When the G20 meets in June, many of its members will still be looking for a way out of the economic crisis of 2008. After four years of economic uncertainty, high unemployment and dismal prospects, industrialized countries in particular also find themselves divided over what strategies to try now. More austerity and belt-tightening? Another shot of stimulus? Whichever path they choose, they should not ignore the opportunity to move towards a green economy. Green economy strategies — which seek to achieve economic growth that is more environmentally benign than conventional growth — are varied enough that there are types that will suit both economic approaches. The G20 can thus agree on a green economy orientation while allowing participant countries to make their own choices about how to handle the challenging global economy of 2012.

The stimulus approach is the best known, as several countries announced green economy stimulus packages at the onset of the crisis. This version of the green economy draws heavily on public resources, offering preferential credit, loan guarantees and green procurement programs as positive incentives to encourage investment and expansion in favoured green economic activities. Alternative energy is a popular target, as are a wide variety of environmental goods and services. At a time when private investment and consumption are low, this kind of public green stimulus can have positive spillover effects into the rest of the economy, generating growth and employment, and stimulating innovation. It comes at comparatively low costs if the government has reserves or low borrowing costs in recession.

Some of the most enthusiastic adopters of green stimulus packages are the emerging powers of the G20, with Brazil, China and South Africa (and, to a lesser extent, India and Mexico) seeing an opportunity to redirect their economies into the next growth sector. South Africa’s Minister of Trade and Industry Dr. Rob Davies, introducing his country’s first large renewable energy initiative during the climate negotiations in Durban last December, called green energy the coming “third industrial revolution.” Davies said this publicly funded initiative was part of his country’s effort to be a producer rather than consumer of the products of that next revolution.

The green economy is less often associated with austerity, perhaps because many of its products are more expensive than those produced using conventional methods. Yet some green economy principles and tactics are very compatible with an approach that is trying to cut rather than increase spending. Environmental requirements and incentives to improve the use of resources, for example, can save money as well as the environment. Energy audits and improvements in energy efficiency often quickly pay for themselves. Minimizing waste and maximizing recycling are other green economy principles that fit well with an austerity approach, harkening back to old-fashioned virtues such as thrift and living within one’s means.

Austerity approaches generally seek to limit state spending to only critical public goods. Towards this aim, the austere green state should implement policies that require private actors to internalize the environmental costs of their economic activities, rather than leaving them for the state to cover with higher health care, cleanup and other bills. Price and market mechanisms like taxes and tradable permits are unpopular in economic downturns, but they are part of the larger process of making sure costs are paid appropriately in the marketplace, rather than being picked up by an ever-larger and more indebted state.

At the G20 Informal Meeting of Ministers of Foreign Affairs in February, Mexican President Felipe Calderón Hinojosa told the assembled ministers, “Perhaps what we have to do here in Los Cabos is to emphasize the word ‘growth’ and minimize the word: ‘green,’ so that no one is scared off by environmental issues…We are going to insist on this issue.”[1] As this commentary explains, green growth can be part of any strategy for economic recovery and growth.

 


[1] A full transcript of President Calderón’s speech is available at: www.g20mexico.org/en/speeches/221-mensaje-al-grupo-del-g20-por-parte-del-presidente-felipe-calderon

Some of the most enthusiastic adopters of green stimulus packages are the emerging powers of the G20...seeing an opportunity to redirect their economies into the next growth sector.
Thematics
Program
As leaders of the G20 nations prepare for their summit at Los Cabos, Mexico June 18-19, CIGI experts present their perspectives and policy analysis on the most critical issues, such as strengthening the architecture of the global financial system, food security, climate change, green growth, global imbalances, and employment and growth.