2% world GDP needed to fund green economy: UNEP report

March 02, 2011
UNEP Towards a Green Economy report
The United Nations Environment Programme (UNEP) has launched a report entitled Towards a Green Economy, Pathways to a Sustainable Development and Poverty Eradication, in advance of Rio 2012, that focuses on innovative ways to reduce poverty and promote sustainable development.

The report suggest that investing two percent of GDP in 10 key sectors of the economy - agriculture, buildings, energy supply, fisheries, forestry, and industry including energy efficiency, tourism, transport, waste management and water - can trigger greener, smarter growth, while fighting poverty.

According to the report, this investment will set up the transition towards a green economy, defined as low carbon, resource efficient and socially inclusive. A large part of this transition, however, implies policies and investment that dissociate growth from the current intensive consumption of materials and energy use.

In his foreword to the report, UNEP Executive Director Acheim Steiner writes: "New ideas are by their very nature disruptive, but far less disruptive than a world running low on drinking water and productive land, set against the backdrop of climate change, extreme weather events and rising natural resource scarcities.

"A green economy does not favor one political perspective over another. It is relevant to all economies, be they state or more market-led. Neither is it a replacement for sustainable development. Rather, it is a way of realizing that development at the national, regional and global levels and in ways that resonate with and amplify the implementation of Agenda 21.

"A transition to a green economy is already underway, a point underscored in the report and a growing wealth of companion studies by international organizations, countries, corporations and civil society. But the challenge is clearly to build on this momentum.

"Rio+20 offers a real opportunity to scale-up and embed these 'green shoots.' In doing so, this report offers not only a road-map to Rio but beyond 2012, where a far more intelligent management of the natural and human capital of this planet finally shapes the wealth creation and direction of this world."

The report aims to "demystify" two myths about greening the global economy. First, sustainable development and economy go together. A green economy does not inhibit but rather provides opportunities for employment and wealth creation, it argues. Secondly, a green economy is not the prerogative of wealthy countries.

The report seeks to motivate policy makers to create the enabling conditions to increase investment in a transition to a green economy in three ways:

  • Shifting both public and private investment to transform key sectors critical to greening the global economy;

  • Show how a green economy can reduce persistent poverty across a range of important sectors;

  • Provide guidance on policies to achieve this shift by reducing or eliminating environmentally harmful or perverse subsidies.

The report emphasizes that the path to a greener economy is in the elimination of trade-offs between economic growth and investment. Reallocation of public and private investments, stimulated by appropriate policy reforms and enabling conditions, is needed to "green" the central sectors, especially agriculture, fisheries, water, forests, which are sectors particularly important for the rural areas.

Three key findings arising from the report are:

  • A greener economy increases wealth but also create a higher rate of GDP growth.

  • There is link between the poverty eradication, better maintenance and conservation of the ecological commons, arising from the benefit flows from natural capital that are received directly by the poor.

  • Greening the economy will increase employment and thus economic growth.

Although for some sectors like fisheries jobs losses will be inevitable during the transition to sustainability, in the long term the number of new and decent jobs will be created and compensate those lost.

Accordingly, green investments give rise to new technologies that will be the main sources of economic development and growth of the future: renewable energy technologies, resource and energy efficient buildings and equipment, low carbon public transport systems, infrastructure for fuel efficient and clean energy vehicles, and waste management and recycling facilities.

The report stresses that complementary investments are required in human capital, management, and technical skills to ensure a smooth transition to a more sustainable development. It outlines five major areas of policy making, essential to support the green transition:

  • How public investment and spending can be used to leverage private investment.

  • How market-based instruments can level the playing field and provide market incentives in order to promote the greening of key sectors.

  • How subsidy reform should be implemented in areas that deplete natural capital.

  • How a country's regulatory framework of legislation, institutions and enforcement can be designed to channel economic energy into environmentally and socially valuable activity; and

  • How international frameworks that regulate economic activity can play a role in driving a green economy.

Moving towards a green economy will not be easy, the report warns, and the collaboration of world leaders, civil society and leading businesses is needed.