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The Green Economy: Mythical or Meaningful? Sir Frank Holmes Memorial Lecture

Victoria University August 6, 2013

I want to share with you this evening my thoughts on the concept of the green

economy. My interest in this topic was stimulated by a project I am working on with an

international team of scholars on “Conceptual Innovations in Environmental Policy.” The

core idea of this project is that ideas matter in the real world, and that ideas expressed as

concepts have influenced the evolution of environmental policy in the last several decades.

Among the questions we are asking are: Where do concepts come from? How do they

change and interact with other concepts? What influence have they had and will they have?

I decided to focus on the concept of the green economy. It appealed to me for several

reasons. One is that it has gained political currency. In the US, the Obama administration

has adopted it as a central way of reframing environmental issues. Second, it is still new,

and there are lively debates on just what it means and what influence it will have. Finally, it

struck me as a politically defensible, analytically sound way, maybe the only way, to

reconcile economic and social goals with the limits of local, regional, and global ecosystems.

I will address several questions in this presentation: What is the green economy?

Where did it come from? Why do some people embrace it while others disdain it? Is it a

meaningful concept for designing a path forward at a time when such a path is urgently

needed? Is it just another set of words or, worse yet, a justification for business as usual?

First: What is the green economy? It is the idea that economic and social aspirations

of people and nations around the world may be fulfilled without exceeding the finite limits of

local, regional, and global ecosystems. It responds to a question posed by an American

Association for the Advancement of Sciences report in 1971: How do we live a good life on a

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finite earth? Until the middle of the last century, only the first part of that question was

seen to matter: How do we live a good life? More recently, we have added the part about a

“finite earth.”

Over the last five decades, there have been fundamentally two points of view

regarding the economy and ecology. One is that there are fixed limits on global ecosystems

and capacities, and economies must be constrained to stay within them by limiting growth.

The other is that any ecosystem limits that may exist are expandable, and that wealth and

technology will provide needed solutions. The green economy reframes this by defining a

creative middle ground; growth in some form may occur but still respect ecosystem limits.

One view of the green economy comes from a 2011 report of the United Nations

Environment Programme (UNEP). A green economy is “one that results in improved well-

being and social equity, while significantly reducing environmental risks and economic

scarcities.” UNEP’s report asserts that a green economy “is not generally a drag on growth

but a new engine of growth”; a “net generator of decent jobs”; and “a vital strategy for the

elimination of persistent poverty.” UNEP concludes that investing just two percent of

annual, global Gross Domestic Product in the core economic sectors, about $1.3 trillion US,

would lead to an economy in which growth is achieved within global ecosystem limits. It

would do this by sustainably managing and restoring the key natural capital sectors of

agriculture, fisheries, forestry, and water, while greatly increasing efficiency in transport,

energy, manufacturing, and buildings. UNEP’s macroeconomic model projects that a green

investment strategy would, after a few transition years, deliver more growth, reduce

poverty, and generate more jobs than would a business as usual, brown economic strategy.

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Another view of the concept, also from 2011, is that of Organization for Economic

Cooperation and Development, (OECD). It looks to green growth rather than a more neutral

concept of a green economy. Green growth is “fostering economic growth and development

while ensuring that natural assets continue to provide the resources and environmental

services on which our well-being relies.” Like the UNEP report, this one gives an optimistic

view of the prospects for a green economy, if the needed policies and incentives are put in

place. Among these, aside from investments in green economic sectors, are eco-taxes; well-

designed regulation that promotes innovation; education and training to support green

energy and other sectors; and removal of harmful subsidies that promote unsustainable

activity in fossil fuels, irrigation, mining, and other brown sectors.

Another approach is from the World Business Council for Sustainable Development

(WBCSD). It offers good news and bad news. The good news for business is that “growth

will deliver billions of new consumers who want homes and cars and television sets.” The

bad news for all of us is that “shrinking resources and…changing climate will limit the

ability of all 9 billion of us [by 2050] to attain or maintain the consumptive lifestyle that is

commensurate with wealth in today’s affluent markets.” The Council offers a two-part

vision for 2050. The first is “a standard of living where people have access to and the ability

to afford education, healthcare, mobility, the basics of food, water, energy, and shelter, and

consumer goods.” The other is “a standard of living [that] can be sustained with the

available natural resources and without further harm to biodiversity, climate, and other

ecosystems.”

The Council argues that, although it may sound utopian, this vision is achievable. A

workable strategy involves many goals, among them meeting the needs of poor countries;

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halting deforestation; halving carbon emissions by 2050; doubling agricultural output with

no increase in land or water used; incorporating the costs of pollution into the price of

goods and services; and getting a four to ten-fold decrease in resources and materials used

for a given level of well-being. Following a business as usual growth path, it argues, leads to

all of us consuming the equivalent of 2.3 earths by 2050; a green path offers the alternative

of consuming just over one earth by 2050. The Council also hints at another issue that is

not prominent in the other reports: that we should rethink our idea of well-being—our

vision of the quality of life we seek through growth as well as our means of achieving it.

Several aspects of these approaches to the green economy are worth noting. The

first is that all three are highly optimistic. Our environmental and energy challenges may be

solved, they all assert, if we are able put the needed policies in place. All are consistent in

recognizing that the current growth and development trajectory of nearly all nations will

lead at some point to disaster. In this sense, all three recognize the existence of ecosystem

limits. Most important, all three embrace the need for continued economic growth,

although in a different form. Indeed, they make their case by arguing that a greening of the

global economy is not inconsistent with increased incomes, especially in poorer countries,

and may actually outperform a business as usual scenario.

Other views of the green economy abound. Van Jones, once an advisor to President

Obama, sees it as “the dual challenge of growing the economy without hurting the earth.”

His particular interest is in stimulating the creation of green jobs: “family-supporting,

career track, or trade-level employment in environmentally-friendly fields.” The Green

Economy Coalition in the US aims for an economy “that generates a better quality of life for

all within the ecological limits of the planet.” It wants to create “more resilient and diverse

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economies capable of producing stable job prospects” by influencing investments, greening

critical economic sectors, investing in people, and managing natural systems responsibly.

All of these approaches have merit. I want to distill them to five core characteristics

that I associate with the green economy. The first is a recognition and incorporation of

ecosystem limits in decision making. If there were no such limits, we would not need to

worry about how green we are. Without limits, a green economy is irrelevant.

A second characteristic is that sources of natural capital—freshwater, forestry, bio-

diversity, and the like—and the ecosystem services they provide are valued appropriately.

The world cannot survive by using up natural assets. Historically, the case for preserving

these assets has been made in ethical, aesthetic, or practical but hard-to-measure terms. It

is apparent now that the case should also be made in economic and instrumental terms.

Ecosystems provide services that cannot be produced in other ways, such as purifying

water, regulating regional and global climate, providing freshwater, and treating wastes.

My third characteristic is having a social consensus that positive relationships among

ecological and economic goals do exist, even abound, in nearly all arenas of economic and

social decision making. The challenge is to overcome the boundaries of particular interests

and short-term thinking. For example, a long-term transition to energy efficiency and to

using renewable sources offers huge benefits in both ecological and economic terms.

The fourth characteristic of a green economy is that ecological considerations enter

into all aspects of societal decision making. They are taken into account in land use, building

design, transportation, infrastructure, tax policy, foreign policy, and so on. Related to this is

that there exist analytical criteria and tools for integrating ecological and economic issues.

A reliance on alternatives to conventional GDP with a so-called Green GDP as a measure of

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progress is one example; another is methods for assigning long-term value to ecological

services.

My fifth characteristic is that there is a serious and critical debate about the current,

near-total emphasis on making quantitative economic growth the overriding goal. Aside

from security, no issue is as broadly embraced in modern political systems as the need for

economic growth. Here the distinctions among growth, development, and progress come

into play. Although I later term a policy of de-growth is too politically and economically

risky, it is worth thinking beyond only quantitative growth in economic scale and income.

Before going any further, it is worth considering where the concept of the green

economy comes from. Let’s think of concepts as shorthand ways of expressing complex

ideas. Often we can trace the origins of a concept, or at least their emergence as currency in

public debates, to specific sources. Although the concepts of sustainability and sustainable

development existed before the late 1980s, for example, especially in sustainable yields in

forestry and fisheries, the widespread use of the term may be traced to the 1987 report of

the World Commission on Environment and Development. Among many influences on the

emergence of the green economy concept, I will look at three as particularly important.

An intellectual influence has been academic literature on ecological modernization

theory. This line of thought emerged in the 1980s, largely from academics in Germany, the

United Kingdom, and the Netherlands. Much environmental writing to that point had

focused on “doomsday” scenarios predicting environmental devastation and a need to

fundamentally restructure existing economic and political systems, including a shift to

more authoritarian governance. Ecological modernization was a reformist, pragmatic, and

optimistic alternative to that scenario. It was reformist in asserting the need for economic,

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social, and political change, but within existing democratic and market institutions. It was

pragmatic in stressing policy reform, technology innovation, and economic incentives. It

was optimistic in asserting that institutions could be restructured to respect ecosystems.

Another source of the green economy is the field of ecological economics. In the last

several decades, many economists grew increasingly unhappy with the orientation of their

field. They thought that a near-total focus on expanding economies and increasing incomes

was narrow and short-sighted, and that the field paid too little attention to such critical

issues as ecological limits and social equity. Of what value is a measure of progress such as

GDP when it counts the destruction of a tropical rainforest or valuable coastal estuary as a

net addition to economic and social well-being? What is the value of ever-increasing

affluence when it leads to loss of the vital ecosystems on which a quality life depends?

Ecological economists set out to create a new approach within their discipline that

recognized biophysical limits and assigned appropriate value to ecological resources. This

was important, because it used the tools of economics to protect the ecological system. It

constituted an intellectual breakthrough that made the reframing of ecological issues in

terms of the green economy possible. One of the contributions of this field was to develop

analytical tools for assigning value to ecosystem services and resources. It now was

possible not just to argue the benefits of a wetland or coastal estuary in aesthetic terms but

also in economic terms. Such results draw attention in ways that other evidence may not.

Consider these numbers: Environmental degradation and pollution cost China some

8 to 12% of its annual GDP. Halving global deforestation rates by 2030 could be worth $3.7

trillion in reduced greenhouse gas emissions. The value of US coastal wetlands in reducing

flooding from hurricanes has been estimated at over $23 billion annually. The global value

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of insect pollinators, mostly bees, has been estimated at nearly $200 billion a year. These

are a few of what could be a very long list of examples of the economic value of ecosystems.

A third place to look for the origins of the green economy is in the literature on the

greening of business. Beginning in the 1980s, leading business scholars and firms have been

engaged in a process of reframing the relationship between finance and the environment.

The old view was that environmental investments subtracted from the bottom line, were a

source of costs rather than of competitive advantage. This view began to change a few

decades ago. In the business literature, a landmark was the writing of business professor

Michael Porter in the 1990s. He turned conventional thinking on its head by arguing that

innovation in environmental, energy, and other such issues was not only compatible with

but essential to business success. In recent decades, we have seen dramatic change in how

some leading firms view environmental and energy issues. They have integrated green

economy ideas into their decision making; this has influenced thinking at societal levels as

well.

In sum, ecological modernization defined a framework for restructuring economic

and governance systems; ecological economics applied the tools of an established

discipline; and the trends in business greening reframed the economy-ecology relationship.

As I move through this lecture, I am sure that you are forming your own impressions

of the green economy. Like the broader and more widely recognized concept of sustainable

development, its intellectual cousin, the green economy possesses a “have your cake and

eat it” quality. After all, it asserts that societies may expand their economies, enhance their

competitiveness, increase per capita income, and provide jobs, all while remaining within

ecological limits. Moreover, some advocates of the concept assert that it offers a path to

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social equity and poverty reduction. These are impressive claims and part of why many

people doubt its validity. Is the concept of the green economy simply too good to be true?

Let’s take a brief look at some of the criticisms. One is that the green economy

concept is too anthropocentric; it is focused almost entirely on preserving natural assets

and respecting ecosystems on the basis of the benefits to people. Green economy thinking

justifies clean technology, renewable energy, habitat protection, and so on based on the

objective of satisfying human needs and aspirations. That is a worthwhile objective, but

many people would like to see more appreciation of nature’s intrinsic qualities, beyond its

instrumental value. Going past this ethical concern is the worry is that we may come to

depend so much on the economic case that, when benefits cannot be measured, we will lose

the argument.

Another source of criticism, largely from the left, is that the green economy concept

serves to legitimize capitalism as managed by liberal democracies and so perpetuates the

fundamental causes of our ecological crisis. As I mentioned earlier, the theory of ecological

modernization was an intellectual forerunner of the green economy. That idea emerged in

response to the argument that only fundamental transformations in capitalist and political

institutions could prevent a headlong rush toward environmental degradation. By laying

out a middle ground, many critics argue, the green economy advocates simply are avoiding

the radical changes that need to occur. Even for those who do not assert the need for

radical change, the green economy is suspect, because it may be used to justify infinite

growth in production and consumption. To these critics, it is less a middle ground than

rationalization for not rethinking growth and its role in ecological and human well-being.

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This is what perhaps is most worrisome for many environmentalists: that the green

economy will be used as a justification simply for continuing business as usual. The concept

emerged in part from business, and groups like the World Business Council embrace it.

This is enough to make many people suspicious that the green economy is merely a vehicle

for avoiding fundamental changes in economic systems of production and consumption. To

many critics, the green economy is a rationale created by business to implement useful but

hardly transformative half-measures—energy efficiency and some renewables here, water

conservation there, some habitat protection and product redesign thrown in—but maintain

the means for making profits and sustaining consumption. I find this to be the most telling

criticism of the concept of the green economy—that it is a form of broad-scale green wash.

What about the objections from the right side of the political spectrum? Why would

economic and social conservatives in some countries not embrace a concept that accepts

the inevitability of economic growth, although more broadly conceived? The fact is, at least

in the US, that the green economy concept is disliked and often derided by conservatives.

One reason is that, by defining a path that reconciles at least some level of continued

growth with ecological quality, green economy proponents are taking away one of the core

arguments against more progressive environmental policies. By reconciling growth with

ecological protection, the green economy removes a major rhetorical weapon from the pro-

growth arsenal and thus, in many eyes, helps to legitimize environmentalism.

Two other reasons are important in explaining the criticisms from the right. One is

that a policy framework designed to promote a green economy could mean a more active

governmental role in the economy and society. Indeed, columnist Charles Krauthammer in

the US has written that “environmentalism is becoming the new socialism, i.e., the totemic

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ideal in the name of which government seizes the commanding heights of the economy and

society.” (WP, 12/11/2009) My view is that the green economy does not necessarily

involve more big government or bureaucracy. Still, fulfilling the green economic vision will

require more social and collective action than advocates of limited government care to see.

The second reason is a simple matter of political coalitions. The current distribution of

political support in the US has conservatives most often relying on fossil fuel and

development interests. There is a reluctance to promote policies that would undermine

these economic interests. I am sure that is true in other countries as well.

In the US, the green economy has been embraced more by the political center and

left of center than the right. It is most closely linked with the presidential administrations

of Bill Clinton and Barack Obama. For both, and President Obama in particular, having to

face an obstructive Congress and often skeptical public on the critical issues of energy,

climate change, water security, and habitat protection in the midst of an economic crisis led

to a reframing of ecological in relation to economic issues. This reframing is an explicit

strategy to minimize the economic argument against strong environmental and energy

policies. It is, and was always intended to be, a strategy of conceptual cooptation.

Here are a few examples of how this reframing is presented in practical terms. The

first is from a poster in the president’s reelection campaign, which read: “There will always

be people in this country who say we’ve got to choose between clean air and clean water

and putting people back to work. That is a false choice. With smart, sustainable policies, we

can grow our economy today and protect our environment for ourselves and our children.”

Example two is from the US Environmental Protection Agency, which last year did a project

on the economic value of water: “Water is vital to a productive and growing economy in the

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United States, directly and indirectly affecting the production of goods and services in

many sectors.” The third example is from Gina McCarthy, newly-confirmed administrator of

the US Environmental Protection Agency. In a speech last week, she asserted that President

Obama’s new Climate Action Plan will “fuel the complementary effects of turning America

into a magnet for new jobs and manufacturing” and is “a way to spark business innovation.”

Nearly all of the recent thinking about a green economy is based on an optimistic

vision of what may be termed a relative decoupling of growth from degradation. The view is

that growth may be accommodated within ecosystem limits if we just grow in the right

way. This objective also is captured in the idea of eco-efficiency—of providing goods and

services with less ecological stress and resources per unit of production and consumption.

This notion of relative decoupling, which is the core of the green economy concept,

brings with it a range of policy strategies. An example is eco-taxes, of which a carbon tax is

a prominent current example. It builds the social costs of fossil-fuel-based energy into the

price of the resource. It is effective in reducing carbon dioxide and other air pollution and

placing renewable sources like solar and wind on a more competitive financial footing. It

generates revenue to fund research on energy efficiency and technologies, offset income

taxes, reduce deficits, or support low-income people. Eco-taxes are one example of policy

tools that seek positive win-wins among ecological and economic goals. Others include

emissions and effluent trading; energy efficiency standards for appliances, vehicles, and

building; green infrastructure for improving water quality; products designed with green

chemistry; elimination of environmentally-harmful subsidies, like those for irrigation;

stringent but smarter regulation that encourages technology innovation; and others. All of

these are central to redesigning economic and policy choices through relative decoupling.

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This strategy of relative decoupling is absolutely essential if we expect to live a good

life on a finite earth. It aims to reconcile economic and social aspirations with ecosystem

limits, but largely within current growth trajectories. There is a strong case to be made,

however, for the insufficiency of a strategy based only on a relative decoupling. Even

aggressive policies at decoupling ecosystem impacts from growth cannot offset the fact of

nine billion people living more affluent lives by mid-century and beyond. Only so much

non-renewable energy, land, water, habitat, and atmospheric capacity are available. And, as

a matter of political reality, we recognize that not all of the policy agenda outlined by the

UNEP and other groups will be adopted, and much of it may not be. One solution is a goal

political leaders around the world carefully avoid talking about—aiming for policies to

stabilize or actually reduce economic size and scale in a process of planned contraction.

The more extreme argument along these lines, that for de-growth, is not just for a

greener but a smaller economy. One proponent defines de-growth as “’an equitable

downscaling of production and consumption that increases human well-being and

enhances ecological conditions.” (Alexander 2012, 351) Recognizing, of course, that people

in many parts of the world are so poor they lack the income needed for minimal material

well-being and social development, this school of thought calls for higher incomes in

poorer countries and lower incomes in wealthier ones. The objective is to achieve a level of

global income that provides well-being and happiness while not exceeding ecosystem

limits. What is the logic in rich countries living well past the incomes needed for happy,

fulfilling lives when the planet is in jeopardy and poor nations lack basics of a comfortable

existence? If people are not happier beyond a certain level of affluence, what is the point of

striving to be still richer?

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The de-growth case reflects an ambitious social and economic agenda. Some of its

proposals are reformist, such as adopting “post-growth” progress measures, promoting

work sharing, and using renewable energy. But others, such as a radical redistribution of

income through the tax system, total taxation of inheritance, and legal limits on working

hours, involve more dramatic change. Many of these measures are designed, in the words

of one advocate, to “rein in lifestyles of profligate consumption” and increase social equity

as well as reverse the path of growth. Politically, these ideas are far from feasible in the US,

and I think they would undermine the green economy agenda and its chances for success.

Still, it is more than a fair criticism to argue that a strategy of relative decoupling

alone may be insufficient. Its greatest virtue may be that it buys time. It may be feasible for

some ecological issues but not for others. As a result, I would include in my conception of

the green economy a notion of a world that aims not just for simple GDP or income growth

but a better quality of life, or a society that looks beyond growth. Research suggests indeed

that there is a point at which growth becomes uneconomic. We reach this point when the

social costs of further growth begin to exceed the benefits. One set of costs lies in the effects

of pollution, habitat loss, chemical exposures, and climate change. Other costs occur in

quality of life, like traffic congestion, high living costs, family stress, and social inequality.

Ecological economists suggest alternatives to GDP as measures of human progress.

One is the Genuine Progress Indicator, or GPI, which captures an array of value-providing

activity as well as the negative effects of pollution, long commutes, crime, and so on. The

New Economics Foundation has developed a Happy Planet Index that compares countries

on the basis of the perceived well-being of citizens; life expectancy, as a health indicator;

and per capita ecological footprint, which measures the environmental impacts of lifestyles.

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By the way, the highest ranking country in the Happy Planet Index is Costa Rica,

which has achieved a balance of perceived and actual well-being without making excessive

demands on the planet. New Zealand did reasonably well, while the US ranked lower due to

our much larger ecological footprint, based mostly on energy. For perceived well-being, as

measured in, for example, the OECD Better Life Index, New Zealand and the US ranked 11th

and 12th, respectively, with nearly identical scores. The OECD nation with the highest sense

of well-being among 36 studied was Denmark; next were Norway, Austria, the Netherlands,

and Switzerland. It is worth noting that most indicators of well-being and progress peaked

in the late 1970s, even while incomes in most of the affluent countries continued to grow.

This is the basis for arguments by growth critics that, beyond some point, a richer world is

not necessarily a happier one. Of course, neither is a poor world with high unemployment.

Recognizing this, some cities in the US have moved toward greener growth, not only

by adopting the policies discussed earlier but by reexamining the primacy of growth as a

community vision. They are moving from a conception of cities as just economic growth

machines to a more nuanced conception of quality of life. Portland, Oregon, one of the most

sustainable cities in the US, has adopted urban growth boundaries to limit land use and

development. Boulder, Colorado was the first US city to enact a local carbon tax. Milwaukee,

Wisconsin undertook a sustainable redevelopment of an old, decayed industrial area with

explicitly ecological and social goals to balance out the economic aspects of the program.

Indeed, these cities offer some of the best examples of green economy thinking in the US.

Even US public opinion may be moving in this direction: A recent Harris Poll found

that “Americans are increasingly placing greater priority on living a fulfilling life—in which

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being wealthy is not the most significant factor.” It may be that some people already are

looking beyond economic growth as the sole measure of human progress and well-being.

As should be clear by now, I see the green economy as being far more meaningful

than mythical. It offers a pragmatic, politically arguable, analytically sound path for policy

making, public and private. Moreover, I see some version of the green economy as the only

realistic path for avoiding the long-term, irreversible ecological devastation that is coming.

In the words of a report issued last year here in New Zealand, “Only the willfully delusional

continue to disregard the impact that humankind is having on the planet.” It is a fact of life

that economies will continue to grow; growth is the basis for political legitimacy in nearly

all nations. And we cannot deny the aspirations for a quality of life in the poorest nations.

A major, relative decoupling of human progress from ecological harm is technically

and economically achievable. A much greener and environmentally sustainable economy is

a realistic possibility. It is most likely to succeed in energy, where a long-term transition to

renewables is feasible. Other economic sectors, such as transport, manufacturing, tourism,

agriculture, and mining are more challenging. Still, by redirecting investment, integrating

ecological and economic policy, recognizing the value of ecosystem services and assets, and

linking ecological with all aspects of decision making, a much greener path is available.

At some point, however, the cumulative effects of more people with ever-increasing

standards of living will again press the limits of global ecosystems. In climate change, those

limits are reasonably well defined. In water resources, persistent and bio-accumulative

pollutants, nutrient loadings, loss of species and habitat, and other indicators it is clear that

limits exists and at some point will be stretched. An absolute decoupling, of looking beyond

growth to more varied and nuanced approaches to progress, should also be on the agenda.

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The challenge of living a good life on a finite earth is far more difficult than the old

one of living a good life without worrying about planetary limits. Clearly, all nations must

redesign policies and institutions to meet human needs in less ecologically stressful ways,

although the political hurdles are formidable. The concept of a green economy reframes the

relationships among economic, ecological, and even social issues. It may, in sum, be the best

conceptual framework for living a good life on a finite earth for the current, and more

critically, for future generations. Thank you.