Inclusive Green Growth: The Pathway to Sustainable Development

Inclusive green growth is the pathway to sustainable development. 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. A variety of market, policy, and institutional failures mean that the earth’s natural capital tends to be used in ways that are economically inefficient and wasteful, without sufficient reckoning of the true social costs of resource depletion and without adequate reinvestment in other forms of wealth. These failures threaten the long-term sustainability of growth and progress made on social welfare.

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. Green growth is necessary, efficient, and affordable. It is the only way to reconcile the rapid growth required to bring developing countries to the level of prosperity to which they aspire with the needs of the more than 1 billion people still living in poverty and the imperative of a better managed environment.

Indeed, green growth is a vital tool for achieving sustainable development. But sustainable development has three pillars: economic, environmental, and social sustainability. We cannot presume that green growth is inherently inclusive. Green growth policies must be carefully designed to maximize benefits for, and minimize costs to, the poor and most vulnerable, and policies and actions with irreversible negative impacts must be avoided.

Green growth also requires improved indicators to monitor economic performance. National accounting indicators like GDP measure only short-term economic growth, whereas indicators like comprehensive wealth including natural capital help us determine if growth is sustainable in the long run.

A green economy is defined as low carbon, resource efficient and socially inclusive. In a green economy, growth in employment and income are driven by public and private investment into such economic activities, infrastructure and assets that allow reduced carbon emissions and pollution, enhanced energy and resource efficiency, and prevention of the loss of biodiversity and ecosystem services.

These green investments need to be enabled and supported through targeted public expenditure, policy reforms and changes in taxation and regulation. UN Environment promotes a development path that understands natural capital as a critical economic asset and a source of public benefits, especially for poor people whose livelihoods depend on natural resources. The notion of green economy does not replace sustainable development, but creates a new focus on the economy, investment, capital and infrastructure, employment and skills and positive social and environmental outcomes across the globe.

The role of green economy, sustainable consumption and production and resource efficiency for sustainable development: Sustainable Consumption and Production aims to improve production processes and consumption practices to reduce resource consumption, waste generation and emissions across the full life cycle of processes and products while Resource Efficiency refers to the ways in which resources are used to deliver value to society and aims to reduce the amount of resources needed, and emissions and waste generated, per unit of product or service. The green economy provides a macro-economic approach to sustainable economic growth with a central focus on investments, employment and skills. The three main areas for the current work on green economy are: 1) Advocacy of macro-economic approach to sustainable economic growth through regional, sub-regional and national fora. 2) Demonstration of Green Economy approaches with a central focus on access to green finance, technology and investments. 3) Support to countries in terms of development and mainstreaming of macro-economic policies to support the transition to a Green Economy.

Building forward for an African Green Recovery

Africa is in the eye of a triple storm. The last half decade has been extremely challenging from a climate perspective: from Cyclone Idai in Mozambique to heavy snowfalls in North Africa, and from desert locusts and fall army worm ravaging crops across East and Southern Africa to floods in Ghana and other countries in West Africa, the repercussions of climate change have been felt across the continent. On the economic front, Africa is facing its first recession in 25 years as a result of the economic repercussions of the COVID-19 pandemic. Over 75 per cent of countries on the continent went into lock down in 2020, while tourism receipts, remittances from abroad and government revenues all collapsed.

Despite that challenge, Africa has demonstrated considerable resilience, owing in large part to the buffers established by many governments prior to the crisis and the support provided by the Group of 20, the International Monetary Fund (IMF) and multilateral development banks. The perfect storm puts Africa at a crossroads of development, with the already-high costs associated with that storm increasing steadily for African countries. Immediate bold action is needed across all fronts to launch a response, recovery, and reset programme. Despite its satisfactory response to the COVID-19 pandemic, Africa has lost over 30 million jobs, poverties are once again on the rise, and debt pressures are mounting.

A swift and bold response is needed to address the devastating impact of the climate, health and economic crises. African finance ministers have called for an injection of external assistance of $100 billion each year for the next three years to close the financing gap of more than $345 billion identified by the IMF. Finally, for climate, health, and the economy, one thing is clear: the entire international community must cooperate to reset and rebuild a stronger multilateral framework to respond to global crises and provide equitable, just and transparent processes and systems for the management and implementation of rapid, monitorable solutions. Without such an approach, African development aspirations, as set out in national development plans, the 2030 Agenda for Sustainable Development and Agenda 2063 of the African Union, will not be attained.

While addressing the ongoing health crisis, countries should draw up plans for kick- starting their recovery. This is a strategic opportunity for African countries to adopt alternative growth models that prioritize value addition in order to leapfrog technologically to a sustainable, inclusive, job-rich future. The African Continental Free Trade Area, which came into existence in January 2021, is an important springboard for recovery. Energy will be a key driver as it will help secure food supplies and enable growth in other sectors of the economy, including transport and industry. The current electricity access deficit of 62.5 per cent is one of the main obstacles to sustainable development. By delivering energy through renewables, African countries will not only limit their impact on the environment and the climate, but will be able to create jobs, increase the fiscal stimulus per dollar spent, and ensure that they do not find themselves locked into using obsolete fuel sources.

Studies have shown that investment in the green economy could create significant numbers of jobs and help accelerate the recovery. For example, a study published in the Oxford Review of Economic Policy revealed that targeted green investments could improve the quality of a recovery in terms of job creation and could enhance countries’ resilience to climate change. In that connection, a case study on green investments in South Africa revealed that green investments provide a stronger gross value added and jobs creation pathway than “traditional” fossil fuel-based investments. Indeed, up to 250 per cent more jobs could be created in the short term and as much as 420 per cent greater economic value generated in the long term compared with traditional fossil fuel-based alternatives. The potential return on energy, nature-based solutions and clean transportation investments in South Africa suggest that other countries could generate similar returns, particularly if they make use of the job creation toolkit developed by the New Partnership for Africa’s Development (NEPAD).

An analysis of options for the Democratic Republic of the Congo also revealed the potential gains of investing in natural capital. This includes reforestation and agroforestry, in addition to building nature-based facilities in urban areas. Utility-scale renewables could increase the extent of electricity penetration in the economy, while the extensive use of mini and micro-grids could bring electricity to as many as 10 million people. Overall, those investments could result in 130 per cent more jobs and 280 per cent greater economic output when compared to traditional investments in the same sectors.

The potential of green investment strategies is all the more important given how they would support the future development of the African economy. A recovery that provides high quality jobs for Africans must be based on an innovative sustainable growth model that delivers both modernization and investment simultaneously, potentially supporting the shift from a low productivity to a high productivity economy. The adoption of such strategies also offers an opportunity to make African economies more resilient, in terms of education, skills, depth of supply chains, finance and climate resilience.

Rationale and approach to supporting Inclusive Green Growth

The World Bank have clearly articulated the rationale for IGG and outlined necessary ingredients for successful policies as follows: Firstly, IGG is necessary, efficient, and affordable. Necessary because sustainable development cannot be achieved without it. Efficient in that addressing the market and governance failures of economic systems will create scope for growing cleaner without growing slower. Affordable because many green policies pay for themselves directly, and others make economic sense once externalities are priced and ecosystem services are valued.

Secondly, greening growth is constrained by social and political inertia and by a lack of financing instruments, not affordability. Entrenched behaviour, 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. Thirdly, greening growth should be carefully sequenced, with priority going to what needs to be done in the next 5 to 10 years, both to avoid getting locked into unsustainable paths and to offer immediate, local benefits. Those benefits will help to reduce the cost of the transition and facilitate the political economy of reform.

Also the search for solutions needs to shift from a search for more financial resources to “getting smart” i.e Smart about learning the lessons of complex reforms to tackle difficult political economy questions, given that many green policies trade immediate costs for later benefits or redistribute benefits from one group to another. Smart about changing behaviour of consumers and firms and the view of societies about what constitutes social success and acceptable behaviour. This entails combining economic incentives with well-framed information. Smart about developing appropriate financing tools for the private sector, especially small firms, for local governments and for national governments, which are sometimes fiscally constrained and have to choose the investment with the lowest up-front cost over one that may be less expensive in the medium term. There is no single green growth model. Inclusive and green growth strategies will vary across countries, reflecting local contexts, preferences, and resource.

Although there exists much theoretical and empirical knowledge pertaining to both green and inclusive growth, green growth raises challenging questions, especially when it comes to the developing world. These include: How can developing countries avoid locking in unsustainable and inefficient socioeconomic systems? Will technology allow developing countries to pursue a less environmentally damaging development path than industrial countries did? What is the best way to manage growth with scarce fiscal resources and limited planning and technical know how? Is green growth just an aspirational goal desirable from an environmental and ethical point of view, but unattainable given competing economic needs?

Conclusion

As the global population heads toward 9 billion by 2050, decisions made today will lock countries into growth patterns that may or may not be sustainable in the future. Care must be taken to ensure that cities and roads, factories and farms are designed, managed, and regulated as efficiently as possible to wisely use natural resources while supporting the robust growth developing countries still need. Economic development during the next two decades cannot mirror the previous two: poverty reduction remains urgent but growth and equity can be pursued without relying on policies and practices that foul the air, water, and land.

Inclusive Green Growth: The Pathway to Sustainable Development makes the case that greening growth is necessary, efficient, and affordable. Yet spurring growth without ensuring equity will thwart efforts to reduce poverty and improve access to health, education, and infrastructure services. Countries must make strategic investments and farsighted policy changes that acknowledge natural resource constraints and enable the world’s poorest and most vulnerable to benefit from efficient, clean, and resilient growth. Like other forms of capital, natural assets are limited and require accounting, investment, and maintenance in order to be properly harnessed and deployed. By maximizing co-benefits and avoiding lock-in, by promoting smarter decisions in industry and society, and by developing innovative financing tools for green investment, we can afford to do the things we must.