Benefits and Risks of Transitioning to a Green Economy

While transitioning to a green economy can benefit countries through increasing sustainable development, reducing poverty, job creation, environmental conservation and reducing harmful gas emissions, developing countries still have some concerns regarding the benefits and risks of doing so.

Benefits

One of the main benefits of adopting a green economy is its potential to alleviate the environmental impact caused by pollution; a benefit that would be felt globally and locally. On a global scale, it can contribute to the fight against global warming, desertification, and the loss of biodiversity. On a local and regional level, adjusting to a green economy could lead to significant improvements in air, water and soil quality.  (Cosbey, n.d, p.41)

Besides the environmental aspects, a green economy also has a great potential to lead to economic growth. Cosbey asserts that, with the shifting of an economy, new markets are created in areas such as biofuels and renewable energy sources. And such new markets would bring international advantages having the potential to be funded entirely through exports, or an increase in domestic sales fueled by increasingly tighter environmental regulations. (Cosbey, n.d, p.41)

Emerging countries in particular can gain from a shift to a green economy as it can provide an opportunity to create more economic and social advantages. For example, by investing in alternative energy sources, access to energy services can be improved and infrastructure can become more energy efficient. This can also lead to the decrease of energy importation and potentially save money. It can also improve resource efficiency as agricultural production will become cleaner and, due to these sustainable agricultural techniques, food security[1] will be improved. (Lefèvre, 2013, p.156-157)  Additionally, new environmental friendly technologies that emerge as a result of a green economy, will help protect and improve agricultural production. (Ocampo, n.d, p. 6) Eventually it is hoped that by embracing a green economy, emerging countries will be able to open a new market segment for the production and exportation of green products and services. (Lefèvre, 2013, p.156-157)

Investing in a green economy and renewable energy sources will not only lead to the creation of new employment but also to benefits in population and environmental health, whilst also improving energy security in the long run.

However, it is important to keep in mind that transitioning to a green economy will not be an easy process, since many countries lack technology and need to guarantee the well-being of their citizens during any transition. Such a transition also does not happen overnight; UNEP’s Green Economy Report illustrates that initially the reallocation of investments towards the transition might slow down economic development during the first years until natural resources are restored, but that in the long term it will lead to faster economic development. (Ocampo, n.d, p. 6)

There are also difficult decisions to be made by governments, especially those of emerging countries with millions of people who do not have regular access to energy, in choosing between immediately alleviating their energy issues or investing in expensive renewable energy sources that require infrastructure and time to implement. The trade-offs must be examined carefully. However, once costs and long-term benefits are taken into consideration, several solutions provided by a green economy are seen as being more attractive. (Bapna and Talberth, 2011)

It is necessary to understand that transitioning to a green economy is not a magic cure for global warming and the world economy. It is a gradual process and one not free of risks or costs.

Risks

Emerging countries worry that shifting to a green economy will hamper economic development and therefore its capability to reduce poverty. Many people also question if the transition is even affordable, as many of its solutions are seen as being costly. Developing countries also feel that they lack know-how regarding green technology and that this will be a disadvantage when it comes to guaranteeing future markets. (Bapna and Talberth, 2011)

Another concern of many developing countries is that changing the market focus of a country’s main industries will also lead to job losses in industries seen as being unsustainable or not environmentally friendly such as coal mining. These companies and their employees will suffer the full impact of a green economy transition, and supporting them will be essential in building a comprehensive and successful green economy. (Bapna and Talberth, 2011)

There is also a fear that developed countries and companies will exploit the green economy model using their technological advantage and the environment as a pretext to gain market access and guarantee a market share by using the excuse that their products are environmentally friendly. A number of emerging countries have already expressed the fear that green economy can be used to promote commercial interests to the World Trade Organization (WTO). (Lefèvre, 2013, p.157)

In addition to not being able to keep up, the lack of technological knowledge and resources prompts another concern that developing countries will be unable to meet the required environmental standards imposed on their product export which would subsequently affect their economic development. Khor states that in order to level the playing field, it will be essential for developed countries to provide emerging countries with, at the very least, the resources and technology to enable them to meet these standards. (Khor, 2011, p.74)

According to Khor, one of the main concerns expressed by developing countries is of the green economy concept jeopardizing them due to its inappropriate use: “there are risks that the promotion of the “green economy” concept may give rise to unhelpful or negative developments, and these must be avoided”. (Khor, 2011)

Khor concludes that inappropriate use of the concept can happen in two main ways:

The first is if it is deployed in a so-called “one-dimensional” way; i.e. sold as an environmentally friendly concept but removed from the overall concept of sustainable development, separated from its equity and development aspects and ignorant of its potential negative impact on emerging economies. (Khor, n.d, p. 72)

This misinterpretation – or misuse – of the green economy concept, could happen by emerging countries using a transition as a pre-condition to receive loans, or the possibility of debt renegotiation. Subsequently this could influence others to adopt a focus on achieving a green economy purely through environmental measures without considering sustainable development and social equity.(Khor, 2011, p.76)

The second is if it is applied to countries in a so-called “one size fits all” way. Such an implementation would be disastrous and inevitably result in no developmental or environmental gains. Khor goes on to state that for a green economy to succeed, it must be tailored to each country’s level of development and should particularly take developing countries’ conditions and prime concerns into consideration. In addition, developing countries should also be given more assistance in areas such as finance and technology and have less stringent regulation imposed upon them. (Khor, n.d, p. 72)

Uncertainty is another important issue brought up by developing countries, since the benefits, risks and costs of moving to a green economy can only be estimated and will be different for each country. Structural risks can appear, along with the economic shift of countries which changes their demand and as a result companies may lose market shares. (Lefèvre, 2013, p. 157)

Some countries also feel that the green economy concept is used as a pretense by developed countries to lift trade barriers on the exportation products of emerging countries. (Bapna and Talberth, 2011)

This ties in with another risk that developing countries face with a green economy transition: that developed countries might use the environment under the green economy implication as a reason to adopt trade protection against the products and services of emerging countries so that unilateral trade can be practiced. This could occur if a carbon tariff or a new border tax on the production process of a product were to be introduced. Industrialized countries could allege that the production process does not obey any standards or limits when it comes to the emission of CO². These measures could significantly harm the economy and market of an emerging country since they do not possess the necessary financial resources and technology to invest in and expand low-carbon technology. (Khor, n.d, p.72)

Developing countries are also worried that they will be at a disadvantage since industrial countries have the resources to provide their firms with subsidies to conduct research and develop low carbon technologies. Emerging countries do not have the financial resources necessary to do the same, which results in an uneven balance between industrial and emerging countries. If developing countries were to lower the tariffs on their green goods they would stand no chance against the products from an industrial country. But this is already happening, with a number of industrial countries encouraging emerging countries to eliminate these tariffs on their environmental friendly goods. (Lefèvre, 2013, p.157-158)

During a Rio +20 preparatory meeting, many developing countries expressed the feeling that the green economy concept does not address the inequality that was shaped by the current economic system. These countries also wanted to be reassured that new premises would not disorganize the current financial and technical measures, which were formerly approved following sustainable development principles, and some expressed that they do not want to see the economic transition based on pre-established global conditions.  (United Nations, 2010)

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[1] FAO defines food security as being a household’s physical and economic access to enough food that will satisfy the members in terms of dietary needs and food preferences. (FAO, n.d)

Lefèvre, C. (2013). Green Economy – A key policy sector for Governance Reform. Complexity Governance: change Management under Challenges of Glocalization. (1., Aufl. ed., pp. 153-172). Hamburg: Kovac, Dr. Verlag.

*This Article is adapted from my master’s thesis: ‘Sustainable Development & Green Economy: the planet’s future or greening indigenous communities into oblivion?’ which was completed as part of the Master’s Curriculum at the Willy Brandt School of Public Policy in Erfurt, Germany.

*Cover image ‘Transition’ by Tal Bright