contention in Greening the Economy

Elke Pirgmaier, Sustainable Europe Research Institute

Areas of contention in Greening the Economy

2nd EU Dialogue on sustainable consumption and economic growth 29 and 30 October 2012, Brussels

RESPONDER - linking RESearch and POlicy making for managing the contradictions of sustaiNable consumption anD Economic gRowth

FP7 Grant Agreement number 265297

Page ii | funded by the EC in FP 7 | Project No. 265297

The information in this document reflects the author’s view and is provided as is. No guarantee or warranty is given that the information is fit for any particular purpose. The user thereof uses the information at its sole risk and liability.

This work was done as part of the RESPONDER project and is published on behalf of its Euro-pean Consortium. The research leading to these results has received funding from the European Community's Seventh Framework Programme (FP7/2007-2013) under grant agreement n° 265297 (RESPONDER, www.scp-responder.eu).

Join the RESPONDER community today by registering at

www.SCP-RESPONDER.eu


Page iii

Table of Contents

1 The RESPONDER journey: Aims and desired Outcomes ....................................................................... 1

2 The Green Economy as a new decision-making framework................................................................. 1

3 Key leverage areas for greening the economy ..................................................................................... 3

3.1 Green Economy and Jobs ............................................................................................................... 4

Contention Area 1: What are the employment effects of greening the economy? ................. 5

Contention Area 2: How do green jobs relate to decent work? ............................................... 6

Contention Area 3: Who are the winners and losers of the green jobs proposition? .............. 6

3.2 Green Economy and Natural Resources......................................................................................... 8

Contention Area 4: What does production that reduces the use of scarce resources in

absolute terms look like? .......................................................................................................... 8

Contention Area 5: What does consumption that reduces use of scarce resources in

absolute terms look like? .......................................................................................................... 9

Contention Area 6: What are the effects of current environmental legislation on the level of

resource use? .......................................................................................................................... 10

Contention Area 7: How does the Green Economy contribute to development and poverty

eradication? ............................................................................................................................ 10

3.3 Green Economy and Finance ....................................................................................................... 12

Contention Area 8: How could the gaps between financial short-termism and long-term

societal interests be addressed? ............................................................................................ 13

Contention Area 9: What are the effects of monetising natural capital for creating green

investments? .......................................................................................................................... 13

4 Synthesis ............................................................................................................................................. 15

5 References .......................................................................................................................................... 16


Page 1

1 The RESPONDER journey: Aims and desired Outcomes

The Green Economy is suggested as a new, more tangible concept to (finally) achieve sustainable development. This 1.5 day RESPONDER journey aims to explore the emerging policy landscape for a Green Economy in Europe. We will have a closer look at the Green Economy concept and examine the challenges, conflicting priorities and areas of contention within green economy policy-making.

The overall aim is to exchange knowledge on how to deal with these contentions and arrive at a useful impetus for effective policy development. In particular, the debate will focus on three themes: Green Economy and Jobs; Green Economy and Natural Resources; and Green Economy and Finance. In a dialogue-oriented atmos-phere, we will be wrestling with these issues, making linkages between them and pulling them together to provide a robust basis for policy making.

For effective progress on the green economy agenda we have to be prepared to tease out the dynamics and the logic of the current economic system and question that logic in some or many areas; and we have to be prepared to ask tough ques-tions: Where does economic stability come from? How can full employment be maintained when economic growth is unsustainable? How do we deal with increas-ing resource use? Where does the money for a great transition come from?

This discussion paper outlines several areas of contention to provide the ground for a fertile conversation. It provides a skeleton of thoughts and evidence to which we will add flesh throughout the workshop. What are examples that support a thesis? Where do we agree? Where do we disagree? What are other areas of contention? Where is there a need for more knowledge?

We will work on these questions not in some university ivory tower but as a par-ticipatory exercise. In a process design that maximizes dialogue between partici-pants, we will create the space and sufficient time to unravel areas of contention on the way to greening the economy. This approach aims to arrive at tangible im-plications for future policy development. Knowledge exchange between all partici-pants is expected to support both policy making and future research efforts.

2 The Green Economy as a new decision-making framework

The Green Economy is suggested as framework to improve human wellbeing while at the same time reducing environmental risks and scarcities. It is argued that this new development path centered on new forms of qualitative growth is needed because risks are increasing as growth continues to erode the environment and social capital (UNEP, 2011a). The efforts around the Rio+20 conference have framed and considered the need for a holistic approach and structural adjustments of economies. A comprehensive policy mix and links between key policy fields is suggested in order to face multiple interrelated crises. State interventions are per-ceived as necessary to jump-start and guide the greening of the economy.

Exploring the emerging

policy landscape for a

green economy

Unraveling areas of

contention in a

participatory way

Vision: improving

wellbeing while

reducing environmental

risks and scarcities

Areas of Contention in Greening the Economy

Page 2 | funded by the EC in FP 7 | Project No. 265297

The Green Economy is a concept that UNEP has taken the lead in promoting since 2008. To implement this vision, UNEP created the Green Economy Initiative, the first results of which were published in the report Towards a Green Economy. The initiative aims to support decision makers in moving towards a more resource effi-cient, low carbon and socially inclusive economy in practice. UNEP aims to demon-strate the reforms and political framework conditions that can motivate private and public investments to finance the transition to a green economy. To this end, examples of best practice from around the world are brought together to illustrate the positive impacts of green investments and policies. Ultimately, this involves embedding individual measures in a coordinated way within a comprehensive strategy, in order to make quick progress towards the goal of a green economy. The Green Economy was one of the two key themes forming the focus of this year's UN Conference on Sustainable Development Rio+20 in Rio de Janeiro. It remains to be seen whether the term can establish itself as a new guiding concept in interna-tional sustainability discourse.

However, there are major barriers and systemic gaps in the implementation of a green economy, especially as Europe currently faces difficult times: low growth projections for the coming years, high unemployment rates across Europe, financial instability and rising budget deficits, and scarce empirical evidence of absolute decoupling between economic growth and resource use. Not least due to these circumstances, the growth-skeptical debate currently experiences a revival, includ-ing an increasing number of degrowth advocates who argue for a multi-dimensional reduction of overall consumption and production as the only path towards social justice, ecological sustainability and well-being.

Against this background, the question arises: Does the Green Economy concept support the urgent action required for reversing contemporary and potentially devastating dynamics? Or is it rather a plea of old wine in new bottles without promising features for the future of people and planet? Views are divided.

Proponents perceive the Green Economy as a new economic paradigm that finally makes sustainable development more tangible. The suggested framework sketches fruitful alliances between governments and innovative companies to collaborate on practical and pragmatic actions. The UNEP report illustrates a range of examples of how production patterns might function otherwise. This can be acknowledged as an important contribution to debates on alternatives.

Critics argue that the suggested greening path would not address the major envi-ronmental challenges. The proposed strategies would not go beyond the predomi-nant neoliberal logic based on unlimited economic growth. “By not questioning the logic of capitalist accumulation and the model of industrial society as the funda-mental causes of the destruction of the conditions that make life possible, it pro-vided new legitimacy to neoliberal globalisation, which began to present itself as sustainable, despite its overwhelmingly devastating dynamic” (Lander, 2011). A major point of critique relates to the fact that unequal power relations and power-ful political, financial and corporative interests that obviously exist in today’s world are not addressed. The picture that is drawn is based on the idea that politicians aim for consensus for the benefit of all. By ignoring geopolitical realities the rec-ommendations would be nothing more that “naïve expression of very good inten-tions” (Lander, 2011).

Aim: create the

conditions for private

and public investment

for a great transition

The global economy is

still far away from being

green

What do proponents

say about the concept

What do critics say

about the concept


Page 3

3 Key leverage areas for greening the economy

The 2nd EU Dialogue will concentrate on three key policy areas that are central to

greening the economy.

Green Economy and Jobs: How can a Green Economy create more and better jobs?

Building a Green Economy will depend critically on its ability to create jobs. It is expected that a greening the economy will deliver more and better jobs in the short, medium and long term (UNEP 2011). However, there is a controversy about whether green growth has the potential to deliver this goal in Europe.

Green Economy and Natural Resources: How can a Green Economy achieve the sustainable use of natural resources?

An absolute reduction of the resource use (that goes hand in hand with global environmental problems) is essential for a resilient economy in the medium and long term. There has been a controversy for many years on how absolute de-coupling between economic growth and resource use can be promoted.

Green Economy and Finance: How can the transition to a Green Economy be financed during a period of economic crisis?

The transition to a Green Economy needs funding. One aim of public invest-ment is to leverage private investment that is necessary for the greening of sec-tors such as transport and buildings. The scale of investment required is large, and there is a controversy about whether enough money can be mobilized by smart public policy.

http://www.unep.org/greeneconomy/GreenEconomyReport/tabid/29846/language/en-US/Default.aspx



3.1 Green Economy and Jobs

How can a Green Economy create more and better jobs?

Building a Green Economy will depend critically on its ability to create jobs. It is expected that a greening of the economy will deliver more and better jobs in the short, medium and long term (UNEP, 2011a). However, there is a controversy about whether green growth has the potential to deliver this goal in Europe.

Discussions leading up to the Rio+20 conference and beyond strongly focus on the impact of green economy policies on employment. UNEP and the ILO argue that the green economy concept will only succeed if the right employment policies are in place. These include investing in human and social capital or phasing out envi-ronmental harmful subsidies. UNEP expects that employment will be affected in at least four ways: 1) in certain sectors additional jobs will be created; 2) in some cases jobs will be eliminated; 3) jobs will partly be substituted, e.g. in shifting from fossil fuels to renewables; 4) many existing jobs will require new skills, e.g. con-struction workers who need to adapt to new technologies. The overall question is what policies need to be in place to guarantee that new jobs will be created and that they provide decent work (UNEP, 2011b).

According to UNEP (2008), green jobs are “work in agricultural, manufacturing, research and development (R&D), administrative, and service activities that con-tribute substantially to preserving or restoring environmental quality. Specifically, but not exclusively, this includes jobs that help to protect ecosystems and biodiver-sity; reduce energy, materials, and water consumption through high efficiency strategies; de-carbonize the economy; and minimize or altogether avoid generation of all forms of waste and pollution“. Eurostat uses an indirect definition of green jobs whereby green jobs are all jobs in the environmental goods and services sector (EGSS).1

Overall, it is clear that a structural shift to a greener economy will go hand in hand with major changes for labour markets. However, these employment and income effects need to be better understood and considered (ILO, 2011). One major prob-lem is that standardized statistics about the green economy, especially about dif-ferent employment aspects, do not yet exist. This makes empirical analysis difficult. There is no comprehensive assessment of how many green jobs exist in the EU. A recent study for Austria (AK, 2012) concluded that 5% of employees work in the green jobs sector, based on data from the year 2009.

In the following, three areas of contention will be sketched. The first contention area focuses on the quantity of jobs, the second on the quality of employment, and the third on actors and power relationships.

1 The EGSS consists of a heterogeneous set of producers of technologies, goods and services that: measure control, restore, prevent, treat, minimise, research and sensitise environmental damages to air, water and soil as well as problems related to waste, noise, biodiversity and landscapes. This includes cleaner technologies, goods and services that prevent or minimise pollution; measure, control, restore, prevent, minimise, research and sensitise resources depletion. This results mainly in resource-efficient technologies, goods and services that minimise the use of natural resources.

It is expected that

greening the economy

will deliver more and

better jobs

Green jobs are a

statistically defined

sector


Page 5

Contention Area 1: What are the employment effects of greening the economy?

There is ample evidence that a green restructuring of the economy bears a great potential for employment creation. According to a UNEP/ILO/IOE/ITUC Joint Report (2008) this potential exists especially in the building sector (including construction, retrofitting, lighting and appliances), as well as in the transportation and recycling sectors. Jaeger et al. (2011) estimate that it is possible to create six million new jobs in the EU by 2020 by raising the EU’s climate target from 20% to 30% emissions reductions as compared to 1990. A study carried out by GHK (2011) ex-plores the potential employment effects of investing 1 billion each in eight envi-ronmental policy areas (such as organic farming or energy efficiency). They con-clude that a redirection of investment would not lead to any employment losses. On the contrary, investment in green activities would have a slightly stronger em-ployment benefit than investment in conventional activities. The largest employ-ment effects are projected for investments in renewables (52,700), Nature 2000 networks (29,900) and energy efficiency (25,900). A precondition for harvesting additional employment effects is adequate labour market policies, for example, the retraining of skills. These estimations are based on an assumption that green poli-cies and investments are expected to lead to green innovation, the development of new products and the emergence of new markets, which have the capacity to boost GDP growth beyond business as usual. Economic growth will lead to em-ployment creation and to a reduction of unemployment. The assumption „Growth equals jobs“ is an often heard statement in political circles.

A study from AK (2012) investigated the green jobs landscape in Austria. They con-clude that green jobs in Austria are not new jobs but rather replacing jobs that are being lost in other sectors. In addition, it has to be noted that the environmental goods and service sector is relatively small – between 1 and 3 % of total employ-ment in EU countries where data are available (ILO, 2011). As such, the entire sec-tor is likely to be too small for any considerable employment effects. In addition, the relationship between (green) growth and (green) jobs is not as straightforward as often assumed. The relationship is mediated by the idea of labour productivity. An increase in labour productivity means that the same output can be produced in less working hours. An increase in labour productivity is considered a good thing, as it increases the profitability of the entrepreneur and the efficiency of the economy as a whole, and it has often been translated into higher wages. In many cases in-creasing labour productivity makes sense (e.g. it has increased people’s incomes and has reduced manual labour) but it has also replaced labour with capital and chased labour out of key industries. In many sectors of a service-based green econ-omy (renovation and refurbishment, health, eduction, social care) it can be ques-tioned whether it makes sense to push labour productivity further. Some case stud-ies highlight that a green restructuring of the economy results in a higher labour intensity on average. For instance, research commissioned by the European Cli-mate Foundation (2010 and 2012) comes to this conclusion for case studies in the construction sector in Hungary and Poland where employment impacts of the con-struction of ordinary buildings were compared with the construction of green buildings (ILO, 2011). Thus, in a Green Economy, a switch of focus from labour productivity to resource productivity can be expedient. An open question is to what extent labour productivity growth can be substituted for higher resource productiv-ity and what this means for overall competitiveness.

Thesis: Green

investments will trigger

employment beyond

business as usual

Antithesis: There is a

case to challenge the

green jobs hypothesis

and the assumption

“growth equals jobs“



Contention Area 2: How do green jobs relate to decent work?

A key challenge for policy-makers in transforming economies is to create decent and meaningful employment. Decent work relates to employment security, fair wages, safe working conditions, worker rights etc. Green jobs are supposed to have the potential to fulfill these criteria. The transition towards a service- and knowl-edge- and innovation-based Green Economy is supposed to lead to green jobs for highly-qualified people that are well paid and especially attractive. The ILO states that low-carbon industries tend to be more productive, have a significantly larger share of high-skilled labour force and the wage-share has fallen less quickly com-pared to the top 15 emitting industries (ILO, 2011). Overall, it is expected that in the EU highly-qualified jobs will rise by 16 million by 2020, while low-skilled em-ployment will decline by 12 million (EC, 2012). It is emphasized, again, that strong labour market policies are needed to unlock the potential of better employment conditions, such as policies focusing on skills upgrading and trainings for people to adapt to new green technologies.

However, the effects of the green transition in terms of better employment condi-tions are ambiguous. Greening the economy will be a challenge with an uncertain future in terms of wages, job security and organizing rights (UNEP, 2011b). German political scientist Ulrich Brand bluntly states: “the equation ‘green jobs = good jobs’ is not valid” (Brand, 2012:13). In the upcoming green sectors, working conditions are often bad, the level of union organisation is rather low and, linked to this, be-low-average wages are widespread. A recent study (AK, 2012) about the Austrian green jobs sector supports this view. The authors conclude that green sectors with a high growth potential such as agriculture and forestry, waste treatment and green architecture are characterised by health risks or insecure work. The “techni-cal engineer for renewable energies” often associated with green jobs only ac-counts for 6% of the green jobs segment in Austria. Another concern is that new skills requirements may be especially challenging for older and less skilled workers. In some cases, the new demands might be completely unrelated to the previous employment. In addition, the green jobs promise seems to overlook the general changing pattern of employment. In recent years, a trend towards precarious work-ing conditions can be observed, characterised e.g. by limited working contracts, variable salaries, part-time employment, a trend towards excessive demands and increased levels of work-related stress, often combined with poor pay. This increas-ing employment insecurity negatively affects people’s wellbeing and has to be addressed by appropriate labour market policies.

Contention Area 3: Who are the winners and losers of the green jobs proposition?

Greening the economy is expected to lead to employment gains in some sectors and losses in others. In the EU-25, the high-carbon intensive sectors account for about 43% of total employment which is equivalent to 87 million workers. Nearly 12% of total employment – or about 24 million workers – are concentrated in the top 15 high-carbon industries. These 15 high-carbon intensive sectors are responsi-ble for 90% of emissions from production in the EU (ILO, 2011). The green jobs proposition is likely to be associated with significant changes in these top emitting sectors. Social dialogue between governments, worker representatives and em-ployers is expected to help resolve who bears the investment cost and the adjust-ment burden of the shift towards green jobs and how potential losers of a green

Thesis: Green Jobs are

good jobs

Antithesis: Green Jobs

often do not qualify as

decent jobs

Thesis: Well-designed

policies and social

dialogue will achieve a

surge in green jobs


Page 7

transition can be compensated by winners. Well-designed policies are seen as key to smoothing the transition (ILO, 2011).

In order for the green jobs model to work and be implemented, what is decisive is who sets the conditions of conversion (Brand, 2012). In most statements that promise green jobs there is no discussion of who will decide on investments and the associated jobs. One might assume that the largest potential for investment capital can be found in such sectors that often count as the losers of the green jobs proposition, e.g. sectors dependent on mining, fossil fuels, smokestack industries, or the automotive sector. The “old” sectors of the brown economy are much more powerful than emerging green economy sectors and the question can be raised why they should be prepared to largely invest in green jobs. Without these power issues being properly addressed the chances for a successful transition are rather low. What might help is a conversion plan and offering realistic perspectives for losers, e.g. for engineers working in the nuclear energy sector.

Some questions for further debate:

What are the effects of a shift towards a „qualitative“ green growth path for labour markets? (regarding the quantity and quality of jobs)

What is the role of the green jobs intervention in the larger context of the current employment crisis?

What are the implications of green technologies and innovation for labour productivity?

What are the effects of lower labour productivity growth on unemploy-ment?

Antithesis: Powerful

sectors might be a huge

barrier for the green

jobs proposition



3.2 Green Economy and Natural Resources

How can a Green Economy achieve the sustainable use of natural resources?

Greening the economy is seen as the path where economic development and hu-man well-being can progress with lower resource use and environmental impacts. Today, more material resources are being extracted than ever before in history. Between 1980 and 2008, global material extraction has grown by almost 80% to around 70 billion tonnes. This physical growth can be observed for all major mate-rial categories and on an annual basis – for the last 30 years global extraction has been grown by an average of 2.8% annually and physical trade by 5.6%. The envi-ronmental impacts of this increased resource use are diverse. Some of the 250 raw materials that the world economy uses have high environmental impacts, such as heavy metals that pollute soil or water. Other materials, such as construction mate-rials are less polluting per tonne, but their environmental impact stems from the large quantities that are being used in the economy. Collectively, the rising quanti-ties of resource use contribute to increasing pressures on the planet’s ecosystems (Dittrich et al., 2012).

Given that environmental pressures are already now above certain thresholds (Rockström et al., 2011) there is little objection that an absolute decrease of mate-rial consumption should become the main benchmark for greening the economy – in particular for the high-consuming rich countries. “A truly Green Economy at the global level will only be realised if an absolute dematerialisation of production and consumption can be achieved. This implies a radical reduction in the scale, volume and rate of human resource use” (Dittrich et al. 2012).

Contention Area 4: What does production that reduces the use of scarce resources in absolute terms look like?

More resource-efficient production is a key instrument in the sustainability tool-box. However, there has been a controversy for many years about the capacity of technological changes and innovation to decouple economic growth from resource use in absolute terms. UNEP’s Green Economy Report aims to unravel the myth that there is a trade-off between environmental sustainability and economic pro-gress in terms of GDP growth. The proposed green modernisation of the economy aims at innovative structural change. The basic assumption is that as prices for natural resources rise, substitution will take place (based on an assumption that a lot of resources are substitutable) and efficient market mechanisms will deal with the allocation of scarce resources. Policy debates have focused on ways of decoup-ling economic growth from the use of natural resources and related environmental impacts. Taking into account that a main driver of resource use in Europe is eco-nomic growth, while at the same time economic growth is a major EU policy objec-tive, decoupling is seen as the only way to achieve a reduction of environmental impacts. Air and water quality are repeatedly mentioned as the two prime exam-ples where pollution could be decoupled from economic growth in absolute terms2.

2 This could be achieved due to a long history of legislation in these areas and relatively easily available

technical solutions.

Global resource use is

jeopardising the well-

functioning of

ecosystems

Reducing resource use

in absolute terms as a

key objective

Thesis: Decoupling

economic growth from

resource use has to be

fostered as a key

strategy to reduce

environmental impacts


Page 9

In practice however, economies are far away from being “decoupled”3. There are

no signs of dematerialisation in the EU or at the global level. Between 1980 and 2008, the world economy has increased material productivity by 40%. Yet, despite this development overall material consumption has been increasing at an unprece-dented scale (Dittrich et al. 2012). Economies are becoming more and more effi-cient but only in relative and not in absolute terms. Rebound effects suggest that the resource efficiency approach might not be sufficient for dealing with the overall environmental burden. On the contrary, the focus on improving resource efficiency may actually have served as a driver to the net increase in environmental impacts (Dittrich et al., 2012). The assumption that technology will not sufficiently address the problem and that substitution has clear limits seldom arises in the political debate. These developments indicate the need for effective new strategies and policies – a true change in paradigm beyond efficiency approaches.

Contention Area 5: What does consumption that reduces use of scarce resources in absolute terms look like?

Sustainable consumption is only addressed at the margin in the Green Economy report. Consumption is mostly used in tandem with production: a key focus is to eliminate unsustainable patterns of production and consumption and to boost the policy goal of Sustainable Consumption and Production (SCP). Sustainable produc-tion is expected to lead to a wider commercialization of green goods and services and thereby promote sustainable consumption (UNEP, 2011a). The assumption here is that a change in society towards ecological products and lifestyles should be strengthened and built upon. The global market volume for environmental prod-ucts and services currently runs to about $1,370 billion (€1,000 billion) (UNEP, 2008). Consumers are perceived as powerful actors that can force enterprises to produce greener products by means of purchasing power, or, in other words, “con-sumer sovereignty”. In this spirit proponents of the Faktor X approach, such as Ernst Ulrich von Weizsäcker (2010) or Friedrich Schmidt-Bleek perceive efficiency improvements by a factor 5 or 10 as massive progress towards sustainable con-sumption. What is advocated is a shift towards green/sustainable/organic con-sumption, e.g. buying an energy-efficient washing machine or the new 3-cylinder BMW. These products are often more expensive and often more labour intensive. It needs to be thought through what this means for the economy as a whole.

Advocates of sufficiency approaches suggest that a different nature of consumption is not enough to reach the goal of living well within environmental limits. They call for addressing the scale of consumption – a downsizing of not just conventional consumption but also of green consumption. The proposition is to reduce “over-consumption” in the rich parts of the world in order to deal with environmental destruction and rising social inequalities. It is argued that this avenue does not necessarily mean a sacrifice in terms of wellbeing and quality of life. Evolving post-material values are seen as an important basis for the transition to a sustainable economy.

3 Decoupling has always been the ecological concept that was the closest to the economy but, in fact, it is “only” a ratio that does not have a look at the actual condition of the environment. This means, even if absolute decoupling will be achieved it does not mean that they condition of the environment will improve. For example, one can stabilise emissions or even decrease them but the condition of the environment can still get worse. Decoupling does not address this issue.

Antithesis: Resource

efficiency

improvements are not

sufficient to address the

environmental burden

Thesis: A shift towards

consumption of green

products and services is

needed to tackle

environmental

problems

Antithesis: The

consumption challenge

is about sufficiency



Contention Area 6: What are the effects of current environmental legislation on the level of resource use?

The Green Economy framework suggests a holistic set of policies to correct the incentive structures in current, unsustainable markets and to alter investment landscapes in the short to medium-term (UNEP, 2011a). The basic assumption is that market-based instruments such as taxes and tradable permits are powerful tools to promote green investment and innovation which will, in turn, help to tackle environmental problems. These policy measures are expected to enable green markets and ensure a more efficient use of the environment and natural resources. In addition, “soft” policy measures such as awareness-raising for envi-ronmental problems are anticipated to trigger sustainable consumer behaviour and a higher acceptance for the implementation of environmental legislation.

Whilst a well-designed policy mix is without any doubt an essential key ingredient on the way towards environmental sustainability, it is nevertheless remarkable that those countries that already pursue a path of well-advanced environmental legisla-tion are often the ones with the highest level of resource use. The case of eco-innovation policies in the EU demonstrates that the best-performing countries in terms of eco-innovation activities4 are amongst the ones with the highest level of resource use (EIO, 2012). High levels of resource use are generally associated with high income. Steinberger et al. (2010) come to the conclusion that income is also strongly coupled to material productivity. If high-income countries tend to have high rates of resource efficiency but also high rates of resource use, this implies that the challenge of dematerializing industrial economies may require a more fundamental restructuring of economies. In that case material productivity may not be suitable as an international indicator of environmental progress (Steinberger et al., 2010). This would require rethinking of the nature, extent and effectiveness of many currently proposed and implemented environmental policies.

Contention Area 7: How does the Green Economy contribute to development and poverty eradication?

This area of contention relates to one of the key questions at the Rio+20 world summit. UNEP officially speaks of a green economy “in the context of sustainable development and poverty eradication”. The Green Economy report demonstrates that several economic sectors with a green economic potential are particularly relevant for developing countries, such as agriculture or water management. In-vestments in these sectors are expected to lead to benefits for the poor, especially as the livelihoods of the poor are particularly dependent on well-functioning eco-system services and especially vulnerable towards climate change. The UNEP re-port recognises that only a strong emphasis on poverty issues in any green econ-omy initiative will contribute to development and the goal of poverty eradication. For instance, investments in renewable energies need to consider the issue of ac-cess to clean and affordable energy (UNEP, 2011a).

There are several concerns about the extent to which a Green Economy has the potential to accelerate development perspectives. First, several countries of the Global South are resource-rich suppliers of Northern industries. A new form of

4 The main orientation of eco-innovation policy today is on environmental technologies, eco-industries

and eco-efficiency.

Thesis: Carefully

designed policies will

lead to less

environmental impacts

Antithesis: Best-practice

performers are

countries with high

material productivity

and high resource use

Thesis: Greening the

economy creates

development

perspectives for the

Global South


Page 11

“extractivism” can be observed that is often based on unsustainable forms of pro-duction, e.g. with low wages and under ecologically poor conditions. Second, re-source extraction is historically often linked to severe conflicts. In countries such as Indonesia or Malaysia palm oil production for export5 which is used in food prod-ucts, cosmetics and increasingly as a biofuel, causes devastating environmental and social impacts. The demand for draining of peatlands and conversion of tropical forest to agriculture leads to biodiversity loss and violates the rights of indigenous people who live sustainably off the forest (SERI et al., 2009). Third, most people in resource-rich countries do not profit from extraction due to economic and political power relations. However, they have to bear the environmental and social conse-quences. Fourth, despite all social progress, social inequality is on the increase in many developing countries (UNDP, 2011), which encourages non-ecological behav-iour even further. The bottom line is: the production for green sectors does not automatically lead to lifting the Global South out of poverty. If the main causes for poverty – inequality and economic and political power relations – and are not ade-quately addressed and altered, the Green Economy will not add value compared to the Brown Economy (Brand, 2012).


What policy framework could effectively reduce resource use in absolute terms?

Which institutional mechanisms are necessary to create incentives for re-source productivity? How to distribute achieved productivity gains?

What are the macroeconomic effects of a shift towards sustainable prod-ucts that are more expensive and have a longer durability as compared to conventional products?

How much responsibility are we prepared to take for the devastating ef-fects of resource extraction elsewhere in the world?

5 Between 2000 and 2006 imports of palm oil products into the EU almost doubled from 1.2 to 2.2

million tonnes. Additional demand resulting from EU biofuel targets could result in the import of a

further 13 million tonnes per year by 2020 (SERI et al., 2009).

Antithesis: Not

necessarily



3.3 Green Economy and Finance

How can the transition to a Green Economy be financed during a period of eco-nomic crisis?

The transition to a Green Economy needs funding. One aim of public investment is to leverage private investment that is necessary for the greening of sectors such as transport and buildings. The scale of investment required is large, and there is a controversy about whether enough money can be mobilized by smart public policy.

A substantial increase in investments is seen as the starting point for transforming the EU economy towards a sustainable, low-carbon economy. Building renewable energy infrastructure, better insulating homes, modernising the power grid – all this requires large investments. An estimated worldwide 45 trillion dollars of in-vestment in clean energy is needed until 2050 to limit global warming to 2 degrees Celsius (Ackerman, 2010). UNEP’s Green Economy Report makes the case for shift-ing both public and private investment to transform key sectors that are critical to greening the global economy. UNEP concludes that greening the economy will be possible through an increase in green investments in the range of 1 to 2.5% of global GDP per year from 2010 to 2050. Currently, green economy investment is below 1% of global GDP (UNEP, 2011a).

The vast majority of investments would have to come from the private financial sector. The three core channels for private financing are: financial investment, banking and insurance. The basic idea is that money comes from banks and invest-ment funds – via credits or as own projects. A regulatory framework and enabling actions aim to “rebalance the risk/reward equation for financial and investment practitioners in favour of green investment“ (UNEP, 2011a: 623). New approaches to finance and investment are suggested such as the creation/extention of carbon markets, markets for ecosystem services, microfinance etc. One specific example is the emergences of cleaner energy technologies as new asset class and the fourfold increase in new investments in sustainable energy that rose from US$ 46 billion in 2004 to US$ 162 billion annually by 2009 (UNEP, 2011a).

Public finance is also important for leveraging a greening, although resources are significantly smaller than those of private markets. A report of the UN Secretary General‘s high-level advisory group on climate change financing concluded that it is possible, though challenging, to mobilise $100 billion a year by 2020. Public financ-ing resources include, for instance, revenues from taxes on international aviation and maritime emissions, carbon tax, removal of fossil subsidies, financial transac-tion tax, and auctioning of allowances in emissions trading schemes. The advisory group highlighted the importance of a carbon price of about US$20-US$25 per ton of CO2 to reach this target (UN, 2010).

Jaeger et al. (2011) describe a way to mobilise a virtuous circle of additional in-vestment. For the EU this could work as follows: if the EU announces a new growth strategy with an ambitious target for emissions reductions, this could trigger addi-tional investments in the range of 4%. This additional investment induces learning-by-doing across the economy that would increase competitiveness and thus en-hance economic growth, which would improve investor’s expectations. If expecta-tions could be stabilised by policies that are consistent with sustainability ideas this would promote a surge of new green investment behaviour even further (Jaeger et al., 2011).

How do we pay for the

new economy?

The private sector

The public sector

How public and private

sectors could work

together


Page 13

However, a time of tremendous economic uncertainty is not the best time for in-vestors. Therefore, the transition represents an enormous challenge, especially when it comes to raising sufficient investments fast enough.

Contention Area 8: How could the gaps between financial short-termism and long-term societal interests be addressed?

Financial short-termism is the biggest barrier to businesses becoming more sus-tainable, according to a recent UNEP poll.

6 The financial system as it works today –

with short reporting cycles and real-time trading – is certainly not directed towards long-term societal interests. You simply have to ask an analyst what „long-term“ means and compare the answer with the one from an ecologist. UNEP’s Green Economy report aims to help business overcome financial short-termism and to make the business case for sustainable investments. In doing that, UNEP argues for a clear role of governments in setting standards and smart policies for green in-vestments, e.g. by presenting the low-carbon energy sector as a business that will triple in size over the next 10 years and by providing incentives for businesses to invest. Investors, on the other hand, demand a policy framework that „delivers on three counts: it must be transparent, it must be long-term, and it must be certain“, former Deutsche Bank CEO Josef Ackerman says (Ackerman, 2010). He further states that public and private sectors need to work together to remove investment barriers such as underdeveloped domestic capital markets (as some do not cater for inflows of foreign capital) or risk-sharing of new technologies.

Critics argue that a further expansion and support of liberalised financial markets and inventing new financial instruments will not help to deal better with sustain-ability issues. The recent history shows that monetary expansion and the easier availability of credit (and debt as a counterpart) in the economy led to instability in the real economy and to unbearable public and private debt levels. Short-term financial profit motives are not compatible with the goals of long-term social justice and ecological sustainabilty (attac, 2012). The UNEP report is criticised for following a logic of capital being amoral – it makes no difference to invest in green technolo-gies or destructive industries, the decisive element is the return on investment – and for suggesting that an extension and deepening of the neoliberal finance model will save the planet (Landers, 2011). Following the current capitalistic model that is based on exploiting nature and people would even worsen the situation. Initiatives such as attac demand a comprehensive restructuring of the financial system towards public interest and common welfare. This would include the elimi-nation of certain financial instruments.

Contention Area 9: What are the effects of monetising natural capi-tal for creating green investments?

Making the value of a healthy environment visible to potential investors also in-cludes approaches to monetise nature. There has been increasing interest in re-cent years to characterise ecosystems in terms of goods and services to allow their valuation in monetary terms. The hope is that by demonstrating how much money biodiversity and ecosystems are worth, people would do something about preserv-ing them. UNEP (2011a) states that reversing the process of unsustainable devel-

6 http://www.unep.org/NewsCentre/default.aspx?DocumentID=2666&ArticleID=9011

Thesis: A transparent,

long term and certain

policy framework will

deliver a surge in

sustainable investments

Antithesis: A complete

redesign of the financial

system is key for more

social justice and

environmental

sustainability

Thesis: Monetary

valuation of natural

capital will make the

case for restoring

ecosystems



opment requires improvements in environmental valuation and policy analysis to ensure that markets and policies incorporate the full costs and benefits of envi-ronmental impacts. Valuing ecosystem goods and services are seen as fundamental tool. One example following this logic is to develop carbon markets a lot further. Another example is the TEEB initiative – the Economics of Ecosystems and Biodi-versity – an approach supported and partly financed by UNEP. The TEEB study is a state-of-the art review of how ecosystem goods and services can be valued and how such valuation is useful for policy making and green investments. It illustrates the economic importance of the planet’s natural assets. TEEB is based on the ar-gument that nature provides vast benefits for society that are not recognised be-cause they have no prices and are not included in markets. Therefore, biodiversity is declining and humans suffer from the consequences.

The promotion of monetary valuation of the environment and expansion of mar-kets for ecosystem goods and services as the solution to this – an approach fol-lowed by TEEB – is criticised for several reasons. First, there are clear limits to the application of monetary valuation methods and serious methodological problems with the way these methods are being used in practice

7. Second, the environment

is to a large extent under pressure due to problems within the capitalist system as several assumptions of the predominant neoclassical approach do not capture social and physical realities. The TEEB mechanism operates in this logic where na-ture is perceived as “the problem” that has to be integrated and solved by the market. Third, the tendency to view the environment as having value only as far as it provides use for humans is problematic. The dominant neoliberal discourse is not the only available ethical system. People tend to be more diverse in their value system, e.g. many people believe that nature has intrinsic value, e.g. value in its own right, regardless of the utility for (other) human beings. Overall, there is a danger that the financialisation of nature is marginalising alternatives. This strategy of the green economy for environmental protection when it pays off in financial terms „has to be conscious of the fact that capital seeking valorisation possibilities exerts economic and social power. It aspires in most cases to higher returns and not to dealing with the enormous ecological, social and economic problems“ (Brand, 2012: 28). There is very much doubt whether financial investments alone will lead to fundamental changes.


What are specific policies and actions for ensuring long-term values?

What would a financial system designed to deliver longer term investment look like?

How much change to the financial services sector is required to meet the investment needs of a green economy?

How are longer-term investment needs related to savings, debt and con-sumption?

7 e.g. silent voices (such as future generations) or low voices (such as of poor people) are not adequately

represented in decision processes; the problem of “protest bids”; assumptions that everything is

commensurable and that people are willing to trade the ecological good valued for more of other goods

and services, which implies trade-offs; but in real life these are often confronted with situations in which

people are not willing to trade.

Antithesis: Monetising

nature might lead to

“optimal species

extinction”


Page 15

4 Synthesis

The Green Economy can be filled with many contents, according to different inter-ests. It is often presented as a framework for win-win solutions. However, if they were truly win-win situations why are proposals not being enthusiastically imple-mented? This question relates to fundamental dynamics of current economic and political realities.

If taken seriously, the Green Economy would have to challenge conventional poli-tics, for several reasons. Nearly all political parties across the spectrum are stuck in an industrial society logic where economic growth was a solution to grow out of poverty (Wijkman, 2011). Moreover, there are very few natural scientists among politicians, e.g. a European Parliament poll concluded that amongst 786 MEP’s there are less than 20 with a natural science background. This has far-reaching consequences for the way political thinking and acting unfolds (Wijkman, 2011). In addition, silo working across the political landscape often prevails. For instance, the term “green jobs” is mostly used from environment ministries whereas “green skills” is used from labour ministries. This is just one example that illustrates the need to strengthen coordination and collaboration between political actors. Green economy proposals furthermore often overlook that politics does not establish legislation based on a neutral position. Politics rather mirrow the relations of power within a society. For instance, there are many forces that block any legisla-tion that infringes freedom of companies. This becomes apparent in the case of subsidies for non-sustainable sectors that are powerfully supported. In such a situa-tion it is essential to recognise that knowledge and facts and more research efforts alone are not enough to change views and behaviour. The political arena is fur-thermore oriented in a structurally short-term way around election circles. All these circumstances make substantial change tremendously difficult.

There is a danger that if the Green Economy remains within a predominant capital-ist rationality that grants access to power to those who have capital and can invest, economic incentives for individual actors including politicians will continue to con-tradict long-term societal objectives. A key question therefore concerns the condi-tions within which a green economy takes place.

The outlined areas of contention in this discussion paper intend to shed light on some possible blockages and barriers to the implementation of a Green Economy that need to be better understood and addressed. The 2

nd EU Dialogue intends to

bring together policy makers and researchers to jointly think about where policy leverage points are and how they could be addressed and supported with research efforts in order to facilitate a transition towards a truly Green Economy.

The role of politics

Towards a truly Green

Economy



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