Achievement of Sustainable Development through Green Growth (First note, very preliminary)

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1 1. Background Achievement of Sustainable Development through Green Growth (First note, very preliminary) Sung Jin Kang Department of Economics Korea University The most important source of climate change faced by mankind has been known to be global warming from accumulation of greenhouse gases rather than any other causes. The mass production system which was conducted by fossil fuel-based economic development strategy since the Industrial Revolution had led to huge emission of greenhouse gases which lead to range beyond natural self-capacity to absorb them and then to the climate change. Even this traditional economic development strategy will not be possible in the future. This is because the fossil fuel as a main factor to development will be exhausted. Thus this will be a burden to the next generation and this burden leads to a difficulty for sustainable development. It is inevitable for currently developing countries to continue economic development strategy to reduce poverty and improve income distribution. This is because relative higher rate of population growth of developing countries tends to increase international poverty rate and thus the countries with higher poverty rate do not want to stop their economic growth strategy. Climate change affects not only individual quality of life through human health but also national security of island countries through higher seawater level. The more important problem for developing countries is the climate change policies conducted by developed countries. After developed countries are ready to adopt 1

2 environment-friendly production process, they will start to enforce developing countries to follow their production methods and then impose additional trade barrier policy if developing countries intend to export non-eco-friendly produced goods. Therefore sustainable development will not be possible if developing countries give up using current energy-intensive production strategies. There are several issues in following green growth strategies. First, it is well-known that green growth strategy which shows win-win strategy between economic growth and environment should be based on market-based instruments such as cap-and-trade and market price of various energies. In this case there is possibility of worsening income distribution and poverty which are from market failure or disadvantage of market mechanism. This is not restricted to the domestic people. The most efficient way to adopt eco-friendly production strategy is through huge investment on green technologies in the long run. The efficient use of energy or energy saving is the goal we can achieve in the short run. Therefore the difference in the investment capacity between developed and developing countries can lead to widening income gap among them. Second, job creation effects of green growth policies should be carefully estimated. This is because green growth policies will crowd out the jobs in the brown sectors by shifting them to green sectors. Furthermore green growth policies create new jobs by expanding the size of green industries. Finally, developing countries are worrying about possibly widening income gap with developed countries. Therefore international cooperation through technology transfer and financial support is necessary to keep sustainable development of developing countries. The green growth policy proclaimed by the Korean government is more persuasive than the climate change policies conducted by many developed countries. This is because 2

3 developing countries are eager to keep their economic growth and the green growth policies consider how we can continue economic growth by shifting current energy-intensive to eco-friendly production strategy. One way to persuade developing countries to join the international movement toward green growth strategy is to use foreign aid toward more eco-friendly production process. To implement this foreign aid, new terminology is defined. This is called green growth ODA. The sectors that help eco-friendly production should be added to the sectors of environment and renewable energies. 2. Current Discussion on the Environment by AICESIS The previous AICESIS meetings that discuss the issues on sustainable development with environment focused on how to achieve sustainable development status. New development paradigm is how to keep economic and social development subject to keeping the balance of natural resources. The report Intensifying international cooperation, Promoting joint development, Building a harmonious world released at the Beijing meeting in 2007 suggested various international cooperative policies to achieve harmonious world through sustainable development. Among various indicators that reflect the different facets of development, environmental policies in addition to education and healthcare are also one of the important factors to improve wellbeing. The cost to implement environmental policies will be modest when it is compared with the long run benefits from these policies. The final report on the topic Development with Equity and Environmental Responsibility which released at the Hungary meeting in 2009 as the report on the main working group topic for suggests to solve the climate change problems in the range that guarantee sustainable development. The harmony between economic growth and social development is necessary only on the condition of keeping natural balance. To achieve this objective, it is necessary to expand the usage of renewable energy and promote investment on ecological research and innovation. 3

4 The report titled as The Role of ESCs in the new global economic, social and environmental governance at the Italy meeting in 2009 contended that the state and civil society should feel jointly responsible for bringing about sustainable development. Sustainable development includes models of production, consumption and distribution of income and wealth that are compatible with respect for the world s ecosystem, energy networks that facilitate the transition to green economies, food security, and the reduction of inequalities between and within countries (p. 11). Many international institutions such as UN, OECD and EU etc. have much interest in environmental sustainability that evaluates economic and environmental state and leads to guide priority targeting, effective monitoring and evaluation of policy effectiveness. In particular, by using the indicators used in public and private sectors, social networks and national and international research institutes, the effects on natural resources of human behavior should be carefully examined. For example, Eurostat has already devised a set of indicators for monitoring environmental sustainability which is followed by the European Sustainable Development Strategy. And the Brazilian Economic and Social Development (CDES) has much interests in making energy matrices for sustainable development which is based on biofuels and their impacts of agri-forestry production. The final objective to make energy matrices is in transiting into green economy through combining various policies such as tax and incentives to promote renewable energy sources (solar, wind, biomass), and incentives to start up new businesses for creating green jobs in all sectors (agriculture, forests, livestock farming, industry, construction, transport, services). These policies should be undertaken through substantial investment in Research and Development and the establishment of networks connecting institutes and universities in different countries (refer to p.12). 3. Green Growth and Sustainable Development 4

5 3.1 Green Growth and Sustainable Development Green growth proclaimed by the Korean government in 2008 is very evolutionary and comprehensive economic development strategy. It considers economic growth strategies in addition to various climate change policies which are similar to those by developed countries. Green growth seeks win-win strategy between economic and environment. Green growth definition should be differentiated from other similar definitions such as sustainable development (WCED, 1987), Eco-efficient (WBCSD, 1992, 2000), Green Economy(UNEP, 2010), Shared Growth (WB) and Pro-poor Growth etc. The sustainable development defined by WCED in 1987 is defined as follows. Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs. Therefore sustainable development indicates virtuous relation among economic growth, social development and environment. Green growth strategy should be interpreted as dynamic and evolutionary development strategy to achieve sustainable development. But it is only necessary condition. At national level, social welfare policy should be used simultaneously to support poor group and improve social development. Furthermore, at international level, international cooperation is necessary for developing countries to catch up with the developed countries. 3.2 Lessons from Green Growth Polices of Various Countries This section reviews various green growth policies of major countries. Through considering various lessons from these policies, productive policy recommendations will be derived and important messages for the 2012 Rio+20 with the main topic Green Economy will be included. 5

6 Green growth policy which South Korea proclaimed in 2008 begins with the hypothesis that there is a virtuous relationship, not trade-offs, between environment and economic growth. Green growth is defined as a national development strategy that seeks to change overall lifestyle and economic and industrial structures into low-carbon, environment-friendly structures and enhance the quality of life by using through green technologies, energy saving and efficient use of energy (Presidential Council for Future and Vision, Feb., 2009). The green growth policy consists of 3 strategies and 10 policies based on a vision of becoming the world s 7 th and 5 th strong green country by 2020 and 2050, respectively. Three strategies are adaptation to climate change and energy independence, a strategy for economic growth such as new growth engine and greening of current industries, and policy direction to enlarge the role of South Korea in the international community. This is why the green growth strategy is called to be comprehensive and evolutionary. In addition to green growth policies, South Korean government enforces the Human New Deal which is a comprehensive social welfare program to get virtual relationship between social development and economic growth. Through combining green growth and human new deal policies, South Korean government intends to achieve sustainable development. The recent initiatives by the European Union (EU) that had taken the impacts of climate change most seriously were the Energy and Climate Change Package in January, 2007 (EU Commission) and Climate Action and Renewable Energy Package (CAREP), 2008, Energy Efficiency Plan This plan originated from an informed need to achieve a goal newly set by the EU Commission that judged some 50% of the target 20% to have been met. The American Clean Energy and Security Act of 2009 (ACES) which was submitted in March, 2009 by the Obama Administration included a renewable electricity requirement to each electricity provider by 6% and 25% of electricity production from renewable sources by 2012 and 2020, respectively. 6

7 Japan announced various initiatives, including Cool Earth-Innovative Energy Technology Program (May, 2007), Fukuda Vision (June, 2008), Action Plan for Achieving Low-Carbon Society (July, 2008), and Green Economy and Social Reform (April, 2009), etc. And it announced Legislation of the Framework Act on Global Warming (draft) in March, China has also tried to reduce greenhouse gas emissions. Major policies include the Renewable Energy Law of the People s Republic of China (2006), which was amended in 2009, the Medium- and Long-term Program for Renewable Energy (August, 2007), the Renewable Energy Development Plan for the 11 th Five-year Period (March, 2008) and China s Policies and Actions for Adaptation to Climate Change (October, 2008). Green growth policies enforced by developed countries focus relatively on efficient use of energies and mitigation of or adaption to climate change. However, those by developing countries aim to promote economic growth and create new jobs through eco-friendly production process and thus catch up with developed countries. 4. Tasks and Direction of Green Growth and Sustainable Development 4.1 Green Growth and Job Creation The final target of green growth policies is in creating green jobs, especially decent green jobs. However, two important issues should be carefully considered. First, green growth policies will lead to reshuffling of current job structures. The jobs in brown industries will shrink while those in green industries will expand. Therefore an increase of green jobs should be counted as net job creation. Second, in order to expect possible creation of new green jobs, the impact of green growth policies on economic growth and change of industrial structure should be estimated. Especially, the definition of green technologies, green industries and green jobs are followed as well. NRCS(2011) conducted the classification of green technologies, industries and jobs and then estimated of green growth policy in Korea on 7

8 GDP, employment and green jobs. 4.2 Green Growth and International Cooperation Developing countries argue that developed countries are more responsible for current accumulation of greenhouse gases and therefore current climate changes. Furthermore they think that the climate change policies enforced by the developed countries might lead to worsening income gap. Therefore developed countries need to play an important role in improving quality of life of developing countries through technology transfers and financial support. Refer to recent international meeting on climate change issues. Independently of financial support through new financing, developed countries spend more foreign aid on green growth related sectors. The foreign aid related to green growth is defined as Green Growth ODA (Kang, 2011) which is beyond a simple range of environment-related sectors. The country with the highest ratio of Green Growth ODA to total ODA is Japan(37%) in That ratio of Japan was 42.5%(2000), 22.3%(2006) and 33.2%(2008). And others are Spain(29.5%), Germany(23.0%), and Denmark(17.8%) in For Korea, the ratio of Green Growth ODA was 27.7% in And the GGGI(Global Green Growth Institute) which was established in 2010 plays an important role through knowledge sharing of green growth economic plan experience for developing countries. The 2010 G20 meeting in Seoul, adopts the Seoul Development Consensus for Shared Growth as development agenda. 6. Policy Recommendations 7. Conclusion 8

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