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CSR Research Digest – June 2012

Summary

In the 2012 report Inclusive Green Growth: The Pathway to Sustainable Development, World Bank economists set out an economic argument and framework for countries to begin greening their growth. This report argues that sustained growth is necessary to achieve the urgent development needs of the world’s poor and that there is substantial scope for growing cleaner without growing slower.

Key Findings

• To get to sustainable development, we need well-designed, inclusive green growth policies that can improve social welfare for all, promote careful stewardship of natural resources, and respect the delicate balance of the planet.
• Greening growth is necessary, efficient, and affordable.
• It is critical to achieving sustainable development and mostly amounts to good growth policies.
• Obstacles to greening growth are political and behavioural inertia and a lack of financing instruments—not the cost of green policies as commonly thought.
• Green growth should focus on what needs to be done in the next five to 10 years to avoid getting locked into unsustainable paths and to generate immediate, local benefits.
• The way forward requires a blend of economics, political science, and social psychology—smart solutions to tackle political economy constraints, overcome deeply entrenched behaviors and social norms, and develop the needed financing tools.
• Green policies can contribute to growth through four effects:
• an input effect (increasing production factors),
• an efficiency effect (bringing production closer to the production frontier),
• a stimulus effect (stimulating the economy in times of crisis), and
• an innovation effect (accelerating development and adoption of technologies).
• Green policies can also contribute to welfare through direct environmental benefits, through distributional effects (including poverty reduction and job creation), and through increased resilience to shocks (including natural disasters and commodity price volatility).
• Welfare impacts will be greater if efforts are made to make green policies inclusive.
• 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 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.
• Innovation and industrial policies are potentially useful tools to spur green growth, as they can correct market (environmental and non-environmental) failures, but they should be designed to minimize risks from capture and rent-seeking behaviors.
• In some cases, growth and green outcomes— such as cleaner air, cleaner water, less solid waste, and more biodiversity—will involve tradeoffs.
• But not all of these tradeoffs are inevitable: innovation, which can be supported through smart subsidies, can help minimize or eliminate some of them.
• Infrastructure policies are central to green growth strategies, because of the huge potential for regret (given the massive infrastructure investments required and the inertia they create) and substantial potential for co-benefits (given the current gap in infrastructure service provision).
• The infrastructure gap offers opportunities to “build right” and leapfrog; but huge unmet needs also can imply difficult trade-offs between “building right” and “building more,” particularly given financing and fiscal constraints.
• A framework for green infrastructure must build on efforts to address overall constraints on infrastructure finance (including cost recovery issues) and must develop strategies to both minimize the potential for regrets and maximize short-term co-benefits to address social and political acceptability constraints.
• A green growth strategy needs to be designed before individual projects are assessed and selected.
• Project assessments need to account for uncertainty and diverging world views.

Author(s)

World Bank

Source

PDF report

Tags: green growth, green policies, sustainable development, World Bank