Why green growth?
Over the past 20 years, ‘economic growth has lifted more than 660 million people out of poverty and has raised the income levels of millions more, but growth has too often come at the expense of the environment,’ the report says.
The earth’s natural capital has been used in ways that are economically inefficient and wasteful, without bearing in mind the true social and environmental costs.
More than a billion people still do not have access to electricity, 2.6 billion still have no access to sanitation, and 900 million lack safe, clean drinking water. ‘Growth has not been inclusive enough,’ says the report.
Monetising ‘natural capital’In The Guardian, Rachel Kyte, the World Bank’s vice president for sustainable development, cited the example of the government of Thailand, which has attempted to place a value on its mangrove swamps. Chopping down mangrove for wood gives a return of less than $1000 per hectare, whilst removing the mangroves to make way for a shrimp farm, for example, gives a return of $10,000 per hectare; but if the mangrove swamps are retained as a barrier against flooding, the return is $16,000 per hectare.
By monetising it, the true value of the natural resource has been assessed and decisions can be made accordingly. However, few countries have valued their resources this way, and in the meantime, their environments have been degraded in the pursuit of economic growth in the short term.
Obstacles to green growth
The World Bank report cites the main obstacles to green growth as political and behavioural inertia, and a lack of financing instruments. The cost of green policies is not the main obstacle as is commonly thought, it says.
‘Entrenched behavior, special interests, and the complicated political economy of reform explain why measures that amount to good growth policies have not yet been implemented.
Also, many green growth measures require increased up-front capital. Yet the debate on financing remains focused on who pays what, rather than on how to finance economically (let alone socially) profitable investments,’ the report reads.
The way forward
According to the World Bank, the way forward requires smart solutions to tackle political economy constraints, overcome deeply entrenched behaviours, and develop the needed financing tools.
Whilst green accounting ‘can help inform and balance the debates on political choices and public investments,’ that is only one part of the way forward. What is needed is a framework that incentivises those choices and investments. ‘It is here that governments can play a critical role by ensuring that market incentives promote green behaviour on the part of firms and individuals,’ says the report.