mike toman, lead economist and manager, environment and energy research team 18 may 2010
TRANSCRIPT
G re e n E c o n o m y a n d G re e n G ro w t h :
World Bank Approaches
Mike Toman, Lead Economist and Manager, Environment and Energy Research Team 18 May 2010
MDG Challenge
1) Eradicate poverty & hunger Natural resource degradation
2) Universal primary education Water/sanitation; energy access
3) Gender equality/empowerment Land use; indoor air pollution
4) Reduce child mortality Water/sanitation
5) Improve maternal health Water quality; energy/pollution
6) Combat major diseases Air & water quality//climate change
7) Environmental sustainability NR degradation; BD, CC; governance
8) Global public good partnerships Biodiversity, int’l waters, CC
Environment and MDGs
Low-carbon growth “Green stimulus” recovery packages “Green infrastructure” investment Meeting basic energy and water needs Increasing resilience to natural variability Improved efficiency of existing
environmental regulation Correcting harmful market distortions New economic opportunities (green supply
chains, eco-tourism, green innovation,…)
Many Themes Under “Green Economy”
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A guaranteed “win-win” for environment and GDP growth◦Real costs of environmental protection yield
improvement in quality of life A direct path to new markets and economic
opportunities◦Some green technologies are not (yet) market
ready; others are missed opportunities An assured solution to problems of poverty
reduction and social equity◦South Africa’s electricity “lifeline” policy yields
significant benefits but also requires ongoing expenditures; broader “safety net” challenges
What Green Growth is Not:
Complement technology development and standards, implementation targets with pro-environment, pro-inclusive-growth economic incentives
Target incentives for cost-effectiveness Solid enforced legal structure also key Policy reforms go beyond the environment
and energy sphere
BUT: If addressed as an Economic Issue, Green Economy is a
Growth Opportunity
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Stronger environmental & natural resource management & investment to enhance growth, reduce poverty Enhanced quality and availability of communal
land and water resources in rural areas Growth-enhancing investments in technical
improvements and infrastructure that also reduce environmental impacts
Includes but goes beyond existing approaches for environmental protection
General Concepts of “Green Economy” and “Green Growth”
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Maintain environmental sustainability◦“Meet needs of present without
compromising ability of future to meet its needs”
◦Offset “natural capital” depletion with other social wealth build-up – increased aggregate savings to accelerate growth
General Concepts of “Green Economy” and “Green Growth”
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Reduce market failures and institutional barriers to green markets◦ Institutional and governance improvements that
improve economic incentives for sustainability (investment and consumption)
o Addressing economically wasteful and environmental harmful subsidies – energy, water, land use, …with concern for impacts on poor
o Targeted, cost-effective fiscal incentives for green investment
Improved national accounting for costs of resource and environmental depletion
General Concepts of “Green Economy” and “Green Growth”
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Enhancing natural resource productivity – “basic needs plus”
Addressing emerging problems as economy grows and diversifies
Taking opportunities in green innovation and new market and employment development
Not just low-carbon development!
Different Emphases at Various Stages of Development
Core Near-Term Policy Issues: Employment Fiscal Space Efficiency of Resource Use Immediate environmental threats Stage setting for longer-term sustainability
Key Message: Green Economy is an Economic Challenge and a
Growth Opportunity
Not listed in any priority order
Stronger and clearer economic incentives are crucial for advancing on all these issues – not just for the environment
Price signals reflecting social costs of resource & environmental impacts are inherent part of incentive system – induce more efficient and sustainable uses
But, there is much more to the story than the pain of higher product prices!
Role of Economic Incentives
Changes in input demands creates ready demand for more eco-efficient technology – increasing economic rewards, reducing risks & financing barriers◦ Can be complemented selectively with
performance standards, demonstrations to increase scale and lower costs
◦ Signals can be designed to reflect balance of more immediate and longer-term environmental and resource conservation priorities
Price Signals Reinforce Green Investment and Consumption
Can start with most available, low-cost and labor-intensive opportunities◦ Solar water heating◦ Green building retrofits◦ Off-grid power for more remote areas◦ Installation of efficient water using devices◦ Audit and assessment functions◦ Transport congestion reduction◦ On-site materials recycling, re-use
Green Incentives Feed Back Directly on Employment Possibilities
Financing technology innovation/diffusion, other longer-term green growth options
Increase green job skills Help for cost of lifeline measures Measures to reduce highly segmented and
distorted labor markets◦ Research indicates net cost of increasing energy
prices may be minimal if accompanied by fiscal and labor market reforms
Green Pricing Measures Can Increase Badly Needed Fiscal
Space
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Improved access for rural/poor credit, transportation infrastructure, education for rural/poor
Cost-effective, market-enhancing economic regulation in energy sector
Reduced institutional barriers to green technology policies – finance, trade, human knowledge
Need for Complementary Measures
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Subsidizing some green investment can be costly, especially if not well targeted◦ Tax breaks reduce fiscal space◦ Feed-in tariffs for costlier renewables shift cost
to all users Industrial policy to develop green markets
and technologies?◦ Generally has worked only for certain countries
in certain circumstances◦ Important to rely on comparative advantages for
managing market and regulatory uncertainties
Cautionary Notes in Targeting Policies and Measures
World Bank Has Strong and Growing Commitment to Mainstreaming
Environment in Growth Initiatives Goal of 50% clean energy lending in
relatively near future, including low-emission transport
Improved watershed management (not just end of pipe treatment)
Support for country access to donor green grant funding
Integrating environment into national level development partnership strategies
Technical assistance and knowledge transfer
Africa Climate Resilient Growth Strategy
Assessment of poverty, environment and health linkages in Egypt, Yemen and Djibouti
Expanded Bank assistance in Sub-Saharan Africa for management of protected areas
Some Examples of WB Supported Environment Mainstreaming
Range of environment – growth synergies not yet fully mapped out◦Tradeoffs between nearer-term stimulus
and longer-term growth◦Relative growth performance of more or
less green strategies◦Role of innovation and strategic capacity
investment to enhance green growth
Need for Analytically Sound, Evidence-based Measures Is
Paramount
….I have discovered the secret that after climbing a great hill, one only finds that there are many more hills to climb….
….I dare not linger, for my long walk is not ended.
A Very Wise Man Once Said…
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Persisting Environmental Challenges
Environmental Healthand Pollution Management
24% of disease burden and 23% of all deaths in developing countries from environmental risk factors
Half of malnutrition caused by poor sanitation from lack of access to safe water
Indoor air pollution responsible for 1.5 million premature deaths from respiratory illness; 2.7% of global burden of disease
Sustainable Natural Resource Management
Deterioration seen in water, air, forests, grasslands, marine resources, agro-ecosystems
Overfishing: 75% of global fish stocks fully or over-exploited
Damages to protected areas, wetlands, other ecosystem buffers
Climate Change
FY09, ENRM portfolio amounted to $13 billion (10% of total)
Active
Environment
and Natural
Resource
Management
(ENRM)
Portfolio
Environment Lending FY09
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Persisting Environmental Challenges
Policies, Governance Institutions,InternationalCooperation
Limited inter-ministerial coordination for advancing and balancing economic, environmental goals
Limited coordination among levels of governmentShortcomings in natural resource managementChallenges and opportunities of urbanization Inadequate enforcementEnvironmentally and economically harmful policy
distortionsWeaknesses in international cooperation
Higher profile of env in country strategies Maintain safeguards management Increased analysis of environmental
opportunities and implementation costs◦ So far, limited economic analysis of
environmental improvements in practice Increased env policy-based lending
Variety of Implementation Methods
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Studies highlight severe infrastructure gaps:
Infrastructure and Green Economy
% house-holds with regular access to:
All developing countries
Africa Non-Africa low-income countries
Electricity 63 29 56
Improved water
84 60 79
Improved sanitation
52 31 48
All weather road (rural)
64 36 42
South Africa figures better, e.g. 81% electricity access
Africa’s Expenditure Gaps Amplified by Various Inefficiencies:
Africa country grouping
Infra Needs (%GDP)
Spending (%GDP)
Correctable inefficiencies(%GDP)
Net gap (%GDP)
Middle income
10 6 2 2
Resource rich
12 5 3 4
Low income
22 10 3 9
Fragile states
36 6 5 25
All Africa 15 7 3 5
Source: World Bank Africa Infrastructure Country Diagnostic, 2010
Private Participation Remains Limited
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 20080
20
40
60
80
100
120
140
160
180
East Asia and Pacific Europe and Central Asia Latin America and the Caribbean Middle East and North Africa South Asia
Sub-Saharan Africa
Source: World Bank data base on private infrastructure investment (PPIAF)
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WB infrastructure lending increased from $2.5billion in FY2008 to $3.6 billion in FY2009
Separate longer-term economic benefits from near-term stimulus effects◦ Many green growth investments could have
large employment impacts only over the longer term
Economic benefits of “creating new jobs” depends on cost-effectiveness of stimulus
Green Growth and “Green Stimulus”
Eskom investment – critical need to alleviate power supply problems, longer-term focus on improved efficiency and renewables◦ Current WB guidance on coal investment
Continued emphasis on biodiversity and tourism benefits from protected areas◦ Cape Peninsula, Simangaliso Wetland Park
Water –persistent need to improve systemic management and resilience to shocks, increase efficiency of use
Illustrative Examples – South Africa context