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Home > Macroeconomic Issues Viewpoints > Why the World Needs a Green New Deal

Macroeconomic Issues Viewpoints

Why the World Needs a Green New Deal

by Achim Steiner and Pavan Sukhdev

Table of contents

Introduction

Achim Steiner has been executive director of the United Nations Environment Program (UNEP) since June 2006. He was director-general of the World Conservation Union from 2001 to 2006. From 1998 to 2001, he was secretary-general of the World Commission on Dams, based in South Africa, where he managed a multi-stakeholder program to develop a global policy process on dams and development. Steiner has a BA from the University of Oxford and an MA in international development and environment policy from the University of London. He has also studied at the German Development Institute in Berlin and the Harvard Business School. He serves on a number of international advisery boards, including the China Council for International Cooperation on Environment and Development.

Pavan Sukhdev is leading two programs for UNEP: The Economics of Ecosystems and Biodiversity program and the Green Economy Initiative. He also holds two board-level positions with Deutsche Bank subsidiaries, including chairman of its Mumbai-based Global Markets Centre, a captive offshoring facility that he helped establish in 2006. After joining Deutsche Bank in 1994, Sukhdev held capital markets, trading, and sales management roles in Singapore, London, and India. In the mid-1990s he played a major role in the development of India’s currency and interest rate derivatives markets. His involvement with the environmental movement in India has included roles with the Green Indian States Trust and Conservation Action Trust.

Another Way?

Some time during 2009 or 2010, trillions of dollars of private investment are going to flood back into the global markets. Indeed, they may already have started to do so.

The question is whether these investments are going to go into the old, brown economy of the 19th and 20th centuries or into the new, green one that will pave the way for the resource-efficient, innovative, and employment-orientated economy that the world so urgently needs in the 21st century.

The food, fuel, and financial crises of 2008 were, in large part, based on speculation. But they also provided a glimpse into a not-too-distant future of mounting instability, intensifying natural hazards, and natural resource scarcity. Unless the international community forges a more sustainable path, there’s a risk that these sorts of crises will become commonplace.

The science is clear. According to the UN Environment Programme’s (UNEP) latest Global Environment Outlook, over 60% of the earth’s ecosystems—economically important assets from forests and grasslands to coral reefs and wetlands—are degraded or else being used unsustainably. Commercial fish stocks may run out in just a few decades, and fertile agricultural land is heading in the same direction.

Economists estimate that over US$2.5 trillion of goods and services are being lost annually as a result of deforestation. We are living off the Earth’s capital; we need to learn to live off the interest.

Climate change, perhaps the biggest market failure of them all, will cost the world economy five to 20% of global GDP over the coming years if left unchecked.

Meanwhile 1.3 billion people around the world are either unemployed or under-employed, with 500 million young people estimated to join the workforce over the coming decade.

Is the solution to find all these people old-style manufacturing jobs, just so that everyone can own several motor cars or have a laptop computer in every room, which is the logical endgame of the current economic model? Or is there another way?

It is our contention that the industrial and services-led “growth at any cost” credo may have hit the buffers—both in terms of job creation and in terms of its ecological footprint on the world’s increasingly scarce nature-based assets. GDP, as a measure of real wealth and as a bellwether of economic success or failure, may too have had its day in its current, narrow configuration.

Overturning Myths

These are among the drivers for the Global Green New Deal and the inspiration for the new UNEP Green Economy Initiative, both of which aim to challenge the status quo and overturn some of the myths that so often stand in the way of real innovation and transformational change.

Take solar power, for example. Governments and experts still contend that this renewable energy will only be competitive with traditional energy sources in 20 or more years.

However, at the last UN climate convention meeting in Poznan, Poland, the heads of three key solar energy companies (First Solar of the United States, SunTech of China, and SolarCentury of the United Kingdom) declared they believe they can be fully competitive with traditional sources of energy within three to five years.

Steering the global economy onto a sustainable path and delivering a Global Green New Deal is not about sentiment. It’s about hard economics, real choices, and a new compass for delivering genuine and lasting wealth creation.

It is not about cutting growth but about finding a path to more intelligent and sustainable growth that captures the true value of human and nature-based capital, as opposed to focusing narrowly on financial and industrial capital.

It is also about rebalancing, refocusing, and redirecting investments and markets in ways that deal with multiple challenges and deliver multiple benefits in the both the northern and the southern hemispheres, while emphasizing “real” value rather than the speculation that all too often benefits the few over the many.

The pillars of new green deal initiative are:

  • clean energy and clean technologies, including recycling

  • rural energy, including renewables and sustainable biomass

  • sustainable agriculture, including organic agriculture

  • ecosystem infrastructure

  • reduced emissions from deforestation and forest degradation (REDD)

  • sustainable cities including planning, transportation, and green building.

 

We are not starting from ground zero here. In 2007, US$148 billion was invested in the renewable energy market, 60% more than the year before.

Much of this has been spurred by creative market mechanisms such as the feed-in tariffs which, in a few short years, have transformed Germany into one of the world’s leading renewable economies. The country’s renewable energy sector employ an estimated half a million people and have an annual turnover of €24 billion.

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