The idea of the “green economy” goes in and out of fashion, not least because it is rarely defined and frequently misunderstood. Partly this is because different groups find ways to exaggerate the aspects of it that support their particular interests, each providing such different analyses and arguments that the term itself ceases to mean much. And partly it is because, like other issues, it is driven up and down the policy agenda by events.
Right now it is extreme weather that is causing concern in many countries, floods in the UK, droughts and storms elsewhere. Given that these are the kinds of events climate scientists have said for years are the probable result of global warming, it’s quite likely they’re linked to climate change, albeit in complex ways.
One of the key objectives of a green economy is reducing greenhouse gas emissions in an effort to mitigate the effects of climate change. Others are improving resource security by ensuring more efficient and productive use of resources, recycling and re-using products when they reach the end of their lives, and contributing to human well-being through clean air and water, urban green spaces, nature conservation and biodiversity.
Climate stability, resource security, environmental quality: these are obvious goods to come from a green economy. One would imagine that people and societies, especially those that are stable and economically well developed, would be prepared to bear some costs in order to reap the benefits. But one remarkable aspect of a green economy is that substantial evidence points to these costs being very small, with savings from great efficiency in some instances being greater than the costs. These are among are the main conclusions of the UCL Green Economy Policy Commission’s report.
Spend now, save later
It’s easiest to illustrate this with the example of reducing carbon emissions. Low carbon energy supply technologies are currently more expensive than high carbon fossil fuels, which might lead to the conclusion that cutting carbon emissions must be costly. But in fact low carbon technologies can save substantially more than they cost.
Switching to low carbon tech will have a net short-term benefit if the gains from efficiency balance out the higher costs of supply. These costs can be further reduced if carbon pricing is used, such as through a carbon tax or emissions trading scheme, in order to stimulate investment in low carbon technologies. This would allow other taxes, for example on labour, investments or enterprise, which reduce incentives to work and save, to be cut – a process known as environmental tax reform.
In the long term, the benefits of moving to low carbon technologies will be enhanced as the costs of low carbon tech come down further, and as these technologies find export markets abroad. The benefits would be greater still if fossil fuel prices continue to rise. Best of all would be if a green economic stimulus in the UK, and the wider European Union, encouraged other countries to move in the same direction.
This points to other areas of policy required for a green economy. Government needs to stimulate innovation, from research and development through to deployment of new technology on the ground and in the sea. It needs to partner with the private sector in building new infrastructure that supports resource-efficient urban renewal and sustainable networks for energy, transport, and water. And it needs to generate much clearer information about the material demands of the economy, providing material accounts that match the national economic accounts in detail and sophistication, so that these materials can be more easily managed and recycled, preventing them from becoming waste.
Government’s role in all these areas involves both committing its own resources and, more importantly, leveraging private sector investment in the new green infrastructure required. But it will only be successful in persuading the private sector to invest in greening the economy if its policies are credible and command confidence that the government intends to see this agenda through to the end.
The confused messages from the government recently in energy policy – for example over the role of renewables or shale gas, or green subsidies on energy bills – have shown how difficult it is for politicians to maintain a clear sense of direction under the pressure of events.
Issuing bonds with interest rates linked to the government’s environmental performance (another recommendation from the report) might help convince investors of its long-term commitment to building a green economy. The mere rhetoric that is forthcoming from time to time will not.