Green Growth Approach – Economic Development Without Degrading The Environment
Introduction to Green Growth
Limitations of Conventional Economy Growth
By the year of 2017, the Gross Domestic Product (GDP) for the entire world has come to 80 trillion, and it is growing substantially with around a 4 percent increase every year, for the developing countries like China, the GDP is growing even more rapidly reaching an annual growth of 7 percent. For the past two decades, the economic growth has helped over 660 million people out of poverty and has significantly improved more people’s living condition. However, environmentalists are greatly concerned about a question arises with the economic growth: For how long can the environment hold up with all the resources exploited for supporting the economy? The United Nations stated that 60 percent of the ‘ecosystem services’ are being used unsustainably, causing loss of biodiversity, global warming and many other negative effects. Unfortunately, the main measure for a nation’s well-being - GDP does not take any environmental aspects into account. In order to achieve a more sustainable development, new approaches are urgently needed to value more of the environment and its resources along with the conventional economy. In this report, the concept of Green Growth will be introduced and it will cover how its progress can be tracked using indicators from different organizations, three examples of roles of engineers and how natural capital can be evaluated with monetary values illustrated by a case study, and finally, limitations of quantifying natural capital are discussed.
Definition of Green Growth
Green Growth is an approach that ensures current economic development without degrading the environment and its resources on which the human rely. It focuses on minimizing the negative effects on the environment, for example, reducing biodiversity loss, carbon emission and resource exploiting.
Green Growth and Conventional Growth
The main difference between conventional growth and Green Growth is that conventional growth solely sees the economy as the main indicator of the wellbeing of human or a nation, it ignores the significant impact of ‘environmental irreversibilities’. For example, in most developing countries, the concept of ‘grow first, clean up later’ has been the best option for them in order to meet the fast-growing economy needs. From the conventional growth perspective, it has worked perfectly as the GDP growth rates for developing countries are continuously increasing. However, it comes with huge environmental issues which are exactly Green Growth is trying to tackle.
Green Growth and Sustainable Development
Green Growth is also closely related to sustainable development. It is known that sustainable development is made of three pillars which are economic sustainability, social sustainability and environmental sustainability, Green Growth makes sure that the economic and environmental sustainability are compatible. For instance, it is a ‘practical and flexible approach’ for a quantitative progress towards the goal of ensuring the environment is capable of providing resources for economy sustainably. Therefore, Green Growth is a specific way of achieving sustainable development and sustainable development provides a broad frame in which Green Growth should work.
Green Growth Indicators
Categories of Indicators
In order to track the progress towards achieving Green Growth, some organizations around the world have created various indicators to quantify specific aspects of Green Growth. For example, the Organisation of Economic Co-operation and Development (OECD) divides their twenty-six indicators into four main parts. First of them is ‘the environmental and resource productivity of the economy’, this is an indicator of how efficiently the economic activities are using the natural resources and services to support themselves, it is measured by how much economic value is generated by each unit of pollution (usually carbon dioxide) or materials. The second part is ‘the natural asset base’, it identifies whether the stock of natural resources is controlled within a safe and sustainable range. Thirdly, ‘the environmental quality of life’ measures the environmental effects on people’s living condition, it also evaluates public access to clean water and green space and other services. The last part is ‘economic opportunities and policy responses’, it is closely related to the government policies and how well they are encouraging businesses to transform to greener models. The indicators developed by Green Growth Knowledge Platform (GGKP) include five main themes: ‘natural assets’, ‘resource efficiency and decoupling’, ‘risks and resilience’, ‘economic opportunities and efforts’ and ‘inclusiveness. ‘Natural assets’ evaluates the existing stock of resources and how they are to change over time. ‘Resource efficiency and decoupling’ accounts for the efficiency of energy use for production and consumption, it measures the same aspects as the first part of indicators in OECD. ‘Risks and resilience’ indicates how well an economy responds when there is a natural disaster or an unexpected environmental situation, the higher the resilience, the faster the economy will recover from the disaster. ‘Economic opportunities and efforts’ evaluates how the opportunities are created to accelerate the transformation of green business models. Lastly, ‘inclusiveness’ relates to the social perspective, it indicates how well people living in different conditions have access to the ‘environmental amenities’ or participate in making decisions.
Comparison of Systems
It is apparent that these two systems of indicators have a lot in common. For example, they both measure the amount of natural resources, the energy use efficiency, policy-making and people’s access to environmental services. However, there are still some differences between them. For instance, the OECD indicators do not consider the resilience of an economy, it is an important factor to consider since it measures the direct relationship between the economy and environment. If an economy is not resilient enough to have the ability of fast recovering from environmental impacts, then it should certainly value more on how it can protect the environment to prevent or minimize the negative effects. The other difference is that the ‘inclusive’ theme in GGKP indicators includes people’s participation in ‘environmental decision-making’, specifically, how much power people have in making the optimum decisions for the environment. Overall, the GGKP indicator themes are more detailed and consider more Green Growth aspects than the OECD.
South Korea’s Green Growth
Although there are many indicators existing to help track the progress, different countries have different priorities when picking which indicators to use. For instance, South Korea, as a member of the OECD, have had rapid economy growth since the Korean War and as a result, the greenhouse gas emission has also dramatically increased [9]. Therefore, the government decided to work towards Green Growth to achieve a more sustainable development. The main indicators they used were GHG emissions, which falls under the ‘the environmental quality of life’ part of the OECD indicators, ‘Energy efficiency and renewable energy’ which relates to resource productivity and lastly, ‘green technology and innovations’ which is the ‘economic opportunities and policies’ part. They did not use the ‘natural asset base’ indicator simply because there are very limited natural resources in South Korea. After many years of work, the results of the Green Growth progress in South Korea were not satisfying. For the GHG emissions, they continued to grow from 503. 1 million tons of CO2 equivalent in 2000 to 688. 3 tons in 2012 [9]. In terms of energy efficiency, it also fell short of the expectations. The energy intensity in the industrial sector has been increasing and it was over the projection by 13. 6% in 2012, this is primarily due to the expansion of industries and the low price of electricity which encourages them to use more electricity thus more energy consumption. However, the government was making a lot of progress in innovating green businesses. In 2013, the investment in green technologies was US$2. 8 billion and it was growing by 15. 8% annually on average. The results reflect that the government realizes the importance of Green Growth but the energy consumption problem must be a priority.
Engineers’ Impacts on Green Growth and Capital Investments
Engineers play a wide range of roles in the progress of Green Growth. These roles can be divided into three main categories which are technology, economic and social aspects and they all work towards the same goal of achieving Green Growth.
Technology Role
First of all, engineers develop green technologies that can be used to improve resource use efficiency which is a key part of the OECD indicators. For instance, the development of solar power system is crucial to reducing GHG emissions and has been used widely in many industries. Engineers have been studying it for many decades and they have developed many sectors that solar energy can be very useful in. For example, the manufacturing industry and electricity generation account for 46% of the world’s total GHG emissions in 2010, the use of solar photovoltaics (PV) to generate electricity produces no GHGs thus can make great contributions to increase resource efficiency. Studies also found that electric furnaces have 95% efficiency comparing to normal gas furnaces’ 40%, which increases resource efficiency dramatically and solar energy can be an excellent source for generating electricity. As a result of solar energy’s great potential, the global market of it has expanded rapidly since 2003, it had an annual growth rate of 135% and total capacity of 40 GW in 2010.
Economy Role
Furthermore, engineers help economy grow in various ways. First of all, the infrastructures like roads and transportation systems built by engineers improve people’s productivity and stimulate economy growth. A study shows that there is a strong correlation between a country's infrastructure level and its GDP per capita. Another example is the development of e-commerce platform by computer engineers, it reduces GHG emissions and helps economy grow at the same time. Instead of customers taking separate trips to go shopping, e-commerce retailers send out a batch of products for multiple customers and they are usually transported by ‘light-duty’ trucks thus achieve a higher fuel efficiency. E-commerce has also been pushing the economy forward. In China, the number of online customers increased from 34 million to 533 million in 2017, and the revenue generated by e-commerce has reached 356 billion USD in 2018. As a result, it increases productivity and competitiveness thus stimulates the economy.
Social Role
The social role of engineers is related to how engineers improve people’s well-being including access to environmental services. As of today, there are about a tenth of the world’s population who do not have access to clean water, mostly because of the high cost of the filtration of raw water and the energy that is required to complete the process. To develop an energy efficient method and allows more people to have access to clean water, material and chemical engineers have invented a polymer membrane that allows raw water to move freely through it and at the same time repel the contaminants from the water to achieve a better water quality. This method requires significantly less energy to pump water through the membrane and also causes a 25% reduction in cost. This invention can potentially benefit the people in underdeveloped countries by allowing them to access clean water at a lower expense and thus improve their living quality.
Capital Investments
Capital investments are also crucial to achieve Green Growth. Typically, there are four main capitals that contribute to Green Growth: natural, human, manufactured and financial capital. Natural capital is the measure of the environment’s well-being, it includes resources, ‘sinks’ and ‘processes’. Resources are the input of economy growth. ‘Sinks’ are assets that can take in wastes and digest overtime to provide a relatively clean environment (forests). ‘Processes’ ensure the environment functions in a balanced way, for example, the carbon cycle. Human capital includes the intelligence, knowledge and productivity of human, it is the core of all the investments needed to put into the goal of achieving Green Growth. Manufactured capital is the services or infrastructures that contribute to the progress. Finally, financial capital relates to conventional economy where decisions are made for the optimum monetary benefit. However, financial capital is the foundation for economy growth which is a part of Green Growth, therefore, we need it to keep the conventional growth while other capitals are invested to make the growth more sustainable.
Case Study of Ethiopia
In Ethiopia, the government cooperated all the capital investments to modify their energy sector. Ethiopia is highly dependent on biomass fuel which accounts for 91. 5% of their total energy use. They also import a large amount of petroleum as another source for generating electricity. With the economy growth, the GHG emission in Ethiopia has increased at a fast pace, furthermore, their economy is also restrained by the international oil price. Therefore, the energy department decided to promote renewable energy as one of the ways to achieve greener economy. Firstly, they have invested in transportation infrastructures to reduce GHG emissions and developed more energy-efficient machines for industries. They raised about $120 million for one of their wind farm projects which has a capacity of 60 MW. Geothermal power is also one of the energy transitions, organizations around the world raised over $30 million to support Ethiopia’s first geothermal plant. Overall, the natural (geothermal), human (government, workers), manufactured (infrastructures) and financial (money) capitals all worked well together to help Ethiopia make progress towards Green Growth.
Assigning Monetary Values to Natural Capital
System of Evaluating Natural Capital
With the increasing acknowledge on the importance of natural capital, some organizations developed systems of accounting for natural capital in order to better analyze the relationship between nature and economy. The United Nation published the System of Environment-Economic Accounting which separates environment into components and assigns both physical and monetary values to them. There are in total seven components including ‘mineral and energy resources, land, soil resources, timber resources, aquatic resources, other biological resources, and water resources’. Each component is assigned with a physical and monetary value, the physical accounts cover a broader scope (volume, area, mass) where the monetary accounts can only measure the financial benefits they have on economy. This system of accounts can help individuals and companies make decisions with more insight in true costs, benefits and risks since it considers consequences of an activity that might affect other parties. Therefore, these externalities can be very helpful in cost-benefit analysis by including potential social and environmental costs.
Case Study of Lower Fraser Valley
A very typical example of assigning monetary values to a natural capital is the wetlands in the Lower Fraser Valley. The valley covers 55% percent of British Columbia’s population and has a huge amount of natural capital including forests, wetlands, and rivers. The wetlands are one of the most important assets that can provide flood control, water treatment and water resource. The TD economics department found out that the annual benefit of the flood protection provided by the wetland was 61 million per year, furthermore, the benefit of water treatment and resources was 150 million per year. The results were calculated by comparing the costs of man-made facilities that would provide the same services as the wetlands do. It is clear that natural assets have huge monetary potential and with proper protections governments can save a substantial amount of cost.
Challenges
Although it is extremely useful to assign values to natural capitals, there are limitations and obstacles for developing a perfect system. The accounting for assets requires a large database and very detailed analysis, while most natural capitals can be quantified, some are challenging to assign a monetary value to. For example, some mining sources whose values have not been discovered are impossible to assess their economic contribution, thus the values would be neglected. Furthermore, there is no global standard of an accounting system, each country is using a different method of evaluation, thus it is hard to compare internationally. Overall, putting monetary values on natural capital is still necessary. It provides a way of thinking and analyzing with a new perspective when making decisions or policies, a perspective that takes environmental aspect into account and considers externalities of a decision. However, further development of a more consentaneous system of accounting natural capital is required to make it more valuable.
Conclusion
In summary, Green Growth is a concept that ensures the integrity of the environment while keeping the economy grow. Many countries around the world are working towards this goal and accessing their progress using indicators, some have made significant improvements which show that Green Growth can truly be a useful concept. Engineers can also contribute by inventing technologies that influence economy and people’s living. However, Green Growth is not yet a mature concept, for example, the accounting of natural capital encounters many obstacles that need to be overcome in order to make it more reliable.
