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The Road to Rio+20 - For a Development-led Green Economy: Volume 2

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The green economy, within the context of sustainable development and poverty eradication, is one of the two themes of the 2012 Conference on Sustainable Development, to be held in Rio de Janeiro. It encompasses some of the most important challenges we face today: eradicating poverty, improving our relationship with the environment, addressing the potential negative impacts of global climate change, and creating a new path for sustainable development.

New York and Geneva, 2011


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E +1 9 9 2 2 0 1 2


For a development-led green economy


U N I T E D N A T I O N S C O N F E R E N C E O N T R A D E A N D D E V E L O P M E N T


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Editorial team
Gilles Chevalier
Daniel De La Torre U.
Robert Hamwey


Khalid El Morabit
Lalen Lleander
Daniel Spiro


The authors of the articles are solely responsible for their contributions.
The views expressed should therefore not be attributed to UNCTAD,
any other institution or Member State.
The presentation of material do not imply the expression of any position
whatsoever on the part of the UNCTAD secretariat concerning the
legal status of any country, territory, city or area, or of its authorities;
the delimitation of the frontiers or boundaries of any country
or territory, or the endorsement of any commercial firm or product.
Material (excluding photographs) may be freely quoted or reprinted,


but full acknowledgement is requested. A copy of the publication
containing the quotation or reprint should be sent to the UNCTAD
secretariat, attention to: Director, Division of International Trade in
Goods and Services, and Commodities, E.8011, Palais des Nations,
CH-1211 Geneva 10, Switzerland.
Photographs are the property of photographers and were made
available thanks to their generosity. They are used without
commercial purposes. The publisher has made every effort to trace
copyright holders.


Yann Arthus-Bertrand front cover, x, 2, 8, 9, 12, 13, 15, 22, 24, 27, 28, 36, 38, 41, 43, 44, 47, 54,
78, 80, 81, back cover
U.N. Photo: Marco Dormino 5 Albert G. Farran 6 Tim McKulka 8 Jeffrey Foxx 10 John Isaac 14, 84 Michos Tzovaras 18
Eskinder Debebe 19, 55, 62, 67 Yutaka Nagata 20, 34 Christopher Herwig 27, 43 Mark Garten 53 Ciganovic 55
Paolo Filgueiras 56 Martine Perret 72
Fotolia: Desaxo 30 Frank Röder 31 Valcho 49 Agence DER 54
Günter Fischer 50, 55 Pierre Virot 60 Bernd Untiedt 67 Ricardo Zerrenner 67 Caelusconsult 71 Dan Crosbie 73
Leila Ghandi 76, 86 Aderee 84, 85 Managem 87, 88, 89, 90


Disclaimer


ii


Contributors


Photo credits, by page


The Road to Rio+20
For a development-led green economy


Special thanks go to the authors for contributing their work to this publication.
The team wishes to also express its gratitude to Mr Yann Arthus-Bertrand and
Ms Leila Ghandi for providing so graciously their photographs.


Acknowledgments


Project Director
Lucas Assunção


Project Coordinator
Eugenia E. Nuñez


Editor
Chris M. Simpson


Graphic Design
Andrés Carnevali P.


Technical Support
Rafe Dent


Printing
United Nations Office
at Geneva (UNOG)


Photographs
Y. Arthus-Bertrand
Günter Fischer
Fotolia
Leila Ghandi
U.N. Photo


All rights reserved. Copyright©United Nations, 2011


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Welcome to this first issue in a projected UNCTAD
series to be published in the run-up to Rio+20,
the UN Conference on Sustainable Development
(UNCSD) in 2012. The aim is to provoke discussion,
advance new ideas, and provide inspiration for
the future Conference whose result should be
consensus on where we want to go in sustainable
development and how developed and developing
countries should work together to get there.


This edition looks at the Green Economy: one which
is low carbon, resource efficient and socially
inclusive. As a concept, however, it needs to be
placed within a specific context, which P a r t 1 of
this volume attempts to do, both explaining and
informing. P a r t 2 offers a variety of commentary
from the supportive to those full of doubt, pro-
viding a measure of the task ahead to achieve the
necessary consensus. In P a r t 3 we take a look at
issues critical in the management of the transition,
not the least of which, as some authors point out,
is funding.


In each number of the series, we will focus on how
selected countries have launched initiatives to make
progress in their ‘green’ transition. P a r t 4 presents
M o r o c c o and looks at how it has integrated
environmental issues into national strategies.
It posits the view that government and the private
sector, working together, can draw inspiration
from the green economy initiative to better manage
natural resources, reduce dependence on fossil
fuels and, at the same time, move ahead with their
economic and social objectives.


Editorial


iii


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Road to Rio(7)+20.indd 4 2/10/11 1:52:05 AM




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The green economy, within the context of sustain-
able development and poverty eradication, is one of the
two themes of the 2012 Conference on Sustainable De-
velopment, to be held in Rio de Janeiro. It encompasses
some of the most important challenges we face today:
eradicating poverty, improving our relationship with the
environment, addressing the potential negative impacts
of global climate change, and creating a new path for sus-
tainable development.


The green economy is defined as an economy that results
in improved human well-being and reduced inequalities,
while not exposing future generations to significant envi-
ronmental risks and ecological scarcities. It seeks to bring
long-term societal benefits to short-term activities aimed
at mitigating environmental risks. A green economy is an
enabling component of the overarching goal of sustain-
able development.


A green economy does not automatically imply higher
levels of output and employment when compared with a
“brown” (or traditional) economy. Rather, moving towards
a green economy implies not only the mainstreaming of
green niches in specific sectors of an economy but also
a change in an economy’s overall social construct. The
sustainable development challenge for a green economy
is to be able to produce more wealth, employment and
better social services, coupled with a lower absolute use
of natural resources and greater reliance on less carbon-
intensive and renewable energy, without causing regional
displacement due to uneven endowment of natural
resources. There is important policy work to be done
to ensure that paths to a greener economy are socially
inclusive and contribute to equitable economic and social
development.


How then, do we transition to a green economy?


There are at least four key elements that need to be ad-
dressed for a successful transition. First, identifying new
sources of funding that can be directly applied to tran-
sitional efforts in developing countries; second, creating
an enabling environment that is conducive to private
investment that will support these efforts; third, tak-
ing advantage of trade as a supporting tool for sustain-
able development and avoiding the temptation of green
protectionism; and fourth, designing new and effective
mechanisms to transfer green technologies to developing
countries.


The international community has a role to play in sup-
porting the transition of developing countries and en-
suring it takes place in accordance with the principles of
equity and sustainable development.


Developed economies will have at hand greater financial,
human resource and technological means to navigate
their transition to a green economy with relatively low
costs. Conversely, developing economies are likely to
incur higher transition costs. It is difficult to imagine a
transition phase in which, at least in the early stages, the
internalization of the environmental and social costs do
not result in a reduction in real income.


There is, therefore, a genuine basis to argue for significant
investment to assist developing countries in their move
to a green economy and thereby achieve a higher degree
of sustainable development. This is particularly so if it is
accepted that a more sustainable, green and less carbon-
intensive world economy comprises a global common
good that benefits all humanity. Short of accepting this,
the internalization of environmental costs is an extra ef-
fort that many countries, both developed and developing,
may not be willing to make voluntarily or undertake in
isolation.


vi


Foreword


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The green economy is not a theoretical concept. Some
countries are already moving aggressively towards it and
it is imperative that all countries consider reshaping their
development strategies and practices accordingly. Inter-
national cooperation will help ensure that opportunities
arising from the transition are maximized and the risks
minimized. Multilateral cooperative action is the only
way forward.


The recent UNCTAD Ad Hoc Expert Meeting on the Green
Economy identified the transfer of appropriate technol-
ogy, the leveraging of climate finance and the transition
to more sustainable lifestyles (as opposed to lower living
standards) in industrialized economies as fundamental
steps towards a feasible transition.


It will also be important to create innovative new markets
such as forestry carbon credits, and focus more attention
on South-South trade and technology transfer.


Furthermore, the international community must agree
upon the principles for the design and implementation
of trade-related instruments in relation to a green
economy. The current WTO rules are not clear as there
is no multilateral consensus on best practice. Without
guidance, it is likely that green economy-related disputes


will be referred to the World Trade Organization’s
dispute settlement mechanism, which could be corrosive
to the multilateral trading system.


Whether a green economy has the potential to become
the basis for a new development path will depend on how
its benefits are perceived and the burden of the transition
costs ultimately shared. UNCTAD will provide a forum
for debating and addressing all the issues raised herein
in the run up to the 2012 United Nations Conference on
Sustainable Development.


It is the aim of this publication, the Road to Rio +20, to
contribute to the debate through a collection of essays
that provide different perspectives on how to increase
the benefits and reduce the risks in the transition to a
development-led green economy. I hope the articles
will trigger more critical thinking and awaken the imagi-
nation on our journey to Rio de Janeiro in 2012.


vii


Supachai Panitchpakdi
UNCTAD Secretary-General


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viii


Approaching Rio +20:
the global context


Globalization in the era of
environmental crisis
Je f f rey Sachs


From a failed growth
economy to a steady-state economy
Herman Daly


Moving the Rio Agenda:
re-engagement and re-commitment?
Melinda Kimble


3 25


3311


17


Going green:
what’s at stake?


Are there downsides to a green economy?
The trade, investment and competitiveness
implications of unilateral green economic
pursuit
Aaron Cosbey


Reflections on the relationship between
the ‘green economy’ and sustainable
development
Chandrashekhar Dasgupta


21


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ix


Managing the transition


Green Economy as a programme
for sustainable development
Carlos Márcio Cozendey


Peak oil and the necessity
of transitioning to regenerative
agriculture
Danie l De La Torre Ugarte
Chad Hel lwinckel


Trade, finance and the green economy
D mitr i Zhengel i si


Making climate change finance
work for human development
Lucas Assunção
Gi l les Cheval ier


Environmental, social and governance
disclosure to manage the change
to a green economy on the
path to sustainable development
Global Report ing Init iat ive


The green transition
of Morocco


The Government’s strategy
on the green economy
H.E. Ambassador Omar Hi la le


Swiss-Morocco Foundation
for Sustainable Development
Mohamed Mike Fani


Renewable energy in Morocco
Saïd Moul ine


MANAGEM: 80 years of development
and valorisation of natural resources
Ismai l Akalay


3 4


39 79


82


83


87


46


52


60


69


issue 1
march 2011


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1
PART


Approaching Rio+20:
the global context


Globalization in the era
of environmental crisis
Je f f rey Sachs


From a failed growth economy
to a steady-state economy
Herman Daly


Moving the Rio Agenda:
re-engagement
and re-commitment?
Melinda Kimble


3


11


17


1


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; ;1


Approaching Rio+20:
the global context


2


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e face more challenges per
minute than we could handle
per month, per year, per decade.


They’re cascading upon us, and even though these fi-
nance, energy, or climate crises sometimes seem to be
independent, they are interconnected. They are all signs
of a tightly-knit world that is still unable to come to grips
with the real nature, challenges, opportunities and threats
of globalization.


I am going to write here about the global economy in the
context of the environmental challenges that we face. In
some ways, you will say, well, we know those things. In-
deed, perhaps our biggest challenge is not exactly what
we know, but how we act. How it is that we lose so much
time on a planet that does not have the time and the lux-
ury that we think it has.


We can no longer put economy and ecology in separate
categories. They never were in separate categories—our
economy rests on the base of ecology because we are bio-
logical organisms. We depend on water, the food we grow,
the safety from natural hazards, the coming of the rains
on time. Millions die and hundreds of millions are threat-
ened by inadequate food supply, by chronic drought, by
disasters that befall them, ever stronger storm events,
higher variability, many threats to food security. So there
is no separation of development and environment. Be-
cause the environmental challenge, the economic chal-
lenge and the social challenge are so integrally connected,
they must not be separated intellectually or in the nego-
tiations or brainstorming that the world must now un-
dertake. That is my central message: we face a dire and


growing crisis. We are in the age where sustainable devel-
opment is truly the fundamental challenge. Our world is
literally unsustainable right now in the way it operates, in
all scales and dimensions.


We are unsustainable socially. The world fabric is com-
ing apart, not coming together. The gaps of the richest
and the poorest are widening. There are, of course, poor
countries getting richer, but it is also true that many of
the poorest people on this planet are dying of their pov-
erty and, if not dying, struggling to survive and falling
further and further behind.


What’s happening? What’s happening, of course, on the
ecological front, is that the world is really bursting at the
seams. Now some part of that is due to the success of our
economic progress. We have become so productive that
we can mine the oceans of fish till they disappear, we can
mine the lands of mineral resources until they’re gone,
we can deplete resources at a rate that’s absolutely stag-
gering, because we’ve become pretty good at it through
almost magical technologies. We’ve also become very nu-
merous, of course, and the population growth rate con-
tinues at an unsustainable course. Even though the rate
has come down, the human population is still increasing
at about 75-80 million people per year. That means adding
more than 2 billion people by mid-century to a planet that
is already profoundly stressed. Still, each of those persons
on the planet expects and will expect to have their human
rights met and to have access to resources, which will lead
to an extreme collision of resource and possibilities.


Now the concept that I really believe is pertinent for all
of us and that I want to spend a few minutes on is a
concept that was coined by a Nobel laureate, the atmos-
pheric chemist Paul Crutzen. Crutzen is one of the three


w


3Jeffrey Sachs


Globalization in the
era of environmental crisis


In a world dominated by human activity, how can we ensure sustainability when economic growth is a given in the developed and
a necessity in the developing world? Jeffrey Sachs offers two approaches. One involves stabilizing population, with the concomi-
tant need to improve survival rates to ensure access to contraception and empower women and girls. For the other, Sachs calls for
a systemic approach to new technology supported by an economic strategy “where markets and society make choices together”.
Furthermore, he emphasizes “we don’t need global negotiations, we need global brainstorming and global problem solving”.


Road to Rio(7)+20.indd 13 2/10/11 1:52:14 AM




4


atmospheric scientists who discovered the ozone deple-
tion effect of chlorofluorocarbon. Their great discovery
saved vast numbers of people and spared us vast destruc-
tion. Incidentally, we didn’t even know about this ozone
depletion effect except by the accident of the brilliance
of these scientists and then the accident that we actually
had a NASA satellite that could take pictures of the hole
of the ozone layer above Antarctica. I mention that fact
because we do not even know what we’re doing to the
planet. Our effects are so pervasive, so inclusive, that we
are doing damage the likes of which we won’t recognize
until the next Nobel winning scientist explains to us how
we are destroying the life support systems of the planet
through some mechanism that we’re not even aware of
today. That’s what Crutzen and his colleagues did.


A few years ago, Paul Crutzen coined the neologism the
‘Anthropocene’ as the term for our new age. What is the
Anthropocene? Anthropo is from Greek and means hu-
man, and ene means epoch. By using this term, Crutzen
suggests that we are in the human-made epoch of the
planet. What does he mean by that? He means that we
are in the age of the planet—the geologic age, mind
you—where human activity dominates the earth pro-
cesses. This is an extraordinary concept: that humanity
has become so large in absolute number and in average
economic activity per each of us, that we have overtaken
the physical earth processes in vital ways to the point of
threatening the stratospheric ozone level, to the point
of changing the climate, to the point of fundamentally
changing the hydrologic cycle and so forth. The Ameri-
can Geologic Society looked at sediment patterns on the
planet and climate patterns and found that Crutzen was
not just speaking in metaphors, he was speaking in rigor-
ous, geologic terminology: we’ve entered a new era where
Earth processes have fundamentally changed.


The Earth’s processes have changed in several ways of
crucial note for us. First, there are nearly 7 billion people
on earth now and, remember, that is 10 times the number
that lived when Malthus wrote ‘The principles of Popul’ in
1798. There are 7 billion of us that are demanding so much
food and land use that human beings are now appropri-
ating almost half of all the photosynthesis occurring on
the planet for ‘primary productivity’, as it’s called. We’re
doing that in our croplands and in our pasturelands. And
these calculations are also including the photosynthesis
lost by previously vegetated land that is now under the


asphalt of our cities. That’s extraordinary—we’re taking
about half, maybe 40-50 per cent—of the primary food
production on the planet for one species. You can be sure
what that means. That means the mass death of other
species, because we are appropriating what used to go for
the rest of the biosphere. That may seem like a zero-sum
struggle, but it’s a negative-sum struggle because we are
now pushing so hard on the food supply that we are lead-
ing to the extinction or dramatic population decline of
the very plants and animals that we depend on for our
survival. The pollinators: disappearing; whole classes of
amphibians: disappearing; fisheries around the world:
disappearing. It is absolutely extraordinary.


We’re also fundamentally interfering in the hydrologic cy-
cle, the earth’s watercycle, because we’ve built about 60,000
major dams on the rivers around the world. I can’t even
imagine these numbers—how can there be 60,000 dams?
But that’s the count, I’m just referring here to what I read,
because I can’t really, viscerally, accept that. But what I do
know is that many of our major rivers no longer flow to
the sea. And you know it too. Major river ways are drying
up well before they reach the sea: the Ganges, the Yel-
low River—even the Rio Grande is now the Rio Pequeño.
This is the effect of mass interference of human beings in
the hydrologic cycle, and there is more to come, as a very
significant part of our food supply comes from irrigated
crops. A very significant proportion of our irrigated crops
come from groundwater irrigation. A very significant part
of the groundwater irrigation is being discharged much
faster than it’s being recharged, so that the water table is
falling sharply, and we have large populations at threat
of water depletion. And when this is happening on the
North China Plain or the Indo-Gangetic Plain, or the
Ogallala Reservoir in the American Midwest, or in the
Andes, there are no easy answers. There are short-term
answers which are lousy.


This same story is true with our glaciers. The glaciers, you
know, are pulling back. Snow melt, which is a buffer for
seasonable river flow in the spring and summer, and pro-
vides the summertime irrigation for our food system, is
coming earlier and earlier. Some snow melt never turns
to snow anymore because of the warming and that means
you get winter run-off of the water rather than spring and
summer run-off. This means that the water is going before
the crops can begin to develop. The glaciers, of course, are
going to disappear entirely in many or most places, and


...our biggest challenge
is not exactly what we know,


but how we act


Road to Rio(7)+20.indd 14 2/10/11 1:52:15 AM




5


right, it will be too late. We don’t know how to turn that
off, that’s for sure, once it’s turned on. All of this is to say
that the age of the Anthropocene is real and is upon us.


Now if that were not enough, ladies and gentlemen, I’m
going to add on another layer. That would be true even
if we stopped what we are doing right now, even if there
was no more economic growth. Of course, it is one of
the key objectives of the world, to continue economic
growth. And this is perfectly understandable—I work
round the clock trying to promote economic growth in
poor countries. That’s a very worthy thing to do and is
extremely important, especially important for the poor
populations of the world. There is absolutely no shred
of legitimacy to saying, “Sorry, stop, we’ve filled up on
economic growth. No more.” There’s a lot more growth
coming. One of the pieces of good news is that many
parts of the world have unlocked the mobilization of sci-
ence and technology for rapid growth.


China’s economic growth is the fastest in history. We
should all admire its phenomenal successes: 10 per cent
growth per year for 30 years. That means a doubling ev-
ery seven years of the size of the economy. Absolutely
phenomenal. It’s led to a dramatic drop of poverty. It’s the
kind of development we want to see happen. But think
of the challenge of sustainability in a context not only in
a world already unsustainable, but where growth is go-
ing to continue in the developing countries and it will
continue because the essence of growth is mobilizing sci-
ence and technology to meet human wants and needs,
and that is now the providence of much of the world.
Not everyone has availed of these levels of growth, not
the countries stuck in a poverty trap. And that means we
can expect more growth ahead— just what we want.


that represents the water supply for hundreds of millions
of people in the Andes, in the American Northwest, and
on the Himalayan Tibetan Plateau, for example. What
are we doing about it? Nothing right now.


I have not touched upon the biggest challenge of all—
and that, of course, is climate change and the greenhouse
gases. Everything I’ve already mentioned would be prob-
lematic enough without the added impact of climate
change. The water crisis and the dams and the zoonotic
diseases and so forth have their own dynamics, as does
the food supply and the land clearing, but add on top of
that the climate change that’s underway, and not just the
climate change, but the other effects of the greenhouse
gases.


When you don’t like your climate anymore, it’s too late.
When your beautiful homeland is not inhabitable any-
more, it’s too late. Because the carbon dioxide remains in
the air for centuries and because anything you see now
—the storms, droughts, weather variability, disappear-
ance of the short rains as is happening over the Sahel—
all of this will continue even if we were to stop at zero
new emissions now.


The effects of climate change will be pervasive—they
already are. It will mean more droughts, more floods. It
will mean loss of irrigation water when we need it, higher
rates of evapotransportation, more intense episodes of
precipitation leading to more run-off rather than more
percolation into the soils. Higher temperatures will
mean loss of crop yields because there is temperature
stress to the crops. It will mean more extreme storms:
the typhoons in the Indian Ocean and in the China Sea
and in the Caribbean. Once we decide the ‘theory’ was


Tropical storm devastated communities
Gonaives, Haiti
3 September 2008


Road to Rio(7)+20.indd 15 2/10/11 1:52:16 AM




6


because that will be a very dangerous world. Aside from
what it will mean for the people involved, that will be a
world of conflicts. I’ve not yet seen a president or prime
minister in the rich world say, “I’ve ran the numbers and
I’m campaigning on cutting our living standards by half.”
Don’t count on it, ladies and gentlemen. This will not go
smoothly. That has not been the rallying cry in the United
States, or even in the more enlightened European Union
on these matters. Everybody wants to grow more. In fact,
nobody is campaigning on a pledge, “Let’s stay where we
are,” even—which was the basis of my calculation.


The other way is from the famous, so-called, IPAT equa-
tion.


I = P x A x T
I = impact of humans on the environment;
P = population;
A = is the level of economic activity; and
T = is a measure of technology.


I means impact of humans on the environment; P is
population; A is the level of economic activity; and T is
a measure of technology. And the famous equation says
that our human impact is equal to our population, times
output per capita, times a measure of our technological
burden on the physical environment. If you take the view
that we want A to go up—that is the per person level of
economic activity—then the only ways to do that with a
lower impact are either to slow the population growth
rate, and maybe gradually have it come down, but not in a


Let me just give a scaling, a sense of this: the rich coun-
tries average about usd 40,000 per capita, PPP, purchas-
ing power parity adjusted. The world as a whole averages
about usd 10,000 PPP, per capita. So in purchasing-power
adjusted terms, the rich world is about four times the
world average and the developing world is about usd 4,000
per capita in purchasing power adjusted terms, which
amounts to one tenth of the rich world average. Suppose
that the rich world stayed where it is right now and the
developing world caught up. What would that mean for
total output in the world? Well, that would be a factor
of 4 increase of production for today’s population—a fac-
tor of 4 —because we go from an average of usd 10,000
to an average of usd 40,000. But we’re not done yet, be-
cause the population is growing. The current trajectory
of the population will take us to about 9.2 billion people
by 2050, another 40 per cent or so. Take an increase of
40 per cent and a four-fold increase of output per capita:
it says that even if the rich world grows no more, the total
size of the world economy would experience a six-time
increase roughly.


Think about it, the paradox of our time. We are trying
to promote economic development: I’m doing it every
morning, noon and night, I can tell you—and I lose sleep
over it too—and that means we’re aiming for six times
the production of today in a world already ecologically
unsustainable. How are we going to do this? Now that’s a
good question. And that’s what I want to write about. So
what came before was all a prelude.


How can we be unsustainable today, pushing for a mas-
sive increase of output which we want, and which is going
to occur whether we want it or not because countries will
achieve economic growth? How can we possibly achieve
sustainability in this way? Well, I think the answer can
only come in a couple of ways and only one of them, in
my view, can be the dominant way. Of course, one way is
that we hit disaster one way or another so that the growth
doesn’t occur. Maybe the rich world collapses, or the poor
world stops growing, or we have global crises, but one way
or another, the world’s aspirations for major regions are
not fulfilled. I don’t want my children to be in that world


Countries The World Developing Countries


4


8


12


16


20


24


28


32


36


40


GDP per capita (PPP adjusted)
Thousands of USD


Road to Rio(7)+20.indd 16 2/10/11 1:52:18 AM




Sub-Saharan Africa


EUROPE


7


We’re working in a village in Ethiopia, for example, where,
because of fellowships brought by the UN, girls are gradu-
ating high school for the first time. I can tell you that this
is a traditional, patriarchal community. The men, the fa-
thers, could not be more proud. They’re thrilled. They’re
not keeping their daughters out of school. They’re so hap-
py that they have an opportunity now for a future. There
is no cultural obstacle, in my view. There’s a resource
obstacle. The Millennium Development Goals, which
I work on, got it wrong when it said universal primary
education. We need universal secondary education. This
is absolutely a prerequisite for a normal and productive
life in the 21st century. This would bring the fertility rates
down from 6 to 3 or under very quickly—this set of mea-
sures. Populations could begin to stabilize and this would
be an enormous benefit for the whole world, especially
for poor families, poor communities, poor countries, and
poor regions.


But now let me turn to the T, which is an even bigger and
more complex challenge: the technology. It must be the
fundamental role and goal of all our policies going for-
ward to have a fundamental, technological overhaul for
global sustainability. Our current technologies—I hope
I’ve convinced you—are incompatible with our develop-
ment objectives and our ecological needs. We cannot go
on with the internal combustion engine, with the coal-
fired power plants, with the way we grow our food and eat
our food now. We cannot simply scale this up. The planet
will not accept it.


We need a fundamental, technological overhaul. That re-
quires a new kind of economy and a new kind of economic
policy because markets go some way towards technologi-
cal change, but only some way. The essence of large-scale
technological change is public-private partnerships. We
will need a new kind of economic strategy, within coun-
tries and globally, to bring about the scale of technology
change that we need in the next two to three decades to
put our planet back on to a sustainable course.


What are those technologies that are needed? Well,
broadly speaking, there are six sectors that contribute to
the challenges that I mentioned before, the challenges of
the Anthropocene. If I look at greenhouse gases, for ex-
ample, six big sectors: one is agriculture. A major contri-
butor to greenhouse gases is agriculture, something like 18
per cent of total emissions. Another sector contributing is
deforestation, also related to agriculture, 15 to 18 per cent.
There are also important contributions from buildings,
the power, transport and industrial sectors.


In general, these are all roughly the same order of mag-
nitude. Power, transport, agriculture, deforestation, are
bigger—building and industries, slightly smaller—of the
total emissions. We need new technologies in all of those
sectors.


disastrous way, because that would also violate what we’re
trying to accomplish, or you need a change, fundamen-
tally, of our technological systems. I would recommend
two things: I’m going to mention one quickly, and then
I’m going to come to the second one.


One thing I would recommend is that we re-double our
efforts to stabilize the human population. I believe every
country should take the responsibility, where populations
are growing quickly, to bring them under control through
voluntary reductions of fertility. Africa cannot go on
with total fertility rates of five children, or six children,
or seven children, per woman in the countryside which is
the level that now persists in much of rural Africa. These
places are bursting at the seams. And you know that the
U.N. forecast for sub-Saharan Africa’s population is that
it will grow from 800 million now to 1.8 billion by 2050,
in a place already under profound ecological stress and
extreme poverty. I believe that, if it occurs, it cannot be
consistent with the kind of economic development Africa
longs for. I believe that African’s economic development
requires leadership to reduce the fertility rates voluntarily
and significantly and rapidly.


How can that be done? There are basically three aspects
to that, very briefly. One is to make sure that all children
survive because, when parents see that their children are
surviving, they’re ready to have fewer children. They don’t
have to have so many children as an insurance policy
against child mortality. When they know that their chil-
dren will survive, they’ll cut the family size voluntarily.
Second, make sure family planning and contraception is
available to all for free. Poor people cannot afford contra-
ceptives and family planning. You charge for it, it will not
reach the poor, who are the one’s having the most having
children. And third, empower girls and women to make
their choices. And the single most important thing of all is
to enable young girls to stay in school and not get married
at age 12. We must ensure girls finish primary school, and
then secondary school.


World population
Billions


0.3


0.6


0.9


1.2


1.5


1.8


Su
b-


Sa
ha


ra
n A


fri
ca


Su
b-


Sa
ha


ra
n A


fri
ca


Eu
ro


pe


Eu
ro


pe


AFRICA


2 0 1 0 2 0 5 0


Road to Rio(7)+20.indd 17 2/10/11 1:52:19 AM




8


Let me talk briefly about a couple of them: the power
sector, for example. Of course, we need different ways to
produce electricity. There are three big categories. One is
renewables: wind, solar, geothermal. I’m not a big fan of
biomass because we don’t have the land area for it. Bio-
mass competes too much with biodiversity and with food
supplies. In big categories, I would say wind and solar;
geothermal is a niche. Nuclear power is an important area,
and dozens of countries will certainly use that as well, and
we need to find ways to ensure that it’s used safely.


The other big category is carbon capture and sequestra-
tion: the ability to use fossil fuels safely by collecting the
carbon dioxide that’s released from their combustion and
putting it safely in geologic storage. I want to make a point
about all three of those possibilities: the renewables, the
nuclear and the carbon capture. The point is the decisions
to use those methods are not commercial decisions alone,
those are societal decisions. Those methods are not some-
thing markets choose. Those methods represent areas
where markets and society have to make choices together.
We need regulatory systems; we need research and devel-
opment; we need public awareness and education. This is
not simply about markets. We need cooperation to bring
about major change.


We can put a man on the moon and bring him back to
earth, but we’re not able, societally, to build a power plant
anymore. That, by the way, technically, is called pathetic.
And it’s frightening. But Europe and China and India are
not doing much better in this. We’re wasting our time. As
if we can write papers and give speeches like the one I’m
giving, and that somehow solves the problem. It doesn’t.
We don’t have in the whole world one coal-fired power
plant that captures and sequesters its carbon dioxide,
even though the engineers and scientists have been tell-
ing us for more than a decade, “You’ve got to try this, if
you want to use your coal.”


Let me say to all the coal-burning countries: try it. You’ve
got to try it. Urgently. First, if you get there first, you can
sell the units to others. I expect we’ll be using China’s car-
bon capture and storage technology all over the world
soon. Great. Somebody take the lead. We can’t go on more
years like this not even building one plant.


I was at General Motors a few days ago, visiting the won-
derful engineering team that is making the new plug-in
hybrid, Chevy Volt. It is fantastic what our cars of the
future could be like. The Chevy Volt could get 230 miles
per gallon—that’s 10 times what we’re getting right now.
That’s possible, within reach, but it requires partnership
in the U.S. that doesn’t yet exist. The partnership would
be between the auto industries, the power grid, the power
generators, the regulators. It requires subsidies for con-
sumers for the uptake of the early stage of this technology,
and we don’t have this yet. What we have is a great idea
and some prototypes. And we don’t yet have a country-
wide strategy to bring this about.


So this is another example. I could go on and on. But the
fact of the matter is that we have lots of options. They’re
powerful options. I have an institute filled with hundreds
of marvellous engineers and scientists, filled with great
ideas—many of them already at trial stage, some at dem-
onstration stage, some commercializable—but we don’t
have a framework globally of what to do. And none of
this, by its nature, can be done by markets alone.


You could put a price on carbon—which we should—to
incentivize non-carbon energy sources. I want to point
out that a simple tax wouldn’t be enough to solve the
problems of large-scale technological change. You need
research, development, demonstration, regulation, public
knowledge, public acceptability, testing, monitoring. It’s a
system approach. And, inherently, the initial investments
in any new technology are public goods, not private goods.
They don’t give a return to those making the investment.
No private company can develop these technologies on
their own profitably. They need public partners.


And even with a tax it’s not enough because the first mov-
ers are going to lose. They won’t get property rights, they’ll
get a lot of learning that will be available for everybody. So
my point is: large-scale technological systems change re-
quires some clever policies on research and development,
and demonstration, and regulation, and promotion, feed-
in tariffs, subsidies for consumers, first-mover advantages,
plus a proper pricing of the externality of greenhouse gas
emissions. All of those things, and over time, there are
so many wonderful things we can do to change the way


%


%


18


16


Major contributors to greenhouse gases are:


Agriculture


Deforestation


Road to Rio(7)+20.indd 18 2/10/11 1:52:20 AM




9


we build our homes, the cars we drive, the way we power
our cities and our economies that can solve these prob-
lems. We can reduce the ‘T’ in the IPAT equation. We can
achieve economic growth at a much lower impact on the
planet if we think clearly, systematically, in systems terms,
with a new kind of market and government approach.
Public-private partnerships can be targeted to achieve
shared global goals. That’s what we need to do in the age
of sustainable development.


Finally, where are we on this? We are not where we need
to be. The way we structure the global negotiations is not
right. Climate change is not a poker game where you hold
your cards close to the vest and you bargain with others.
That’s how we’re viewing the climate negotiations. Don’t
reveal your hand, don’t say your position because it’s
viewed as a negotiation. If there is a model for it, it is trade
negotiations.


That’s the model people have in their heads. That’s the
wrong model for this problem.


The climate change problem is not a trade negotiation in
any way. The climate change problem is simply the most
complex engineering, economic and social problem that
humanity has ever had to face together. And so we are well
before the stage of negotiating; we should be at the stage
of joint problem-solving. All cards should be on the table.
And we should be discussing, “What can we do?” The U.S.
should be saying, “Well, here’s how fast we think a plug-in
hybrid can be introduced. Here’s what we think we can
do on nuclear power. Here’s what we think we can do in
tapping solar power from the Mojave.” Europe should be
saying, “Well, we have the Desertec project to link solar
and North Africa with Europe’s energy needs. It’s usd 400
billion. We’re thinking of making that investment. And if
the new technologies for electric vehicles come along, we
could do that the following in our timetable.” And China
could say, “We are a coal-burning economy. 80 per cent
of our electricity comes from coal. More than 50 per cent
of all our primary energy needs come from coal, so we’re
ready to take the lead in testing carbon capture seques-
tration and we’re going to put four plants around to see
about our geologic capacity to capture our CO2.”


Then we’d start getting somewhere rather than having
only diplomats around the table. We need engineers
around the table; we need scientists around the table; we
need hydrologists around the table. I’d even allow one or
two economists around the table, to try to ask how much
it might cost for different options. But I frankly don’t un-
derstand doing this, holding up the cards as if this were
a poker game. It’s too complicated. This is a poker game
where the people holding the cards don’t even understand
the rules of the game. How can they? It’s too complicated.
We need to put the cards down and have a new kind of
process.


I’ve wanted all this time that the secretariat of the U.N.
Framework Convention on Climate Change have a stand-
ing, a technical one. That is spilling out options, doing
costing, asking what Tunisia could do, what’s the option
for this one, is Desertec a good idea, what is plausible for
the next five years in such-and such country? To my mind,
by the way, in that context, the issue of whether a na-
tional goal is binding or not is one of the least interesting
questions. First of all, what’s binding if you can’t achieve
it? So, if we don’t know what’s achievable, what’s all the
talk about legally binding? It’s silly. We constantly agree
to things that aren’t achievable and aren’t achieved. We
should be talking about, not the debate of what’s binding
and what isn’t binding, but what can we do. What can we
do now, what can we do in five years, what can we do in
ten years, how can we get this moving? Once we analyze
those options, then we can talk about how to share the
costs too. Because there’s no doubt that the rich world
must fund a significant part of the incremental costs of
this effort. Absolutely no doubt about it.


But we’re debating hypotheticals right now, not practicali-
ties. We’re debating concepts that barely have a real-life
counterpart right now. Because what are these plans the
way they are right now? They’re not based on real, tech-
nological possibilities. They’re not based on brainstorm-
ing, sharing technologies, creating global platforms for
electric vehicles or carbon capture sequestration and the
like.


So I keep saying, though not to much effect, that we
don’t need global negotiations right now, we need global
brainstorming and global problem-solving. We need to
get the world’s minds together to solve these problems.
That’s a quite different exercise. Later on we’ll figure out
how to allocate the costs, once we know what we’re do-
ing. But we’re not even at the point of really knowing
what we’re doing yet. We could be there, but we’re not
there.


Finally, let me say that we’ve got to get there fast, for all the
reasons that I mentioned. Our sustainability depends on
it. The current recovery of the world economy, which is so
fragile, depends on robust investment in the future. But
if you’re an American business, you can’t invest robustly


Road to Rio(7)+20.indd 19 2/10/11 1:52:21 AM




10


right now if you don’t know what the rules of the game
are. What kind of power plant can you build? What’s the
cost of energy going to be? What should the auto compa-
nies do? How should infrastructure be built?


It all depends on our strategy. We need a strategy. We ac-
tually need a plan. Not a rigid, central plan, but a plan, an
indicative plan. We need a public investment profile and
a timetable. And without that, we won’t get the robust in-
vestments that we need to sustain even the macro-econ-
omy. We certainly won’t be able to solve the problems of
the poorest of the poor. We need to decide to help Africa
build an energy system from the ground up. Now Africa
has more solar power than any other part of the world. It
could provide all of the world’s electricity needs were the
cables long enough from a little square in the Sahara Des-
ert. And we need to help Africa accomplish that because
still 90 per cent, or more of the villages in Africa, I would
guess, don’t even have electricity. And I’ll tell you, if there’s
one rule of development that I can assure you, it’s that


there is no development without electricity. We need to
get on with electrification to ensure social stability.


And finally, we need to get on with it for the sake of eco-
logical stability. And for that, I mean our children’s future,
because what we’re doing is reckless right now. I’m always
reminded in this regard when people ask me, “Well, could
we ever agree to these things; could we ever really reach
a consensus?” I’m always reminded of the words of John
F. Kennedy, in what I regard as the greatest speech of
an American president in modern times, which was his
speech on peace at American University in June 1963. He
said, “Let us not be blind to our differences, but let us di-
rect attention to our common interests and to the means
by which those differences can be resolved. And if we can-
not end now our differences, at least we can help make the
world safe for diversity. For in the final analysis, our most
basic common link is that we all inhabit this small planet.
We all breathe the same air. We all cherish our children’s
future. And we are all mortal.”


Two young boys in a fishing village
Bahia, Brasil
1 April 1975


Jeffrey Sachs
Director of the Earth Institute, Quetelet Professor of Sustainable Development and Professor of Health Policy and
Management at Columbia University, United States and Special Advisor to United Nations Secretary-General Ban Ki-moon.
This text is adapted from the 14th Raúl Prebisch Lecture delivered at UNCTAD in Geneva, Switzerland on 15 September 2009.


AuthorTHE


Road to Rio(7)+20.indd 20 2/10/11 1:52:23 AM




Wsteady-state economy is
incompatible with continuous
growth—either positive or
negative growth.


A
The goal of a steady state is to sustain a constant, suf-
ficient stock of real wealth and people for a long time. A
downward spiral of negative growth is a failed growth
economy, not a steady-state economy. Halting an ac-
celerating downward spiral is necessary, but is not the
same thing as resuming continuous positive growth.
The growth economy now fails in two ways: (1) positive
growth becomes uneconomic in our full-world econo-
my; (2) negative growth, resulting from the bursting of
financial bubbles inflated beyond physical limits, though
temporarily necessary, soon becomes self-destructive.
That leaves a non-growing or steady-state economy as
the only long run alternative.


The level of physical wealth that the biosphere can sustain
in a steady state may well be below the present level. The
fact that recent efforts at growth have resulted mainly
in bubbles suggests that this is so. Nevertheless, current
policies all aim for the full re-establishment of the growth
economy. No one denies that our problems would be
easier to solve if we were richer. The question is, does
growth any longer make us richer, or is it now making
us poorer?


I will spend a few more minutes cursing the darkness of
growth, but will then try to light a few little candles along
the path to a steady state. Some advise me to forget the
darkness and focus on the policy candles. But I find that
without a dark background the light of my little candles
is not visible.


We have many problems, poverty, unemployment, envi-
ronmental destruction, budget deficit, trade deficit, bail-
outs, bankruptcy, foreclosures, etc., but apparently only
one solution: economic growth, or as the pundits now
like to say, “to grow the economy”.


But let us stop right there and ask two questions.


First, there is a deep theorem in mathematics that says
when something grows it gets bigger! So, when the econ-
omy grows it too gets bigger. How big can the economy
be? How big is it now? How big should it be? And most
pointedly, what makes anyone think that growth (i.e.
physical expansion of the economic subsystem into the
finite containing biosphere) is not already increasing
environmental and social costs faster than production
benefits, thereby becoming uneconomic growth, making
us poorer, not richer? After all, real GDP, the measure
of “economic” growth so-called, does not separate costs
from benefits, but conflates them as “economic” activity.
How would we know when growth became uneconomic?
Remedial and defensive activity becomes ever greater as
we grow from an “empty-world” to a “full-world” economy,
characterized by congestion, interference, displacement,
depletion and pollution. The defensive expenditures
induced by these negatives are all added to GDP, not
subtracted.


We must recognize that many developing countries are
still in the phase of truly economic growth—the marginal
benefits of growth are still greater than the marginal
costs. Yet the world as a whole is “full”. Therefore the duty
of limiting growth, and the policies discussed below, ap-
ply first to the richer countries where in fact growth has
become uneconomic. The rich must free up ecological
space for the poor to grow into, leading to a process of


Herman Daly


From a failed growth economy
to a steady-state economy


Herman Daly postulates the absurdity of infinite economic growth in a finite biosphere, arguing that there will always be a point
where marginal costs exceed marginal benefits, i.e. there will be a point of uneconomic growth, as recent economic bubbles
have amply demonstrated. In its place, he outlines the characteristics of a steady-state economy, with quantitative growth limited
to ensure qualitative development through a variety of policy measures he advances, within the assimilative and regenerative
capacities of the ecosystem.


11


Road to Rio(7)+20.indd 21 2/10/11 1:52:23 AM




convergence to a common level of resource use that is
sufficient for a good (not luxurious) life and sustainable
for a long (not infinite) future. Some worry that slow-
ing growth in rich countries will hurt poor countries by
reducing their export markets. That just means that de-
veloping countries will have to shift from the export-led
model back toward the import-substitution model, devel-
oping their own internal markets.


Second question: is it possible to see growth as a continu-
ing process, desirable in itself —or as a temporary process
required to reach a sufficient level of wealth which would
thereafter be maintained more or less in a steady state?
Most of modern economic policy discussion revolves
around the growth forever view. We have to go back to
John Stuart Mill and the earlier Classical Economists to
find serious treatment of the idea of a non-growing econ-
omy, the Stationary State.


Here are some reasons to think that the Classical Econo-
mists are right. A long run norm of continuous growth
could make sense only if one, of the three following con-
ditions were true:


if the economy were not an open subsystem of
a finite and non-growing biophysical system,


if the economy were growing in a non physical
dimension, or


if the laws of thermodynamics did not hold.


Let us consider each of these three logical alternatives
(if you can think of a fourth one let me know).


(a) Many in fact think of nature as the set of extractive
subsectors of the economy (forests, fisheries, mines,
wells, pastures, agriculture, etc.). The economy, not the
ecosystem or biosphere, is seen as the whole; nature is
a collection of parts. If the economy is the whole then
it is not a part of any larger thing or system that might
restrain its expansion. If some extractive natural subsec-
tor gets scarce we will just substitute other sectors for
it and growth of the whole economy will continue, not
into any restraining biospheric envelope, but into side-
real space presumably full of resource-bearing asteroids


and friendly highly-evolved aliens eager to teach us how
to grow forever into their territory. Sources and sinks are
considered infinite.


(b) Some say that what is growing in economic growth
is value, and value is not reducible to physical units. The
latter is true of course, but that does not mean that value
is independent of physics! After all, value is price times
quantity, and quantity is always basically physical. Even
services are always the service of something or somebody
for some time period, and people who render services
have to eat. The value unit of GDP is not dollars, but
dollar’s worth. A dollar’s worth of gasoline is a physical
amount, currently about half a gallon. The aggregation
of the dollar’s worth amounts of many different physical
commodities (GDP) does not abolish the physicality of
the measure even though the aggregate can no longer be
expressed in physical units. True, $/q x q = $. But the fact
that q cancels out mathematically does not mean that the
aggregate measure, “dollars’ worth”, is just a pile of dol-
lars. And it doesn’t help to speak instead of “value added”
(by labour and capital) because we must ask, to what is
the value added? And the answer is natural resources,
low-entropy matter/energy—not fairy dust or frog’s hair!
Development (squeezing more welfare from the same
throughput of resources) is a good thing. Growth (push-
ing more resources through a physically larger economy)
is the problem. Limiting quantitative growth is the way to
force qualitative development.


(c) If resources could be created out of nothing, and wastes
could be annihilated into nothing, then we could have an
ever-growing resource throughput by which to fuel the
continuous growth of the economy. But the first law of
thermodynamics says NO. Or if we could just recycle
the same matter and energy through the economy faster
and faster we could keep growth going. The circular flow
diagram of all economics principles texts unfortunately
comes very close to affirming this. But the second law of
thermodynamics says NO.


So if we can’t grow our way out of all problems, then
maybe we should reconsider the logic and virtues of non-
growth, the steady-state economy. Why this refusal both
to face common sense and to reconsider the ideas of the
early Classical Economists?


C


C


C


…the duty of limiting
growth... applies first to the


richer countries where
in fact growth has become


uneconomic


Road to Rio(7)+20.indd 22 2/10/11 1:52:25 AM




I think the answer is distressingly simple. Without
growth, the only way to cure poverty is by sharing. But
redistribution is anathema. Without growth to push the
hoped for demographic transition, the only way to cure
overpopulation is by population control. A second anath-
ema. Without growth the only way to increase funds to
invest in environmental repair is by reducing current con-
sumption. Anathema number three. Three anathemas
and you are out!


And without growth how will we build up arsenals to
protect democracy (and remaining petroleum reserves)?
How will we go to Mars and Saturn and “conquer” space?
Where can technical progress come from if not from
unintended spin-offs from the military and from space
research? Gnostic techno-fantasies of colonizing outer
space, partially turning off the sun to make more room
for greenhouse gasses in the atmosphere, and of abolish-
ing disease and death itself, feed on the perpetual growth
myth of no limits. Without growth we must face the dif-
ficult religious task of finding a different god to worship.
The communist growth-god has already failed. Surely
the capitalist growth-god will not fail! Let’s jump-start
the GDP and the Dow-Jones! Let’s build another tower
of Babel with obfuscating technical terms like sub-prime
mortgage, derivative, securitized investment vehicle, col-
lateralized debt obligation, credit default swap, “toxic” as-
sets, and insider slang like the “dead cat bounce”. (If you
drop it from a high enough tower of Babel even a dead cat
will bounce enough to make some profit.)


Well, let us not do that. Let us ignore the anathemas and
instead think about what policies would be required to
move to a steady-state economy. They are a bit radical by
present standards, but not as insanely unrealistic as any of
the three alternatives for validating continuous growth,
just discussed.


Let us look briefly at a few specific policy proposals for
moving to a steady-state economy, i.e. an economy that
maintains a constant metabolic flow of resources from
depletion to pollution—an entropic throughput that is
within the assimilative and regenerative capacities of the
ecosystem.


1. Cap-auction-trade systems for basic resources. Caps
limit biophysical scale by quotas on depletion or pollu-
tion, whichever is more limiting. Auctioning the quotas
captures scarcity rents for equitable redistribution. Trade
allows efficient allocation to highest uses. This policy
has the advantage of transparency. There is a limit to the
amount and rate of depletion and pollution that the econ-
omy can be allowed to impose on the ecosystem. Caps are
quotas, to the throughput of basic resources, especially
fossil fuels. The quota usually should be applied at the
input end because depletion is more spatially concen-
trated than pollution and hence easier to monitor. Also
the higher price of basic resources will induce their more
economical use at each upstream stage of production. It
may be that the effective limit in use of a resource comes
from the pollution it causes rather than from depletion—
no matter, we indirectly limit pollution by restricting
depletion of the resource that ultimately is converted
into wastes. Limiting barrels, tons, and cubic feet of car-
bon fuels extracted per time period will limit tons of CO2
emitted per time period. This scale limit serves the goal of
biophysical sustainability. Ownership of the quotas is ini-
tially public—the government auctions them to the indi-
viduals and firms. The revenues go to the treasury and are
used to replace regressive taxes, such as the payroll tax,
and to reduce income tax on the lowest incomes. Once
purchased at auction the quotas can be freely bought and
sold by third parties, just as can the resources whose rate
of depletion they limit. The trading allows efficient allo-
cation, the auction serves just distribution, and the cap
serves the goal of sustainable scale. The same logic can be
applied to limiting the off-take from fisheries and forests.
With renewables, the quota should be set to approximate
sustainable yield. For non-renewables, sustainable rates
of absorption of resulting pollution, or the development
of renewable substitutes may provide a criterion.


2. Ecological tax reform—shift tax base from value add-
ed (labour and capital) and on to “that to which value is
added”, namely the entropic throughput of resources
extracted from nature (depletion), and returned to na-
ture (pollution). This internalizes external costs as well
as raises revenue more equitably. It prices the scarce but
previously un-priced contribution of nature. Value added
is something we want to encourage, so stop taxing it.
Depletion and pollution are things we want to discour-
age, so tax them.


13


Let us think about
what policies would be


required to move to
a steady-state economy


Caroni River in the Canaima National Park
Concentration of mining activity is damaging the quality of the water courses.
Bolivar, Venezuela


Road to Rio(7)+20.indd 23 2/10/11 1:52:27 AM




Ecological tax reform can be an alternative or a supple-
ment to cap-auction-trade systems. Value added is simul-
taneously created and distributed in the very process of
production. Therefore, economists argue that there is no
“pie” to be independently distributed according to ethi-
cal principles. As Kenneth Boulding put it, instead of a
pie, there are only a lot of little “tarts” consisting of the
value added by different people or different countries,
and blindly aggregated by statisticians into an abstract
“pie” that doesn’t really exist as an undivided totality. If
one wants to redistribute this imaginary “pie”, one should
appeal to the generosity of those who baked larger tarts to
share with those who baked smaller tarts, not to some in-
vidious notion of equal participation in a fictitious com-
mon inheritance. I have considerable sympathy with this
view, as far as it goes. But it leaves out something very
important.


In our one-eyed focus on value added, we economists
have neglected “that to which value is added”, namely the
flow of resources and services from nature. “Value added”
by labour and capital has to be added to something, and
the quality and quantity of that something is important.
Now, there is a real and important sense in which the
original contribution of nature is indeed a “pie”, a pre-
existing, undivided totality that we all share as an inheri-
tance. It is not an aggregation of little tarts that we each
baked ourselves. Rather it is the seed, soil, sunlight, and
rain (not to mention the gene pools and suitable climate)
from which the wheat and apples grew that we converted
into tarts by our labour and capital. The claim for equal
access to nature’s gifts is not the invidious coveting of
what our neighbour accumulated by her own labour and
abstinence. The focus of our demands for income to re-
distribute to the poor, therefore, should be on the value
of the contribution of nature, the original value of that to
which further value is added by labour and capital.


3. Limit the range of inequality in income distribution—
a minimum income and a maximum income. Without
aggregate growth, poverty reduction requires redistribu-
tion. Complete equality is unfair; unlimited inequality
is unfair. Seek fair limits to the range of inequality. The
U.S. civil service, the military, and the university manage
with a range of inequality of a factor of 15 or 20. Corpo-
rate America has a range of 500 or more. Many industrial


nations are below 25. Could we not limit the range to, say,
100, and see how it works? People who have reached the
limit could either work for nothing at the margin if they
enjoy their work, or devote their extra time to hobbies
or public service. The demand left unmet by those at the
top will be filled by those who are below the maximum.
A sense of community necessary for democracy is hard
to maintain across the vast income differences current in
the U.S. Rich and poor separated by a factor of 500 be-
come almost different species. The main justification for
such differences has been that they stimulate growth,
which will one day make everyone rich. This may have
had superficial plausibility in an empty world, but in our
full world it is a fairy tale. I have advocated a maximum
income as well as a minimum income for a long time. The
idea has been very unpopular, but thanks to the banksters
and their bonuses it is now becoming more popular.


4. Free up the length of the working day, week, and
year—allow greater option for part-time or personal work.
Full-time external employment for all is hard to provide
without growth. Other industrial countries have much
longer vacations and maternity leaves than the U.S. For
the Classical Economists the length of the working day
was a key variable by which the worker (self-employed
yeoman or artisan) balanced the marginal disutility of
labour with the marginal utility of income and of leisure
so as to maximize enjoyment of life. Under industrial-
ism the length of the working day became a parameter
rather than a variable (and for Karl Marx was the key de-
terminant of the rate of exploitation). We need to make
it more of a variable subject to choice by the worker. Mil-
ton Friedman wanted “Freedom to Choose”—OK, here is
an important choice most of us are not allowed to make!
And we should stop biasing the labour–leisure choice by
advertising to stimulate more consumption and more la-
bour to pay for it. Advertising should no longer be treated
as a tax-deductible ordinary expense of production.


5. Re-regulate international commerce. Adopt compen-
sating tariffs to protect, not inefficient firms, but efficient
national policies of cost internalization from standards-
lowering competition. This “new protectionism” is very
different from the “old protectionism” that was designed
to protect a truly inefficient domestic firm from a more
efficient foreign firm. We cannot integrate with the global


A non-growing or
steady-state


economy is the only
long run alternative


Road to Rio(7)+20.indd 24 2/10/11 1:52:32 AM




economy and at the same time have higher wages, envi-
ronmental standards, and social safety nets than the rest
of the world.


6. Stop treating the scarce as if it were non-scarce, but
also stop treating the non-scarce as if it were scarce. En-
close the remaining commons of rival natural capital (e.g.
atmosphere, electromagnetic spectrum, public lands)
in public trusts, and price it by a cap-auction trade sys-
tem, or by taxes, while freeing from private enclosure
and prices the non-rival commonwealth of knowledge
and information. Knowledge, unlike throughput, is not
divided in the sharing, but multiplied. Once knowledge
exists, the opportunity cost of sharing it is zero and its
allocative price should be zero. International develop-
ment aid should more and more take the form of freely
and actively shared knowledge, along with small grants,
and less and less the form of large interest-bearing loans.
Sharing knowledge costs little, does not create un-repay-
able debts, and it increases the productivity of the truly
rival and scarce factors of production. Existing knowl-
edge is the most important input to the production of
new knowledge, and keeping it artificially scarce and ex-
pensive is perverse. Patent monopolies (aka “intellectual
property rights”) should be given for fewer “inventions”,
and for fewer years. Costs of production of new knowl-
edge should, more and more, be publicly financed and
then the knowledge freely shared.


7. Stabilize population. Work toward a balance in which
births equals deaths. This is controversial and difficult,
but as a start contraception should be made available for
voluntary use everywhere. We should support voluntary
family planning, democratically enacted.


8. Reform national accounts—separate GDP into a cost
account and a benefits account. Compare them at the
margin, stop throughput growth when marginal costs
equal marginal benefits. In addition to this objective ap-
proach, recognize the importance of the subjective studies
that show that, beyond a threshold, further GDP growth
does not increase self-evaluated happiness. Beyond a
level already reached in many countries, GDP growth
delivers no more happiness, but continues to generate
depletion and pollution. At a minimum we must not just
assume that GDP growth is “economic growth”, but prove
it. And start by trying to refute the mountain of contrary
evidence.


While these policies will appear radical to many, it is
worth remembering that they are amenable to gradual
application. The range of distribution can be restricted
gradually, caps can be adjusted gradually, etc. Also these
measures are based on the conservative institutions of
private property and decentralized market allocation.
They simply recognize that private property loses its le-
gitimacy if too unequally distributed, and that markets
lose their legitimacy if prices do not tell the whole truth
about opportunity costs. In addition, the macro-economy
becomes an absurdity if its scale is structurally required
to grow beyond the biophysical limits of the Earth. And
well before reaching that radical physical limit, we are
encountering the conservative economic limit in which
extra costs of growth become greater than the extra ben-
efits, ushering in the era of uneconomic growth, so far
unrecognized.


15


Herman Daly
Herman Daly is an Ecological Economist and Professor Emeritus at the School of Public Policy of University of Maryland,
College Park in the United States. He was Senior Economist in the Environment Department of the World Bank, where he helped
to develop policy guidelines related to sustainable development.


AuthorTHE


Road to Rio(7)+20.indd 25 2/10/11 1:52:33 AM




Captain Planet communicated that concerted
local action can have global impact and people


have the power to change the world


16


Ted Turner and Captain Planet
Photo: Joe Kohen/WireImage, April 24, 2008
The New York Post and LIFE magazine


1989


Road to Rio(7)+20.indd 26 2/10/11 1:52:35 AM




A two-part Captain Planet episode raised awareness about
the United Nations Global Summit on Environment
and Development in Rio de Janeiro in 1992. Watching an
episode in Colombia early in 1992, it was easy to appreciate
the message and the innovation behind Captain Planet’s
approach. Captain Planet communicated that concerted
local action can have global impact and people have the
power to change the world. Captain Planet imaginatively
demonstrated the “think locally, act globally” message of
the Rio Earth Summit. It was an entertaining and inspir-
ing message. Now, a decade into the new millennium and
two decades after adopting a global action plan to address
environmental challenges and sustainable development,
it is worth taking stock of what has been achieved and
where work still needs to be done.


Early in the 1970s, the United
Nations began an effort to as-
sess global trends –charting what
was happening globally in terms
of population growth, resource
availability, food security and
urbanization. These discussions
promptedPresidentJimmyCarter
to direct the Council on Envi-
ronmental Quality and the De-
partment of State to organize


an assessment, Global 2000 – a study that foreshadowed
many of the emerging challenges we are now facing. This
work and similar studies set the stage for a new level of
international attention to environment and resource
challenges.


Twenty years before the Rio Earth Summit, the first
United Nations Conference on the Human Environment
convened in Stockholm in 1972 dramatically accelerated
international environmental cooperation. By the end of
that year, the international community had established
the United Nations Environment Programme (UNEP)
with new monitoring and reporting mandates.1 And,
with more information on environmental and conserva-
tion challenges, the world proceeded to adopt a variety of
new international agreements: the World Heritage Con-
vention; the Ramsar Convention to Protect Wetlands;
the Convention on International Trade in Endangered
Species of Wild Fauna and Flora; the Basel Convention
on the Control of Transboundary Movements of Hazard-
ous Wastes and Their Disposal and, in 1985, the Vienna Con-
vention for the Protection of the Ozone Layer.2


Clearly, the adoption of the Vienna Convention for the
Protection of the Ozone Layer signalled a watershed in
that it mandated more observation, reporting and analy-
sis of the status of the ozone layer –a gaseous belt that
protects life on earth. It also committed states to “take ap-
propriate measures” if a threat was conclusively identified.
Scientists throughout the world had started to recognize
a change in the ozone layer– and work was actively under-
way to identify the cause or causes.3 Prior to the Vienna
Convention, member states were encouraged to take na-
tional action to protect the environment. Vienna started
to envision “collective action” based on an international
agreement that would address planetary scale problems.


17


n 1989, CNN founder Ted Turner
developed Captain Planet,
a cartoon series that both
entertained children and taught
them about environmental
responsibility.


Melinda Kimble


Moving the Rio Agenda:
re-engagement
and re-commitment?


Melinda Kimble looks back to the beginnings of international cooperation on the environment from the 1972 founding of UNEP to the
early achievements of collective action such as the Montreal Protocol on Substances that Deplete the Ozone Layer, which, despite its
naysayers and detractors, proved to be a milestone. She notes a political backlash in the United States in the wake of the 1992 United
Nations Conference on Environment and Development (UNCED) in Rio from concerns over environmental costs and related industry
competitiveness, which has seriously hampered international efforts to reach environmental consensus. She calls for new ideas and
advocacy in the lead-up to Rio 2012.


Road to Rio(7)+20.indd 27 2/10/11 1:52:38 AM




Within months of concluding the Vienna treaty, scientists
in the United Kingdom and the United States confirmed
that the ozone hole over Antarctica was expanding, and
studies pointed directly to the use of chlorofluorocarbons
(CFCs) as the primary culprit. More tests and debate en-
sued. Industry initially questioned the scientific analyses,
but several industrial countries pursued a precautionary
approach and started banning use of CFCs in aerosol
sprays and as refrigerants. A small number of states, led
by the Nordic countries and the United States, joined to-
gether to act as prescribed by the Convention to reduce
and eliminate ozone-depleting substances. These actions,
in collaboration with UNEP and its director, Mostafa
Tolba, led to the negotiation of the Montreal Protocol to
Reduce and Eliminate Ozone Depleting Substances. The
Montreal Protocol was negotiated and opened for signa-
ture in 1987.4


The Montreal Protocol contained features that encour-
aged the relatively young international environmental
movement that it had a formula to meet global envi-
ronmental threats. The Protocol had clear targets and
timetables for elimination of gases; a regular monitoring
and reporting mechanism; a grace period for developing
countries; and a fund to help developing countries build
capacity and eliminate key substances. U.N. Secretary-
General Kofi Annan noted that “perhaps the single most
successful international agreement to date has been the
Montreal Protocol”. 5


In the United States, however, some had a different
view of the agreement. The “common but differentiated
responsibilities” approach of the Protocol –exempting
developing countries from comparable actions in the
same timeframe as developed countries and requiring
developed countries to pay for developing countries’
actions– raised many concerns in the U.S. Congress. The
most important was imposing a requirement on U.S.
companies that was seen to raise costs, while permitting
developing countries to continue to produce banned
substances and displace U.S. firms.6 Yet, the Montreal
result seemed to underscore that we could cooperate to
manage the “global commons.” The Montreal experience
had targeted the chemical industry and notably a set of
produced chemicals used as refrigerants and propellants.


This success, and the progress made on a range of envi-
ronmental agreements, emboldened the international
environmental community to call for more scientific
cooperation on climate change. In response, UNEP and
the World Meteorological Organization, with the sup-
port of both UK Prime Minister Margaret Thatcher and


U.S. President Ronald Reagan, established a new inter-
national scientific panel –the Intergovernmental Panel
on Climate Change in 1987– to ensure research findings
were examined in a broader context.


All this activity led to a more focused discussion of other
trends and an agreement at the General Assembly in 1989
to prepare for an international conference that would ex-
amine the challenges of environment and development.
This meeting –the United Nations Conference on En-
vironment and Development– was designed to formu-
late a course of action to address the complexities of the
changing world. Among the issues were climate change,
species loss, desertification and deforestation. At anoth-
er level the U.N. also committed to examine population
growth and urbanization. This effort was a huge under-
taking and the U.N. asked the first Executive Director
of UNEP, Maurice Strong, to lead it. Maurice Strong, a
former businessman, environmentalist and government
official, recognized he needed to increase public aware-
ness of the issues. He reached out to the private sector,
encouraging the creation of the World Business Council
on Sustainable Development and discussions with his
friend, media mogul Ted Turner, resulted in Turner in-
tensifying his coverage of U.N. issues –and a decision to
create the Captain Planet cartoon series– as one of many
awareness-raising efforts.


The problem of global climate change was clearly more
extensive and intensive than any challenge the world had
previously addressed. And in light of its experience with
the Montreal Protocol, the United States, under the new
George H.W. Bush administration, was determined to
shape the international approach to the challenge. The
U.S. successfully sponsored a UNGA resolution and invit-
ed negotiators to Chantilly, Virginia, in 1989 to begin ne-
gotiating a “Framework Convention on Climate Change”.
with the goal of completing the negotiation before the
United Nations Conference on Environment and Devel-
opment (UNCED) convened in 1992.


The United Nations Conference on Environment and
Development – also known as the Earth Summit or Rio
Conference – sought to catalyze and integrate actions in
social, environmental, and economic spheres to achieve
sustainable development. Agenda 21 laid out a compen-
dium of actions in many areas, including managing for-
ests, controlling chemicals, planning urban settlements,
etc. This roadmap was designed to integrate U.N. agency
work across the three spheres –economic, social, and
environmental.


18


Road to Rio(7)+20.indd 28 2/10/11 1:52:42 AM




19


World Summit on Sustainable Development
Children perform at the “South African Welcoming Ceremony” for the World Summit on Sustainable Development at Ubuntu Village, Johannesburg
24 August 2002


Road to Rio(7)+20.indd 29 2/10/11 1:52:46 AM




20


In June 1992, UNCED convened in Rio de Janeiro,
Brazil. One hundred seventy-two governments partici-
pated, with 108 participating at the level of head of State
or Government. At that point, it was the largest meeting
ever convened by the United Nations. Two thousand four
hundred representatives of NGOs also participated, and
17,000 people attended a parallel NGO Forum.


Several documents were adopted at the Rio Conference,
including the Rio Declaration, a set of 27 principles that
have found their way into domestic law in many coun-
tries, and the Statement of Forest Principles. Negotia-
tions were also completed on the Conventions on Cli-
mate Change and on Biological Diversity. Delegates also
agreed to negotiate additional multilateral environmental
agreements (MEAs): the Desertification Convention and
the Straddling Fish Stocks Agreement. The U.N. Com-
mission on Sustainable Development (CSD) was created
to track implementation of the Rio commitments.


Despite the Rio admonition of “think globally, act locally”
we actually “acted globally” to spur “local action.” How-
ever, top down solutions invariably meet resistance, and
in the U.S. there were warning signs at the national level
that environmental policy might not be as easily imple-
mented as it had been in the past. As the U.N. prepared
for the Rio Earth Summit, environmental debate in the
U.S. was focused on expanding the authority of the Clean
Air Act to reduce emissions of sulphur dioxide from coal-
fired power and manufacturing plants in the Midwest to
prevent “acid rain”, which was seriously impacting the for-
ests in the Northeast.


Up to this point, the U.S. public had broadly supported
the authority and actions of the Environmental Protec-
tion Agency (EPA) as it implemented the Clean Air and
Water Acts. The acts were expansive in their nature and
provided the EPA sweeping powers to protect the public
from health risks. Once in place, these laws ensured that
EPA could take action against practices or substances that
posed risks to human health and enforce these actions in
court. Eventually, U.S. chemical and manufacturing firms
began to raise strong objections to the discretionary pow-
er and the uncertainty posed by the EPA’s authority. The
compromise on sulphur dioxide expanded the application
of “market-based mechanisms” or “trading emission per-
mits” under a regulated limit, or “cap”. This mechanism


was seen to minimize costs to companies and ensure that
“lowest cost reductions” were taken first.


The ambitions of Rio hit the shoals of political backlash.
In the U.S., a new shift was occurring that suggested en-
vironmental policy might be less bipartisan in the future.
The Montreal Protocol was already viewed by some in
Congress as a “dangerous precedent,” and the implica-
tions in Al Gore’s popular book, Earth in the Balance, that
the world should adopt global treaties to shape domestic
U.S. law proved to be a politically sensitive idea.


To balance the perceived pro-environmental tilt of federal
policy, President George H.W. Bush also established the
Council on Competitiveness, under Vice President Dan
Quayle, and the Council took on the task of examining
existing and proposed Federal regulations through the
lens of competition; environmental regulations were on
the firing line. The prospect of a new international treaty
–even with the U.S. leading the charge– to prevent cli-
mate change and by implication dramatically restructure
U.S. energy policy, became a controversial subject.


The consolidation and expansion of the European Union
(EU) also complicated the international landscape. Dur-
ing the Montreal Protocol negotiations the U.S. chemi-
cal industry witnessed rapid loss of market share to the
EU. Many domestic corporations believed that a climate
agreement would disadvantage the U.S. vis-à-vis EU and
Asian competitors –and that developing countries would
also take advantage of regulations that imposed higher
costs on U.S. firms. Moreover, the European Union was
now integrating countries with vastly different legal sys-
tems and different approaches to policy. The EU was
adapting to an enlarging union through the harmoniza-
tion of policies and measures, negotiated in the European
Commission in Brussels and adopted by states. The evo-
lution of European policy was moving in a different direc-
tion, which would split the approach of the EU and the
U.S. on climate action. This push to integration made the
idea of “binding” global targets a plus for the European
Union, but problematic for the United States.


Despite the success of the Montreal Protocol, the U.S. has
been increasingly reluctant to ratify international envi-
ronmental agreements, limiting its engagement to the
U.N. Framework Convention on Climate Change (but


The first Executive Director of UNEP, Maurice Strong


Road to Rio(7)+20.indd 30 2/10/11 1:52:47 AM




21


not the Kyoto Protocol) and the Convention to Combat
Desertification and Land Degradation. Major chemical
treaties –e.g. the Basel Convention on Hazardous Waste
and the Stockholm Convention on Persistent Organic
Pollutants are prime examples. The U.S. caution has
clearly hampered both international action and slowed
implementation of the Rio Agenda.


Global civil society needs to rethink how to approach these
21st century sustainability challenges in the context of re-
ducing poverty and protecting the environment. It is in-
creasingly evident that we are still trying to save the planet
without establishing values for a number of environmental
goods and services through policies that strengthen both
supply and demand. If we want to advance the “Green
Economy” we will need new tools and new markets. We
also need new standards of progress to measure the accel-
eration of the transition to the Green Economy.


Underlying policies and measures that will deliver emis-
sions reductions and low-carbon growth most effec-
tively should be attractive in their own right. Four core


elements–or building blocks–of an effective response to
climate change include: energy efficiency, renewable en-
ergy, forest conservation and sustainable land use, and
adaptation. Achievable gains in the first three of these
areas could achieve up to 75 per cent of needed emis-
sions reductions in 2020 at a net savings of usd 16 billion,
based on analysis by McKinsey Global Development In-
stitute’s Project Catalyst.7 These actions, along with ad-
ditional investments in adaptation, can help developed
and developing countries alike address a variety of strate-
gic interests, including sustainable development and job
creation, energy security and energy access, food security
and improved rural livelihoods – as well as producing co-
benefits in environmental quality and public health.


More than 20 years after Captain Planet began spread-
ing his message of environmental sustainability and re-
sponsibility the world seems to need a new generation of
both ideas and advocacy. The U.N.’s decision to convene
a reprise of the Earth Summit in Rio+20 offers an oppor-
tunity to regain momentum and accelerate our work on
sustainable development.


Endnotes


1 UNGA Res. 2997, Dec. 15, 1972, established UNEP and Maurice Strong of Canada was appointed the first Executive Director.


2 List of Environmental Treaties, U.S. Dept of State.


3 UNEP Ozone secretariat, www.unep.org, discuss the Vienna Convention and the Montreal Protocol.


4 UNEP, ibid.


5 UN, International Day for the Preservation of the Ozone Layer, http://www.un.org/en/events/ozoneday/background.shtml,
accessed January 18, 2011.


6 Encyclopedia of the Earth, see Richard E. Benedick, Science, Diplomacy, and the Montreal Protocol, a summary of what ensued,
including the loss of U.S. market share after unilateral EPA decision to ban CFCs.


7 Project Catalyst, www.project-catalyst.info, accessed November 15, 2010.


Melinda Kimble
Senior Vice President and Head of the UN Foundation’s International Bioenergy and Sustainability Initiatives. Prior to this, she served as
Minister-Counsellor in the U.S. State Department Foreign Service and in the Bureau of Economic and Business Affairs overseeing multilateral
development issues and debt policy, and at the Bureau of Oceans, International Environment and Scientific Affairs (OES) leading environmental
negotiations (e.g. Climate Change Conference, Kyoto, Japan, 1997). Her assignments outside the United States include Cote d’Ivoire, Egypt


and Tunisia. She speaks French and Arabic and holds two master’s degrees: Economics (University of Denver) and MPA (Harvard’s Kennedy School of Government).


AuthorTHE


If we want to advance
the “Green Economy”
we will need new tools


and new markets


Road to Rio(7)+20.indd 31 2/10/11 1:52:47 AM




Road to Rio(7)+20.indd 32 2/10/11 1:52:52 AM




2
PART


Going green:
what’s at stake?


Are there downsides to a green economy?
The trade, investment and competitiveness
implications of unilateral green economic
pursuit
Aaron Cosbey


Reflections on the relationship between
the ‘green economy’ and sustainable
development
Chandrashekhar Dasgupta


25


33


Road to Rio(7)+20.indd 33 2/10/11 1:52:52 AM




Going green:
what’s at stake?


; ;; ;2


24


Road to Rio(7)+20.indd 34 2/10/11 1:52:55 AM




There is a wide range of measures that governments
might employ in pursuit of a green economy. Table 1
(next page) depicts measures to achieve a green economy,
surveys many of them, but not all. And it is important
to note that most of the measures described there have
many different variations—that the design of the mea-
sure makes a significant difference.


Table 1 contains a number of measures which are un-
important to the theme of this paper, since they have
insignificant effects on trade, investment and the terms
of competition. But some of them (denoted by shading)
do have particular relevance, and they will be discussed
in the remainder of this section. The aim is to predict in
each case what forms the measures might take, and assess
the significance of their potential impact.


The analysis that follows sometimes touches on the
WTO-legality of certain measures, but this is not a cen-
tral focus. Where it does so, it is usually to show that there
are remedies available to prevent abuse or that there is
international consensus that some types of policies are
unacceptable.


ssessing the potential measures in pursuit of
the green economy


Aaron Cosbey


Are there downsides to
a green economy?
The trade, investment and competitiveness
implications of unilateral green economic pursuit


In response to concerns voiced over the trade and competitiveness impact of a range of measures governments might employ in
pursuit of the ‘green economy’, Aaron Cosbey’s analysis finds the majority domestically focused, with no significant impact on imports
or exports, some with potentially positive impacts for foreign exporters and others, while not inherently negative, with possible
troubling aspects dependent on their design. A “clutch of measures” do have troubling impacts but are actually covered by WTO
disciplines, while only a few could be problematic and are not adequately covered. Interestingly, Cosbey notes that a large number of
the measures analysed do not fit the traditional mould of pitting developed against developing countries.


25


A


Road to Rio(7)+20.indd 35 2/10/11 1:52:56 AM




26


A network of laws, norms and
organizations that encourage
long-term and efficient
management and use of
resources


Laws and norms that
encourage the transfer of
technologies


Improved administrative
and technical capacity
in government and other
organizations


Improved transparency and
accountability


Effective enforcement of laws


Economic


Institutional


Route to a green
economy


Sectors where these measures
might be particularly importantRationale Measures


Information-based


Support for green sectors


Policy support for green
sectors is clear, predictable
and stable


Prices that reflect true costs
of goods and services


Increased data and analysis
about ecological conditions


Increased awareness about
sustainability challenges


Increased information about
life-cycle costs of goods and
services


A workforce equipped
with the skills needed
to take advantage
of green opportunities


The right combination of laws, incentives, agreements
and understandings can encourage the rational
exploitation of finite resources and the sustainable
exploitation of renewable resources, preserving the
economic value of natural resources and the markets
that rely on them. When they encourage efficiency,
they can reduce the burden of economic activity on
natural resources, though only if efficiency gains exceed
growth in the use of those resources. National and
international organizations can be instrumental in the
management of these laws and norms.


Access to technology can be instrumental to the
improved management of resources, preserving their
economic value and the markets that rely on them.
It can also create new economic opportunities.


In some cases, governments may need to enlarge their
administrative and technical capacities as a prerequisite
to enacting policies that stimulate investment in green
economic activity.


Transparency and accountability are pillars of good
governance. They allow for monitoring and evaluation of
policies intended to stimulate green investment, and in
this way can help ensure that policies are achieving their
objectives, and in an efficient way.


Unless laws can be adequately enforced, they may
partially or fully fail to alter investments flows towards
green economic activity.


In some sectors, direct support or specific infrastrucure
may be required to effect immediate change (especially
where there is lengthy capital stock turnover) or to
support infant green industries.


Investors may be cautious of industries that rely
on policy support. Investment can increase if support
of green-sectors is predictable, clear and has
long-term stability.


When the price of an unsustainable good or service does
not reflect its true societal cost, it is more likely to lead
to overexploitation of natural resources, inefficiency
and waste. Prices that reflect true costs can make green
opportunities relatively more attractive.


Policy must be informed by accurate information, and in
many cases data collection must be instituted, improved
or increased in order to establish local best practice.


Increased awareness of sustainability challenges will
increase popular demand for green goods and services
and policies that support them.


Increased information about the life-cycle costs of goods
and services helps consumers choose which products
they would prefer to buy and can increase the market
share of green good and services.


As many of the innovations in green sectors require
particular skills and knowledge, the workforce will need
to adapt to take advantage of new opportunities.


Strategic, integrated planning, e.g. baskets
of complementary policies; consideration of
policy effects cross-sectorally and at local,
provincial, national and international levels


Reform of property right law
Reform of ecosystem access right laws
Use of rules and regulations, standards or
prohibitions, e.g. vehicle engine efficiency
standards, outlawing bottom-trawling


Use of negotiated and voluntary agreements
International cooperation, agreements, laws
and organizations


Redesign of intellectual property
rights


Removal of trade barriers to green
goods and services


Investments in technical and administrative
capabilities


International cooperation, e.g. Bali Strategic
Plan, international financial institutions etc.


Monitoring and evaluation as a component
of other policies


Transparency to make info. about
decision-making and spending available
in a user-friendly way


Accountability mechanisms as a component
of policies, e.g. critical reviews, performance
targets


Create adequate enforcement incentives,
e.g. adequately priced fines for
non-compliance etc.


Develop government capacity to enforce


Increased funding for the innovation chain,
e.g. research, development, deployment,
information-sharing


Investment incentives: low-interest loans,
feed-in tariffs, exemption from certain
regulation, etc.


Sustainable public procurement, including
green infrastructure spending


Conditioned support: contingent on use
of local goods, technology transfer, etc.


Investment-grade policy design, e.g. long-term
guarantees, predictable changes, gradually
phased out support etc.


Reform of harmful subsidies


Environmentally-related taxation, other tax
instruments, certificate trading markets, fees
and charges


Development and use of accurate indicators
of progress.


Educational initiatives, e.g. a government
‘vision’ for the green economy, information
campaigns, material in state education


Label and certification schemes, green audits,
or legal requirements for disclosure (also
covered above under regulations, standards
and prohibitions)


Retraining and support schemes for
workers using new techniques or changing
employment to new sectors


Support to encourage the take-up of codified
and tacit knowledge about technology


Local, national, regional and international
knowledge-sharing and skills workshops


Agriculture, Buildings, Cities, Energy,
Fisheries, Forests, Manufacturing,
Transport, Waste, Water


Agriculture, Fisheries, Water
Agriculture
Agriculture, Buildings, Cities, Energy,
Fisheries, Forests, Manufacturing,
Transport, Waste


Buildings, Cities, Forests, Waste
Fisheries, Waste


Agriculture, Energy, Transport,


Agriculture, Energy, Transport, Water


Energy, Fisheries, Manufacturing,
Transport, Waste
Fisheries, Transport, Waste, Water


All


Cities, Forests, Transport,


All


Cities, Manufacturing, Waste


Fisheries, Manufacturing


Agriculture, Cities, Energy, Waste


Agriculture, Buildings, Cities, Energy,
Fisheries, Forests, Manufacturing,
Transport, Waste


Buildings, Energy, Waste


Energy, Manufacturing, Waste


Energy, Transport


Agriculture, Energy, Fisheries, Forests,
Manufacturing, Water


Agriculture, Buildings, Cities, Energy,
Fisheries, Forests, Manufacturing,
Transport, Waste, Water


Agriculture, Fisheries, Transport, Waste


Agriculture, Buildings, Fisheries, Forests,
Transport, Waste


Agriculture, Buildings, Forests,
Manufacturing, Waste


Agriculture, Fisheries, Manufacturing,
Transport, Waste


Energy, Transport


Agriculture, Waste


Table 1


Road to Rio(7)+20.indd 36 2/10/11 1:52:58 AM




Subsidy reform


Subsidy reform involves reduction or elimination of sub-
sidies that have perverse economic (and often environ-
mental) outcomes. Perverse subsidies are common in the
areas of agriculture, energy, fisheries, forests, manufac-
turing and water.


Removing such subsidies frees up potentially significant
levels of public finance for other (green) policy priorities.
It may also reduce unsustainable activities and consump-
tion, depending on the sector. For traded commodities,
any subsidies will negatively impact unsubsidized foreign
competitors, so subsidy reform in those cases removes
distortions from the conditions of competition. The
same holds for subsidies to inputs for traded goods such
as energy and water, but to potentially a lesser degree of
significance depending on subsidy design. In the end, this
instrument promises a positive potential impact on trade
and conditions of competition, since it removes distor-
tions in the market.


Environmentally-related taxation, other tax
instruments, fees and charges


In general, environmentally-related taxation and levies
aim to internalize external costs, and thereby to dampen
activity in sectors that work against the goals of the green
economy. These sorts of levies may affect trade, since
they affect domestic demand for the covered products
and their alternatives. But they do not generally reflect
protectionism. In fact such taxes, fees and charges will
tend to raise the prices of domestically produced goods
relative to those produced elsewhere.


Taxes applied to international transportation services,
or applied at the border, offer a different context than
those applied as part of domestic regulations. Levies on
transport services, for example related to carbon emitted
in transport to market, will be inherently punishing for
traded goods vis-à-vis locally produced goods.


Another type of tax or charge related to imported goods
is border carbon adjustment, or a levy at the border
that tries to level the playing field between regulated


domestically produced goods and foreign goods that are
less stringently regulated.1 With such schemes the devil
is entirely in the details. If the regime were designed such
that it did not alter the conditions of competition, impos-
ing on foreign producers exactly the equivalent of regula-
tory burden imposed on domestic producers (accounting
for whatever regulatory burden had already been borne
in the country of export), then it could at least be argued
that the regime was non-discriminatory (and potentially
more likely to be accepted as WTO-legal). Even in this
scenario, however, there would be impacts that punished
high-intensity producers and rewarded clean producers.


But the administrative and methodological difficul-
ties involved in constructing such an ideal scheme are
daunting,2 and the schemes that have been proposed to
date take significant pragmatic shortcuts. One risk is that
such schemes will be constructed in ways that reduce the
administrative burden of implementation, but thereby
discriminate against foreign producers.


Another risk is that, even if market share is unchanged,
the result may be unfair. If, for example, a country takes
action to address climate change through one sector (e.g.
avoiding deforestation) and thereby achieves its “fair”
share of economy-wide mitigation, but takes no action in
another sector (e.g. steel), then to impose a levy on steel
exports from that country would amount to an unreason-
able demand.


The bottom line seems to be that domestic regulatory
tax instruments are probably not a significant concern,
but instruments applied to international transport, or
applied at the border, have the potential to negatively im-
pact trade and the conditions of competition for develop-
ing country exporters, or to unfairly penalize them. The
solution is clearly careful regime design, ideally based on
internationally agreed principles.


Use of regulations, standards or prohibitions


There is a rich body of law in many countries that dictates
how production should be carried out such that environ-
mental objectives are respected. It comes in a variety of
forms: rules and regulations, standards both mandatory


27


Road to Rio(7)+20.indd 37 2/10/11 1:52:59 AM




and voluntary, and prohibitions on certain practices, or
on trade in certain products. By far the majority of these
rules apply only to domestic production and therefore
have little impact in terms of trade and the conditions
of competition. The regulations, standards and prohibi-
tions that are potentially of concern are those that apply
to imports.


The question to be addressed here is whether, if these
sorts of measures are used in pursuit of green economy,
they will alter the terms of international competition;
that is, can they be used as protectionist instruments?


A sectoral analysis can give solid grounding to the dis-
cussion. In the agriculture sector, and particularly in the
agri-foods sector, there are a number of rules that dictate
the method of production and processing at the domestic
level. Some also extend to the international level, impos-
ing standards on imports. Most of these are related to
sanitary and phytosanitary concerns and are not particu-
larly relevant for the green economy discussion. There
are few environmental requirements to such processes,
and the standards are not applied by governments in any
case, meaning they could not be considered part of any
government-led push to green the economy. Where gov-
ernmental agreement is necessary to recognize foreign
certifications and regimes as equivalent to domestic re-
gimes, there is certainly scope for concern.


The energy sector occupies a central place in the pursuit
of a green economy and most countries’ energy sectors
are heavily regulated with respect to environmental per-
formance. Few of these sorts of regulations apply to trade
in energy or energy products, though. There are a few
notable exceptions. In California (U.S.) and British Co-
lumbia (Canada) there are now low-carbon fuel standards


and GHG emissions standards for imported electricity. In
both cases the focus seems to be legitimately to protect
the integrity of domestic regulations vis-à-vis neighbour-
ing states, rather than to favour domestic producers.


Another exception is the potential use of border carbon
adjustment. This was discussed above as a tax measure,
but it could also be employed as a regulatory measure, if
importers were forced to buy into domestic cap and trade
schemes, for example.


In the fisheries sector, again the bulk of measures ad-
dressing production methods are targeted at domestic
producers, mandating methods and timing of harvest for
specific species, allocating permits and quotas for harvest,
and so on. Where there may be concerns is with measures
that impose PPM-based standards on imports. The WTO
US-Shrimp case laid down several useful conditions:


Measures should be preceded by efforts at interna-
tional agreement to address the environmental prob-
lem in question.


Measures should not specify particular technologies,
but should only specify outcomes to be achieved in
ways that may vary from country to country.


Measures should take into account the efforts of in-
dividual producers, rather than assign some sort of
default production method to a country or sector as
a whole.


In the forestry sector the only measures of concern are
those that are related to imports. Some such measures
indeed exist today, and include laws prohibiting the im-
port of timber that has been illegally harvested. The only


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Road to Rio(7)+20.indd 38 2/10/11 1:53:01 AM




other type of forestry measures aimed at imports are
voluntary standards certifying sustainable harvest. Un-
less such standards actually feature as part of mandatory
government-led requirements (e.g. as part of government
procurement specifications) they cannot be seen as part
of a government-led drive for a green economy.


In the manufacturing sector most countries have laws
with respect to production and processing methods,
including emission standards and restrictions on the
use of particularly harmful substances. There are no in-
ternational standards for energy efficiency in manufac-
tured goods, and having many different (and changing)
standards in different markets is a costly proposition for
exporters.


There may also be trade implications to specified tech-
nologies – prohibitions of certain types of environmen-
tally damaging manufactured products, or new technol-
ogy standards. Despite notable cases of bans on certain
kinds of technology leading to expanded new markets for
export of the alternative technologies, there is clearly po-
tential for technology standards to be used in a manner
that benefits primarily domestic producers.


Standards are not the only concerns in this sector. Coun-
tries might also implement regulatory requirements for
take-back and recycling of goods that contain hazardous
component materials. Such regimes have the potential, if
not designed carefully, to disadvantage foreign producers
with small market share, since the fixed costs of such a
regime would be spread over a much smaller total sales
base.


In the area of transport, most rules will cover domestic
services, specifying fuel standards, for example, and ve-
hicle emissions standards. Any rules governing interna-
tional transport will obviously affect international trade.
However, regulations that increase the cost of shipping to
regulated economies will, by the same token, also increase
the costs of exports from those economies. As such, these
rules as adopted would certainly alter trade patterns, but
there seems to be no clear-cut pattern of detriment to
non-regulating states.


In the waste sector, most countries have stringent domes-
tic regulations as to the handling and transport of certain
types of waste. Trade-related regulations in this sector
cover the import and export of hazardous waste. Bans on
the import of hazardous waste are not a major concern.
Bans on the export of hazardous waste may be problem-
atic if they deprive the destination countries of a source
of raw materials for manufacturing or processing. The
key (unresolved) issue here is how to differentiate hazard-
ous waste from scrap for recycling, since states that ban
exports may end up benefiting from a lower-priced flow
of feedstock.


Removal of trade barriers to green goods
and services


Countries may seek to increase their imports of green
goods and services by lowering barriers to their trade.
There are talks ongoing under the Doha Round of WTO
negotiations with a mandate to lower or remove such
barriers, but any country could do so unilaterally if it so
chose. The justification would be to foster greener pat-
terns of production by lowering their costs relative to
conventional goods and services. The likely trade impacts
from such a move would be positive for foreign produc-
ers, making any environmental goods and services ex-
ports more viable in the implementing country.


Increased funding for the innovation chain


Many governments choose to pursue a green economy
with financial support that fosters increased innovation
in clean technologies. There are various types of forms
for this sort of support, spanning the length of the inno-
vation chain:


support for research and development: joint R&D,
funding for R&D;


support for commercialization: low-interest loans,
loan guarantees;


support in the form of demonstration projects: proj-
ect financing, low-interest loans/loan guarantees.


Support for deployment and dissemination of commer-
cial technologies –the final segment in the innovation
chain – usually takes other forms than funding: technol-
ogy standards, feed-in tariffs, investment incentives, etc.


Funding for the innovation chain will not have any im-
mediate direct effect on trade patterns and conditions of
competition, but the long-term indirect effects are pre-
cisely the purpose of this sort of support. The ultimate
aim is to foster domestic competitiveness in particular
sectors of the new economy. As such, innovation funding
if it is successful may be one of the most significant policy
instruments in terms of potential impact.


That said, it is more or less recognized that support for
innovation is within the bounds of acceptable sovereign
practice. Support for mature industries, however, may
raise more acute trade and competitiveness issues. The
WTO panel decision in EC – Aircraft gives some reassur-
ance that this sort of support is governed by clear rules.


Support offered to aid in the commercialization of a
technology, or in the form of demonstration projects, is
almost by definition offered to technologies that are not
yet on the market, where trade impacts will be felt only


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Road to Rio(7)+20.indd 39 2/10/11 1:53:01 AM




well into the future. In that sense they are like support
for R&D to non-mature sectors; they may eventually have
trade impacts, but not in the medium term. Also like R&D
support, the use of this type of support is commonplace.


Investment incentives


Governments may, as part of a drive for a green economy,
grant financial support to attract green investment to a
particular location. Often this sort of support will be part
of a larger strategy to build up economies of scale and
competitiveness in a particular sector. But it may also
be simply a question of increasing local economic activ-
ity, and doing so in a sector that furthers environmental
objectives.


Clearly such measures, if successful, can help to establish
viable industries in sectors that are key to building a green
economy. It is possible that such support would result in
more green production than would otherwise be possible.
But they also, by definition, distort investment decisions.
In the longer term they may affect the competitiveness
of national sectors if economies of scale can be reached,
and/or agglomeration effects result in a critical mass of
related sectoral investment. The jurisdictions at the los-
ing end of the competition for this sort of investment will
tend to be small and/or poor economies without the fi-
nancial means to triumph in a battle of spending.


Most of the investment incentives described above can
be employed as instruments of competition between ju-
risdictions in attracting investment. The bottom line is
that such incentives, whether WTO inconsistent or not,
will always affect investment decisions and, in most cases,
will thereby rob other jurisdictions of the opportunity to
exploit their comparative advantage.


Conditioned support


Support for green sectors, whether in the form of invest-
ment incentives or other measures discussed above, is
sometimes conditioned on requirements designed to fos-
ter “green infant” industries. This meshes the economic
and environmental objectives that so strongly character-
ize the green economy. The most common sort of condi-
tion for support is that there be some domestic sourcing


of materials or labour, but there may also be demands for
export performance, or for technology transfer. Support
measures with these sorts of conditions might include:


feed-in tariffs or preferential grid access granted to
renewable energy power producers –can be condi-
tioned on local content in the technologies used,
joint ownership of any investment, transfer of pro-
prietary technology;


investment incentives to green manufacturing –can
be conditioned on sourcing local inputs, use of local
labour, joint ownership, technology transfer;


export credit instruments granted to green export-
ers, investors (export credit, various types of insur-
ance) –are by definition conditioned on the export of
goods or on outward investment.


Clearly, such measures distort investment location deci-
sions and patterns of international trade; in fact that is
their primary aim.


There are many more programmes using conditional
support than there are WTO disputes founded on them,
in part precisely because they are so widely used that few
countries have a clean enough record to feel comfort-
able challenging others. But it is important to note as a
point of principle that the international community has
decided that such conditions are inappropriate. Any sub-
sidy conditioned on use the of domestic inputs or export
performance is prohibited under the WTO’s Agreement
on Subsidies and Countervailing Measures.


Sustainable public procurement


Government spending is a powerful force in many econo-
mies and still a significant enough force in most econo-
mies that governments have tried to spur green economic
activity through their purchasing decisions, and also to
lead by example.


Government outlays on greening national infrastructure
have featured heavily in the national stimulus packages
introduced by many governments in the wake of the fi-
nancial crisis. This sort of spending has spin-off benefits


30


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Road to Rio(7)+20.indd 40 2/10/11 1:53:05 AM




for other countries if it creates markets for their green
products and services, and if it pushes the technology en-
velope toward lower costs and wider working knowledge
of new technologies.


That sort of upside holds true for green government
procurement in general, since government purchases
can help generate economies of scale for new technolo-
gies, and through a demonstration effect can help in fur-
ther deployment and dissemination. It should be noted,
however, that green government procurement is often
accompanied by the sort of conditions discussed above,
and particularly by requirement for domestic content or
sourcing. This sort of conditioning risks losing the direct
benefits for exporters of green goods and services, but
may still retain the indirect spin-off benefits associated
with greater diffusion and deployment.


Conclusions


The first thing to note about the range of measures available
to governments in pursuit of a green economy is how few
of them actually have trade and competitiveness impacts.
The clear majority of measures is domestically focused and
does not significantly impact imports or exports.


It is also worth noting that some of those measures that
are trade-relevant may actually have positive impacts for
foreign exporters. Subsidy reform and strong environ-
mental taxes probably raise the cost of domestic goods
relative to foreign goods. Liberalization of trade in envi-
ronmental goods, and new technology specifications, may
open up new markets for foreign exporters. And green in-
frastructure spending may create both new markets and
lower the costs of technology for all, as economies of scale
are reached.


Other measures have potentially troubling aspects, but
are not inherently negative. The final impact of this class
of measures depends strongly on the design of the mea-
sures involved. Environmental taxes, for example, can be
constructed in such a way that they are non-discrimina-
tory and yet still punish foreign producers, though few
examples of this exist. Take-back regulations can be simi-
larly punishing or not, depending on the design of the


regime. Border carbon adjustment has many variations
that make it more or less problematic.


There are, however, still a clutch of measures that govern-
ments might take that have troubling impacts on trade
or investment flows, and on terms of competition. Many
of those surveyed above are actually covered by WTO
disciplines: environmental taxes, PPM-based standards
or prohibitions, R&D support, and support conditioned
on local sourcing, for example, have all been the subject
of WTO disputes, and several are the subject of ongoing
disputes. While WTO coverage does not guarantee there
will be no negative impacts, it nonetheless must lessen
the concern about the potential abuse of such measures.


Only a few measures are left as potentially problematic
and not adequately covered by WTO rights and obliga-
tions. International transport taxes as contemplated
under the UNFCCC are in this category, though the
UNFCCC negotiations are working hard to ensure that
the final result respects the principle of common but dif-
ferentiated responsibility. Another measure in this cat-
egory is border carbon adjustment, simply because we
don’t know yet what sort of scheme will be enacted and
how it will be viewed by the dispute settlement mecha-
nism. Energy efficiency standards are another measure
with potential problems but no obvious solution. Many
competing standards can raise costs for exporters, and
an international harmonization of standards would be a
solid step toward green economies, but there is no obvi-
ous forum for such harmonization.


It is interesting to note that while the trade and com-
petitiveness debates have traditionally pitted developed
against developing countries, a large number of the is-
sues discussed here do not fit that mould. For example,
Canada is being challenged by Japan on the conditioning
of provincial-level feed-in-tariffs. The U.S. government
has initiated a WTO dispute against China for its sup-
port to clean energy sectors. The low-carbon fuel stan-
dard being used in North America is being used on fellow
North American states and provinces. Investment incen-
tives for the most part pit OECD countries and regions
against one another. In part this reflects the fact that the
developed-developing distinction needs more nuance in
a changing world. But it is also a sign that the traditional
split is not a defining framework in this discussion. De-
veloped and developing economies alike are using the
measures discussed here, and both feel the impacts. That
said, developing and least developed countries are clearly
more vulnerable as a group, saddled as they are with a lack
of export diversity and a relative lack of resources to adapt
to the changing demands of a greening global market.


31


Road to Rio(7)+20.indd 41 2/10/11 1:53:09 AM




How can we deal with those few measures that have the
potential for negative impacts? Each probably deserves a
tailored approach. The harmonization of international
energy efficiency standards, for example, needs an insti-
tutional home and champion. Levies on international
transportation deserve careful attention in the forum
that is already mandated to handle them – the UNFCCC.
BCAs probably need some effort at defining how best to
design the instrument so as to avoid unfairly punishing
developing country exporters, and the same approach
might yield results for those measures with final impacts
that are design-dependent (e.g. environmental taxes,
take-back regulations).


At the end of the day, there are some grounds for develop-
ing country concern about the green economy’s implica-
tions for trade, investment and the conditions of com-
petition. But, put in the perspective of the whole green
economy effort, the few measures that are problematic
seem to be the exception rather than the rule. There is a
clear need to delve deeper into those types of measures
that may need special attention from the international
community if we are to get the greatest potential from
the international drive for green economy.


32


Endnotes


1 For an overview of these instruments see Wooders, Peter, Aaron Cosbey and John Stephenson, 2009. Border Carbon Adjustment and Free
Allowances: Responding to Competitiveness and Leakage Concerns. Background paper to an OECD Roundtable on Sustainable Development,
23 July 2009, Singapore. (SG/SD/RT(2009)8).


2 See Cosbey, Aaron, 2009. Border Carbon Adjustment: Questions and Answers (but more of the former). Background paper produced for the GTDF/
IISD Round Table Discussion: Toward International Agreement on Border Measures for Climate Change, November 12, 2009, Geneva. Winnipeg:
International Institute for Sustainable Development.


3 Note that these conditions were not framed as general requirements for the use of unilateral extrajurisdictional measures, but were entirely
case-specific. That said, they have some relevance in considering what measures would be considered acceptable by future panels.


4 This is not clear cut, however. Investment incentives could conceivably just serve to offset the inefficiencies inherent in a particular production
location, in which case the net effect would not lower the firm’s costs.


Aaron Coseby
Environmental Economist specializing in the areas of trade and sustainable development, international environmental governance, and climate
change. He works on two of IISD's program areas: trade and investment, where he serves as Associate and Senior Advisor, and climate change
and energy, where he serves as Associate. He manages IISD’s program of work on trade, investment and climate change.
He is a past Member of International Trade Canada's Market Access Advisory Group, past Member of the Deputy Minister for International Trade's


Academic Advisory Council on Canadian Trade Policy, and of the Minister for International Trade's Environmental Sectoral Advisory Group on International Trade, where
he chaired the SAGIT's Working Group on the FTAA.


AuthorTHE


Road to Rio(7)+20.indd 42 2/10/11 1:53:10 AM




Current formulations of the “green economy” fail, in
particular, to do justice to the mutually interdependent
relationship between environmental protection and in-
clusive economic and social development. If we squander
our environmental heritage, we will imperil the prospects
of future development. At the same time, if developing
countries fail to achieve rapid and inclusive economic and
social development, they will lack the resources necessary
to protect the environment. For poorer countries, devel-
opment is an indispensable requirement for environmen-
tal protection.


At the Stockholm Conference in 1972, Mrs Indira Gandhi
succinctly summed up the viewpoint of India, as a devel-
oping country:“the environmental problems of de-
veloping countries are not the side-effects of excessive
industrialization but reflect the inadequacy of develop-
ment. The rich countries may look upon development as
the cause of environmental destruction, but to us it is one
of the primary means of improving the environment for
living, or providing food, water, sanitation and shelter, of
making the deserts green and the mountains habitable”.1


The mutually interdependent relationship between econo-
mic and social development and environmental protec-


tion is now recognized. It is embodied in the concept of
sustainable development, as elaborated in the Brundlandt
Commission Report (1987)2 and subsequently adopted
at the Rio Summit on Environment and Development
(1992). Economic development, social development and
environmental protection are the three pillars of sustain-
able development. The interdependence is also reflected
in Principle 3 of the Rio Declaration on Environment and
Development, which states, “The right to development
must be fulfilled so as to equitably meet the develop-
mental and environmental needs of present and future
generations”.


How does the “green economy” approach deal with the in-
terdependence between developmental and environmen-
tal imperatives? A 2009 UNEP policy document informs
us that “a common misperception is that there is a trade-
off between economic development and environmental
stewardship… In reality this is not a trade-off because all
human activity depends upon the existence of a responsi-
ble framework for using environmental assets”. 3 This fails
to recognize fully the interdependence between the envi-
ronment and economic and social development. It rightly
reflects the fact that the prospects of future development
will suffer in the absence of appropriate environmental


he concept of a “green economy”
has acquired a remarkable salience
in UN forums even though it
lacks a clear definition.


33


Reflections on the relationship
between the ‘green economy’
and sustainable development


Chandrashekhar Dasgupta believes the interdependence of social and economic development and environmental protection is not
adequately addressed in what he calls the “uni-dimensional ‘green economy’ approach”. While he finds that a number of ‘green
economy’ policy recommendations deserve serious consideration on their own merits, he says others fail to deal adequately with the
concept of development or are in conflict with other agreements, while still others, notably provisions on industrial standards, might
be protectionist. He concludes that “a new and ill-defined concept” should not displace the well-established concept of sustainable
development.


Chandrashekhar Dasgupta


Road to Rio(7)+20.indd 43 2/10/11 1:53:12 AM




stewardship but it fails to recognize the reality that, for
developing countries, development, economic and social,
is an essential requirement for environmental protection.
Without development, poorer countries will lack the re-
sources necessary to protect the environment. To quote
Mrs Gandhi once again, the “environment cannot be im-
proved in conditions of poverty”. The element of inter-
dependency is heavily discounted in the uni-dimensional
“green economy” approach.


The “green economy” is both a conceptual construction
and a menu of policy options. Many of the policy recom-
mendations are unexceptionable and these deserve seri-
ous consideration on their own merits, independently of
the conceptual framework in which they are embedded.
However, a number of other proposals, as shown below,
reflect inadequate attention to the developmental dimen-
sions of sustainable development. Some propositions are
also in conflict with the provisions of the UN Framework
Convention on Climate Change and the Rio Declaration
on Environment and Development. Finally, the “green
economy” policy menu includes propositions that must
be looked at very closely in the context of current pro-
tectionist moves, disguised as environmental concern, in
evidence in some developed countries.


The “Global Green New Deal”, launched by UNEP in
March, 2009, addresses the current recessionary trends
in the OECD countries. The Policy Brief begins with the
assertion that the “world today finds itself in the worst
financial and economic crisis in generations”.4 In this
context, it identifies three objectives for the Global Green
New Deal: reviving the world economy; promoting “sus-
tainable and inclusive growth”, including achievement of
the MDG poverty reduction target, and reducing carbon
dependency.


The principal recommendation –that fiscal stimulus
packages should be used to promote a sustainable post-
recession economy– is unexceptionable. The same can-
not be said, however, for the way in which the issue
is framed or the specific policy recommendations for the
developing countries.5


The current recession in developed countries does, in-
deed, constitute a major global problem not only for
those countries but also because of its negative impact on


growth rates in the developing countries. From an OECD
perspective, it may, indeed, be the “worst financial and
economic crisis in generations”. But does this apply to the
world as a whole? Many developing countries are con-
tinuing to achieve relatively high growth rates (though
these might have been higher but for the global situation)
and their living standards today are much higher than
they have been in recent centuries. From their perspec-
tive, the present situation can hardly be described as the
“worst financial and economic crisis in generations”.


Policy recommendations reflect a similar inadequacy.
A major recommendation is that “developing countries
should prioritize investment in agricultural productiv-
ity measures, freshwater management and sanitation, as
these have demonstrable and exceptional social returns”. 6


This is a highly selective list. The three areas must, of
course, figure in any priority list. But, why exclude other
essential areas, such as investing in energy efficiency or
public transportation or constructing an infrastructure
with enhanced capacity to withstand the impacts of cli-
mate change? While raising agricultural productivity,
many, if not most developing countries also need to de-
velop the industrial and services sectors, in order to pro-
mote employment and raise living standards.


The recommendations for reducing carbon dependency
are even more problematical. They echo the position of
the developed countries in ongoing UNFCCC negotia-
tions in asserting that the “principle of CBDR” must be
upheld with regard to developed countries, emerging
economies, countries with economies in transition and
least developed countries”.8 As many developing countries
have pointed out, the UN Framework Convention on Cli-
mate Change applies the CBDR principle with regard to
developed countries and developing countries, making
a clear differentiation between their respective commit-
ments. Nowhere does it recognize a category of “emerg-
ing economies”. The cumulative per capita emissions of


34


“Environment cannot be
improved in conditions


of poverty”
Indira Gandhi


Road to Rio(7)+20.indd 44 2/10/11 1:53:12 AM




developing countries, including those undergoing indus-
trialization, remain relatively low. There is no justifica-
tion for ignoring UNFCCC treaty provisions, particularly
since the cumulative per capita emissions of the “emerg-
ing economies” are still relatively low compared to the
developed countries.


The UNEP Policy Brief also asserts that the “international
policy architecture needs attention in the areas of trade,
aid, carbon pricing and technology and policy coordi-
nation” (emphasis added).9 UNFCCC does not call for
policy coordination between developed and developing
countries. Indeed, it lays down differentiated commit-
ments for these groups. It might well be asked if the call
for policy coordination in the context of carbon pricing
and linking this call with international trade policy, sig-
nals an endorsement of the disguised protectionism in
evidence in many developed countries.


In a similar vein, at the launch meeting of the “Green
Economy Initiative” it was suggested that “government-
backed and defined Best Available Technology Standards
(BATs) are required. Here lies a challenge of convergence
across national boundaries…”.10


The proposed convergence of technology standards be-
tween developed and developing countries is inconsis-
tent with Principle 11 of the Rio Declaration on Environ-
ment and Development, which states: “Environmental
standards, management objectives and priorities should
reflect the environmental and developmental context to


which they apply. Standards applied by some countries
may be inappropriate and of unwarranted economic and
social cost in other countries, in particular developing
countries”.


These preliminary observations underline the need for
independently examining the merits of each of the nu-
merous proposals that are bunched together under the
banner of the “green economy”. The offered menu of
policy options is an amalgam of good, bad and indifferent
proposals. These must be de-linked from one another and
considered independently on their own merits. As indi-
cated above, a number of current “green economy” policy
proposals should be rejected by developing countries.


In 2012, the Rio+20 Summit will have on its agenda an
item on “green economy in the context of sustainable
development and poverty eradication”. The context is of
primary importance. The so-called “green economy” pro-
posals are relevant only to the extent that they promote
sustainable development, including economic and social
development.


It must be ensured that a new and ill-defined concept
does not displace the well-established concept of sustain-
able development. The Summit is expected to reaffirm
the global commitment to sustainable development. It
would be a singular tragedy if it ends up endorsing a new,
vaguely defined concept which waters down the develop-
mental dimensions of sustainable development.


35


Endnotes


1 Address to the plenary session of the UN Conference on the Human Environment, Stockholm, June 14, 1972.


2 Our Common Future.


3 UNEP, Global Green New Deal – A Policy Brief, March 2009, p.7.


4 Ibid.


5 UN-DESA has produced its own version of the “new deal”. See, UN-DESA, Policy Brief No. 12: A Global Green New Deal for Sustainable
Development. This rectifies some of the omissions of the UNEP paper but the expanded title raises the question whether a new conceptual
construction is at all required to supplement sustainable development.


6 Ibid. p.1.


7 CBDR: common but differentiated responsibilities.


8 Ibid, p.7.


9 Ibid, p.1


10 UNEP, Meeting Report, Launch meeting of the Green Economy Initiative, December 2008, p.6.


Chandrashekhar Dasgupta
Has been engaged in climate change and other sustainable development issues during and after his career in the Indian Diplomatic Service.
He is currently a member of the Prime Minister’s Council on Climate Change and a Distinguished Fellow at The Energy and Resources Institute,
New Delhi. He is also a member of the U.N. Committee on Economic, Social and Cultural Rights.


AuthorTH
E


Road to Rio(7)+20.indd 45 2/10/11 1:53:13 AM




36


There is only one growth
and development story,


that is the story of green growth
and resource efficiency


Road to Rio(7)+20.indd 46 2/10/11 1:53:15 AM




3
PART


Managing the transition


Green Economy as a programme
for sustainable development
Carlos Márcio Cozendey


Peak oil and the necessity
of transitioning to regenerative
agriculture
Danie l De La Torre Ugarte
Chad Hel lwinckel


Trade, finance and the green economy
Dimitr i Zhengel i s


Making climate change finance
work for human development
Lucas Assunção
Gi l les Cheval ier


Environmental, social and governance
disclosure to manage the change
to a green economy on the
path to sustainable development
Global Report ing Init iat ive


39


46


52


60


69


Road to Rio(7)+20.indd 47 2/10/11 1:53:16 AM




Managing
the transition


; ;3


38


Road to Rio(7)+20.indd 48 2/10/11 1:53:19 AM




Green Economy as a programme
for sustainable development


Carlos Márcio Cozendey says the legitimacy of the green economy concept should derive from actions that promote more sustainable
ways of producing and consuming and wider opportunities for developing countries to enter markets in environmental products and
services. He calls for greater interlinkage between economic growth, environmental concerns and social priorities associated with
capacity building in green market-related activities. Cozendey cautions against green conditionalities being applied to development
financing and supposed green concerns used as a pretext for trade protectionism. He emphasizes the need for continued interna-
tional consensus and a rebalancing of current resource and knowledge asymmetries.


Carlos Márcio Cozendey 39


It went beyond a debate that, too frequently, taking de-
veloped countries’ reality as a point of departure, tended
to oppose growth and favour environmental protection.
At the same time that it recognized poverty as a major
cause of environmental degradation, it was based on a
dynamic view: this was not a static world and we could
neither sit and see it deteriorate nor cease to believe in


the transforming power of mankind. Under such a vision,
international cooperation was natural and followed suit.


Twenty years later, we have decided to reinforce the pro-
motion of sustainable development and it has been pro-
posed that “Green Economy” be one of the main themes
of the 2012 Rio Conference. This has generated discussion
on the contents of this concept, which, given its diffuse
origin, is far from being consensually understood. It has,
in fact, been used with a number of different meanings
and applications.1 By its terms, the concept tries to con-
jugate environment and economic activity, but in what
relationship? The fact that we have got used to seeing
environment and social and economic development side
by side for some time now justifies the preoccupation
that, “green” being the qualifier, we might be back to a
preservationist approach that emphasizes limitations to
development. Or, as it has now been expressed by many
delegations of developing countries, that it would imply a
prevalence of “green” over “economy” that would justify
trade restrictions or the imposition of new conditionali-
ties on financing for development.


rom a developing country
perspective, the consensus
around the concept of sustainable
development, enshrined in
the 1992 Rio Declaration, was
possible because it recognized
the possibility of ensuring
social and economic
development whilst addressing
pressing environmental
challenges.


F


Road to Rio(7)+20.indd 49 2/10/11 1:53:20 AM




To alleviate those concerns, some efforts - such as UNEP’s
Green Economy Initiative and UNCTAD’s background
note for the Ad Hoc Expert Meeting on the Green Econ-
omy: Trade and Sustainable Development Implications,2


are well under way, to develop the relationship between
the concept of green economy and the basic assumptions
and objectives condensed in the concept of sustainable
development. But if one follows this track, in the end, the
green economy concept would incorporate so many ad-
ditional aspects to ensure the adequate anchoring in the
development expectations of developing countries and
their social dimension, that the concept would become
equivalent to sustainable development itself. In such a
case, why build a new concept?


On the other extreme, the concept and its variations,
such as the term “green growth”, being used in the OECD,
could be seen simply as a marketing reformulation to sell
the necessity of incorporating environmental preoccupa-
tions in the normal functioning of economic activities. It
would aim at conveying an image of harmony between
economic activity and the need for environmental con-
servation, as a tool to persuade businesses on the accept-
ability of environmental policies, often viewed as gener-
ating further production and administrative costs to the
detriment of competitiveness. In a field where businesses
have often equated state action with “additional costs of
regulatory policies”, “limits on growth”, “need for con-
sumption pattern change”, they would now be able to
read “economic opportunities”, “financing, diffusion and
business deals on new technologies”, “exports of environ-
mental goods”. In parallel, sectors of the public opinion
would be pleased by the active stance of governments in
pushing the environmental agenda with the private sec-
tor, while supporting green incentives for companies, be
it under stimulus packages or not. In this case, the risk
would be that emphasis on the green economy concept
becomes not much more than a way of promoting the
sales of some companies in developed and in very few de-
veloping countries.


The discussions around the concepts of green econo-
my and green growth have frequently highlighted, for
instance:


(a) fast-track mechanisms for the granting of intellec-
tual property rights for green technologies, particularly
patents;


(b) promotion of access to green technologies, understood
as licensing and sale of intellectual property rights or of
goods and services which embody these technologies;


(c) Liberalization of trade in goods and services incorpo-
rating green technologies, as negotiated in the framework
of the Doha Round of the WTO;


(d) Development and promotion of market instruments
in the design and implementation of environmental poli-
cies, given their potential to generate more efficient solu-
tions in terms of cost-effectiveness.


Although these approaches are not per se necessarily
negative, they tend to:


(a) favour developed countries, which own those tech-
nologies for the most part;


(b) consolidate at the global level the few existing poles of
production of goods and services considered to be envi-
ronmental, thus reducing both the potential for competi-
tion in the long run and the scope for adaptation to local
economic, environmental and social conditions;


(c) reduce the space for the mobilization of public re-
sources and international cooperation, despite the rec-
ognition of its importance, given the focus on the action
of the market;


(d) reduce the role of sustainable development as the
guiding concept of the international debate on issues re-
lated to the environment.


In effect, let us examine a category of green goods whose
contribution to climate-change stabilization is particu-
larly straightforward and meaningful: renewable ener-
gies. According to Jha,3 an analysis of the areas of biofu-
els, solar, wind and photovoltaic energy shows that: (a) 18
out of the 20 biggest companies in the fields of renewable
energies proceeded from developed countries, mostly


40


…it has been proposed that “green economy” be one
of the main themes of the 2012 Rio Conference.


This has generated discussion on the contents of this
concept, which, given its diffuse origin, is far from


being consensually understood


Road to Rio(7)+20.indd 50 2/10/11 1:53:20 AM




European; (b) European countries, many of which ben-
efited from incentives in the past, enjoyed a commanding
position in exports of components in the covered areas;
(c) trade of developing countries in the covered areas was
less than half of that of developed nations and was basi-
cally performed by only 14 developing countries; (d) the
contribution of developing countries to the exports of se-
lected products, representative of the renewable sectors
covered, was dominant only in photovoltaic panels (60
per cent), to a large extent due to China’s weight, amount-
ing to less than one-fifth on the other goods considered.
The share in exports of wind turbines and solar heaters
was below 3 per cent; (e) developed country markets were
supplied with massive subsidies and a sizable volume of
venture capital investment in the realm of renewables; (f)
two-thirds of patent holders of renewable technologies in
developing countries were multinationals, basically from
developed countries.


A recent analysis by the WTO secretariat of the list of
environmental goods (composed of 164 subheadings of
the Harmonized System) proposed for liberalization by
a group of 9 countries (mostly developed) in the context
of the Doha Round negotiations discloses a fairly similar
picture: developed country members are responsible for
around 78 per cent of exports and 67 per cent of imports
of listed goods in value terms.


In a Schumpeterian way, development is about change
in the structure of production and consumption of an
economy. Under this definition, all movements towards
a greener economy are development –departing from
the regular way of doing things, identifying or creating
new markets, providing for them. But the concept of a


green economy will only be of interest to developing
countries if, through its implementation, new opportu-
nities of sustainable development are effectively created
for them. A concept of green economy which implies
that developing countries will produce the same things,
but with new inputs and technologies generated or
produced in developed countries, would mainly mean
additional development for developed countries, at the
expense of greater equity in the international system. It
is necessary that the research and discussions associated
with the concept of green economy incorporate areas
that can realistically and feasibly be appropriated and
developed by developing economies, as well as address
the provision of the necessary international financial
and technology flows.


An emphasis on the technological challenges and pers-
pectives of developing a low carbon economy, followed
by a policy conclusion on the need to establish and dedi-
cate resources to research centres, sounds terribly exci-
ting, but is very far from the reality of the majority of
developing countries. According to a joint UNEP/EPO/
ICTSD study,4 the majority of patenting activity in the
area of clean energy technologies is concentrated in six
countries, which account for 80 per cent of all patent ap-
plications (Japan, United States, Germany, France, Korea
and United Kingdom). Furthermore, the study shows that
Licensing Agreements with non-OECD countries are at
a low level and are also very concentrated, mainly bene-
fiting stakeholders in China, India, Brazil and Russia.


It is necessary to look at accessible technology that can
generate realistic investments and development in deve-
loping countries. Take, for example, certain biofuels: they


41


Road to Rio(7)+20.indd 51 2/10/11 1:53:23 AM




are highly adaptable in tropical countries, derived from
fairly stabilized and simple technology, yield important
environmental benefits and, finally, can be a source not
only of exports, but also of clean energy for local con-
sumption, both as fuel and through cogeneration of
electricity.


Failure to strike the right balance between economic
and environmental needs in developing countries might
engender unwelcome barriers to development. This
same reasoning could apply to the multilateral context,
in which ill thought out outcomes could lead to further
constraints on development efforts.


In this way, the discussion of the green economy has
to be strongly anchored in the objective of sustainable
development. The concept of green economy should
probably not be seen as an objective, a guidance for pol-
icy-making. This reading is implicit, for instance, in the
idea of a “transition to a green economy”, a formulation
that immediately generates confusion as to the rela-
tion with the overall sustainable development objective,
giving the impression, in particular, that the social aspects
of development will be left, once again, for later down the
road. Instead of expending time and resources to produce
a concept to compete with sustainable development, per-
haps we should rather conceive it as a programme to be
implemented in order to construct sustainable develop-
ment, a set of activities in different sectors that would fa-
cilitate and promote sustainable ways of producing and
consuming. In other words, a balanced set of activities
from which developing countries can clearly identify re-
alistic and feasible development opportunities for them.


This implies not only a balanced green economy pro-
gramme but also a programme of balanced proposals for
action . The areas of focus should be approached in a way
that puts in a dynamic economic perspective the environ-
mental requirements and the social urgencies of our time.
First, the environmental perspective itself has to be exam-
ined in a balanced multidimensional way. In a number
of situations, sustainability aspects compete with each
other. For instance, hydroelectric power generation may
be key to a low carbon energy grid, but at the same time,
the construction of new dams, if not well conceived, may
pose environmental challenges in terms of destruction of
natural vegetation. Second, from a developing country
perspective, the balance between environmental needs


and social urgencies has to be accounted for. For instance,
the elimination of subsidies for fossil fuel consumption
has been identified as an action that would favour both
economic rationality and the reduction of carbon emis-
sions. We know, nevertheless, that a lot of those subsidies
are given by developing countries to allow poor popula-
tions the satisfaction of basic energy needs in terms of
heating or cooking, therefore posing the issue of finding
alternatives to solve the social problem, before taking the
otherwise reasonable action. Third, those balances have
to be analyzed in a dynamic economic perspective, one
that incorporates the changes that innovation and invest-
ment bring into the economic processes. It has, therefore,
to incorporate the dimension of changing comparative
advantages and the policies necessary to allow develop-
ing countries to develop new industries that are going
to be relevant in a more sustainable economy, instead
of focusing only in short-term economic efficiency. Ef-
forts to liberalize trade in environmental goods, as a con-
sequence, should be approached with caution and flex-
ibility, in order not to kill the possibilities of newcomers,
who would in the long run favour competition on a global
level through less concentrated industries.


A green economy programme should, therefore, incorpo-
rate a real “sustainable balance analysis” when selecting
principles of action and activities, incorporating, but going
beyond instruments like life cycle analysis, internalization
of externalities through market instruments, etc. Only in
that way would the green economy concept favour a great-
er interlinkage between economic growth, environmental
concerns and social priorities in a legitimate way.


The legitimacy of a green economy programme would
not only base its attention on areas of real opportunity for
developing countries but also require that certain policy
issues be dealt with in international fora and promoted by
international institutions without fear of touching areas
of sensitivity to developed countries. Take for example
the issue of agricultural subsidies, which induce unsus-
tainable practices in exhausted lands in developed coun-
tries, while undermining rural development efforts in
poor countries. Frequently overlooked in the discussions
around the economy-environment link, the issue is a vic-
tim of efforts by some developed countries to downplay
its relevance every time it is raised by the secretariat of
international institutions like the OECD or UNCTAD.


42


Instead of expending time and resources to produce
a concept to compete with sustainable development,


perhaps we should rather conceive it as a programme to
construct sustainable development


Road to Rio(7)+20.indd 52 2/10/11 1:53:25 AM




43


The legitimacy of a green economy
programme would not only


base its attention on areas of real
opportunity for developing
countries but also require


that certain policy issues be dealt
with in international fora


The conception of a green economy programme has to
take into account that, in a number of areas, we will be
dealing with the induction or direct creation of markets.
This is true for developed countries –take, for instance,
the creation of a carbon market through carbon allow-
ance schemes– but particularly important in developing
economy societies, where, for instance, the low purchas-
ing power of large portions of the population may pose
difficulties to the substitution of energy sources, adoption
of resource efficient construction materials or energy ef-
ficient durable goods. Therefore, attention will have to be
given to the ability of the State to develop the instruments
of market induction or creation that will be necessary.


In the case of developing countries, this would require
important efforts in terms of capacity building and mo-
bilization of resources in the public sector. In this same
context, the issue of subsidies for the development of
greener industries will have to be discussed. If, on the
one hand, subsidies may be an important instrument in
developing new markets and industries, their abuse may
create enormous asymmetries between countries with
more ample resources and those with a smaller subsidi-
zation capacity. Green incentive programmes embedded
in recent fiscal stimulus packages will tend to deepen the
gulf between developed and most developing countries
in relation to technology generation and production of
the goods and services relevant for a green economy pro-
gramme. In such a scenario, it would be difficult to count
on enthusiasm from less-favoured economies for such a
programme.


A green economy programme would also have to be a
guide for international cooperation in the promotion
of sustainable development and, as such, should be at-
tentive to certain principles. Adaptation to local condi-
tions, for instance. Only by adapting to locally defined
environmental, economic and social priorities, can we
ensure ownership by different countries and societies, a
requirement for the success of the deep transformations
needed. In that sense, it should not be a source of new con-
ditionalities for development financing, be it through loans
or ODA, to the extent this would distort local priorities
and tend to impose “successful” models on very dif-
ferent realities. Rather, locally generated programmes
should receive the support of developed countries, as
a legitimate expression of the principle of common but
differentiated responsibilities, established in the Rio
Declaration on Environment and Development.


Road to Rio(7)+20.indd 53 2/10/11 1:53:29 AM




In the same vein, attempts to use trade to induce behav-
iour should be avoided. They also imply the distortion of
environmental, economic and social priorities defined by
local stakeholders and express a self-supposed superior-
ity in the capacity to define the best policies. In this con-
text, the role and risks of private standards should be dis-
cussed, given the possibility that they create unnecessary
obstacles to trade when they do not follow international
standards or lack scientific justification, thereby running
counter to their own well-intended objectives.


Another issue of great relevance in this debate pertains
to the environmental efficacy and trade restrictiveness of
certain trade and regulatory measures with environmen-
tal aims. Implemention of international commitments
and domestic legislation related to climate stabilization,
for example, are likely to favour some sectors of the econ-
omy to the detriment of others. In this respect, worries
about competitiveness loss, especially in energy-intensive
trade-exposed sectors, have motivated political pressure
for the adoption of unilateral border protection measures


in developed countries. A few of these have considered
putting in place border adjustment measures - carbon
taxes, mandatory acquisition of emissions allowances by
importers, and even antidumping duties and countervail-
ing measures - on imported goods and services based on
their carbon content. These run the risk of both creat-
ing unnecessary and unjustifiable discrimination or a
disguised restriction on international trade and failing to
achieve legitimate environmental goals. In view of this,
countries should resist the temptation of green protec-
tionism and favour environmentally oriented policies
and measures, including for climate stabilization, based
on international consensus built in organizations of both
developed and developing countries.


International cooperation should act in the direction
of rebalancing present asymmetries of knowledge and
resources, in order to open to developing countries a
wider realm of possibilities of seizing the opportunities
that a green economy programme would bring for their
development. Effective initiatives in terms of transfer


44


Road to Rio(7)+20.indd 54 2/10/11 1:53:32 AM




of technology, technology absorption, capacity building
and financial resources would turn more areas of the pro-
gramme into realistic benefits for developing countries
willing to engage the necessary national efforts.


In sum, a green economy programme will only be suc-
cessful at the global scale if we understand that what is at
stake is not only the ability of and willingness to protect
the environment or contribute to climate-change miti-
gation and adaptation, which are themselves legitimate
goals. Equally vital are the economic and social gains
that are likely to result from an equitable access to the


Endnotes


1 See in this volume Green Economy and Sustainable Development, by Tarik Banuri.


2 Available at www.unctad.org.


3 See Climate change, trade and production of energy-supply goods: the need for levelling the playing field, by Veena Jha. Presentation at the WTO
workshop on environmental goods and services, Geneva, September 2009. Trade data from 2007.


4 Patents and clean energy: bridging the gap between evidence and policy, Munich, UNEP, EPO and ICTSD, 2010.


International cooperation should act in
the direction of rebalancing present asymmetries...


to open to developing countries a wider realm
of possibilities that a green economy programme


would bring for their development
45


Carlos Márcio Cozendey
Secretary for International Affairs at the Brazilian Ministry of Finance. Prior to that, he held several positions, including: Director of the Economic
Department at the Brazilian Ministry of External Relations, Counsellor at the Brazilian Mission to the European Communities in Brussels,
and Head of the Mercosur Division at the Ministry of External Relations in Brasilia. Mr. Cozendey holds a Masters in International Relations
from the Federal University of Brasilia.


The author wishes to thank Alessandro de Rezende Pinto for his input.


knowledge, technologies, goods, and production process-
es which will make feasible the transition to a resource-
efficient, sustainable economy. Correctly addressing the
economic, environment and social pillars of sustainable
development in the context of a green economy pro-
gramme does not mean an ever expanding set of issues in
those three realms, but is rather about focus and interlink-
age among them. Building a green economy programme
that is capable of generating interest and adherence by
both developed and developing countries is a challenging,
yet attainable task.


Road to Rio(7)+20.indd 55 2/10/11 1:53:33 AM




As the total annual quantity of oil physically capable of
being extracted from the earth begins to decline over
the next several decades, agriculture may find itself de-
pendent upon a scarce and expensive resource. In 2008,
world commodity prices reached their highest levels
in 30 years, food prices skyrocketed and food shortages
emerged, leading to riots affecting more than 40 coun-
tries. After many years of having to deal with the negative
consequences of chronically low prices, poorer nations
suddenly had to deal with the opposite.


With the global economic downturn starting in late 2008,
both energy and food commodity prices receded from
their high water mark. But forecasts of declining conven-
tional oil production suggest it is only a matter of time
before oil prices rise again, and a food crisis re-emerges


due to higher input costs and renewed emphasis on bio-
energy production to fill the shortfall in conventional en-
ergy sources.1


Agriculture, like all other industries over the past century,
has taken great advantage of the extraction and refining of
plentiful, energy-dense, fossil fuels. Today, agriculture has
evolved into a net energy user for the first time in 10,000
years—instead of being a means of converting free solar
energy into metabolizable energy, it now transforms finite
fossil energy into metabolizable energy. The industrial ag-
ricultural system has allowed for the cheap production of
plentiful food to feed a growing population, but evidence
indicates that it is ill-suited to meet the challenges of the
21st century. Over the next several decades, the practices
of agriculture must reverse the fossil energy dependence
and once again become a net source of energy, stop ero-
sion and begin to regenerate soil, and meet human food
needs. In other words, agriculture must transition to
practices that run on solar energy, regenerate fertility and
produce in abundance.


he food crisis of 2008 gave a first
glimpse of the problems that are
emerging as global oil production
peaks.


Peak oil and the necessity
of transitioning to
regenerative agriculture


Authors Chad Hellwinckel and Daniel De La Torre Ugarte posit a transition to regenerative agriculture as necessary to avoid being locked into a system
that depletes soils and is dependent on an energy resource in decline (fossil fuels). They point to successful regenerative systems that meet these three
imperatives: (1) sponsor their own energy; (2) regenerate soils; and (3) produce in abundance. They also stress that modern knowledge of biological
dynamics should be used in conjunction with appropriate scale technologies to enhance traditional practices. Biofuels, say the authors, could be a
vital part of long-term agricultural policy. They caution, however, that agriculture should not simply become a part of energy policy.


Daniel De La Torre Ugarte and Chad Hellwinckel46


Road to Rio(7)+20.indd 56 2/10/11 1:53:37 AM




47


Fossil energy dependence: the U.S. example


To meet the needs of a growing population, the modern
U.S. food system uses 10.25 quadrillion BTU’s of fossil
energy inputs, or about 10 per cent of U.S. annual fos-
sil fuel consumption. The industrialization of agriculture
has, for the first time in history, led to the situation where
agriculture actually uses more energy than it creates, with
7.3 units of energy going to create and deliver one unit of
metabolizable energy.2 This energy deficit of agriculture
is an historic anomaly. Up until the past 50 years, agricul-
ture had always yielded more energy than it used.3


Historically, by producing more energy than the farmer
needed, others were freed from food production, and civ-
ilizations were built on the small positive gains in energy
from agriculture.


The Energy Returned on Energy Invested ratio (EROEI)
of U.S. agriculture in 1920 has been estimated to be
3.1, but by the 1970s had fallen to 0.7.4 Add the energy


required to move, process, package, deliver and cook food
in the modern food economy, and EROEI becomes 0.14,
indicating that agriculture has lost its traditional role as
an energy production system and become simply another
user of fossil fuels.


Historically, the foundation of civilization rested on con-
sistent solar radiation. Now it rests on the annual extrac-
tion of finite fossil fuels. One solution is to find other
energy sources, such as wind or solar, for energy-intense
agriculture. Yet when comparing the EROEI ratios of the
alternative fuels, the benefits of oil are apparent.5 Today,
economies are running off the large oil discoveries of the
1950s and 1960s with EROEI ratios of 50+.6 Alternative
fuels will likely have an increasing role in meeting the en-
ergy needs of the larger economy, but to believe agricul-
ture can continue to function under the current energy
balance is folly. It is imperative that agriculture return to
a more balanced energy ratio over the next century.


Road to Rio(7)+20.indd 57 2/10/11 1:53:38 AM




Soil loss


By using energy-dense inputs to produce on remaining
land, industrial agriculture has been able to offset soil loss
with intensification of production. But in the transition
to less energy-intensive methods, continuing soil losses
are not feasible. Every year, 75 billion metric tons of soil
erode from the earth’s agricultural lands, and 30 million
acres are abandoned due to over-exhaustion of the soil.7 8


This is equivalent to losing an area the size of Ohio every
year.


Erosion is a problem that has followed cultivation for
10,000 years. Its slow effects are evident in the lands
surrounding fallen civilizations such as in the Tigris/
Euphrates valley, Israel, Greece or the hills of Italy. Over
time, agriculture has led to the loss of one-third of global
arable land, much of it within the past 40 years.9 Green
revolution methods of mechanization have sped the rate
of erosion in many regions and led to the abandonment
of traditional practices, such as integrated crop-animal
systems or polyculture plantings, that had slowed ero-
sion and enabled some traditional systems to function
for centuries.10


Soil is a depletable resource that forms over thousands of
years. It is estimated that it takes 800 years for one inch
of soil to form in the American Midwest.11 Modern agri-
culture is depleting soils at a rate of one to two magni-
tudes faster than they are formed.12 The United States,


which has much lower erosion rates than
Africa and Asia, is still losing soil at a rate
of four tons per acre per year.13 14 This
use of soils can be thought of as spend-
ing the accumulated capital of millennia,


not unlike the use of fossil fuels. In the past, if one cul-
ture exhausted its soils and declined, civilization could
re-emerge in newly settled fertile areas. Today, with 3.7
billion acres under cultivation, there are few remaining
virgin soils. If this trend of soil depletion continues, we
will face an increasingly hungry world, even without the
added burden of biofuels production.


Establishing regenerative practices


Long-term agricultural policies must be guided by three
imperatives: (1) reverse fossil energy dependence and once
again become a net source of energy; (2) stop erosion and
begin to regenerate soil; and
(3) meet human food needs.


Regenerative agriculture17


allows natural systems to
maintain their own fertil-
ity, build soil, resist pests
and diseases and be highly
productive. Regenerative agriculture uses the natural
dynamics of the ecosystem to construct agricultural sys-
tems that yield for human consumption.


Regenerative methods regenerate the soil, the fertility,
and the energy consumed in semi-closed nutrient cycles,
and by capturing, harvesting and reusing resources such
as sun, rain, and nutrients that fall within the farm’s
boundary. Other terms refer to similar principles, such as
natural farming, permaculture, agro-ecology, integrated
agriculture, perennial polyculture, holistic management,
forest gardening, natural systems agriculture and sustain-
able agriculture.


Successful regenerative practices are used by small land-
holders capable of managing more intensive and complex
systems which rely on the integration of crop-animal-hu-
man functions, use of perennial species, and the growing
of multiple crops in the same field18. Many of these prac-
tices are based on traditional cultural land-use practices,
but others are newly forged systems.


For example, one of the most promising and easily scal-
able methods to improve the health and productivity of
large amounts of land is the use of intensive grazing—
dividing a pasture into several small fields and closely
managing the time livestock are allowed to graze each
field.19 20 Evidence indicates that by finely managing when
herbivores are placed in a field to graze, total primary


48


Once soil is eroded,
it cannot be easily or


quickly recreated.


There is increasing evidence
that regenerative agriculture
can produce more food
with less energy than industrial
agriculture, while increasing
the health of soils.15 16


Road to Rio(7)+20.indd 58 2/10/11 1:53:43 AM




productivity of the landscape can be increased dramati-
cally.21 22 Grassland productivity can also be augmented
through Keyline ploughing, a method of widely-spaced
deep chisel ploughing following the contour of hillsides.
This acts to shed water away from eroding valleys, direct-
ing it to water-poor ridges while increasing ground ab-
sorption.23 The increased grassland productivity and the
regenerative capabilities of the grasses take a considerable
burden off energy intensive feedlot production. Intensive
grazing is a good example of a practice that is already de-
veloped and spreading on its own. It may not take much
of a push for these practices to become widespread.


Another proven practice, the traditional highland Viet-
namese production system (VAC) that integrates aqua-
culture, garden, livestock and forest agriculture in small
plots, could serve as a template for other tropical regions.24


VAC illustrates a key principle of regenerative practices—
using the waste stream of one component to feed another
component. Food scraps are placed in the pond to feed
the fish, pond biomass growth is removed and fed to pigs,
and pig manure is used to fertilize the garden and fruit
trees. In this manner, regenerative systems conserve en-
ergy and maintain fertility.


VAC has other notable practices indicative of regenera-
tive systems: it makes full use of vertical space by planting
vegetables and fruiting bushes below fruit and nut trees.
It uses riparian zones (small ponds), the most productive
ecosystems on earth, yielding more net primary produc-
tivity per unit of area than any other ecosystem. It also
stacks functions of components in the system, such as the
use of the pond for waste disposal, microclimate cooling,
and fish, duck, feed and fertilizer production.


Other regenerative systems already in use include the Zai
methods in the Sahel of Africa,25 the no-till rice-legume-
rye system developed by Masanobu Fukuoka in Japan,26


and the edible forest system indigenous to the Kerala re-
gion of India. There are also efforts underway to develop
new regenerative systems, such as the perennial poly-
culture system being developed at The Land Institute,
which mimics the native prairie ecosystem in form and
function.27


Successful regenerative systems will look different de-
pending on local ecosystem capabilities and constraints.
By studying the foundational elements of existing sys-
tems, new practices unique to individual ecosystems can
be developed fairly rapidly. Research investments should
be made in locally-adapted regenerative systems. While
they borrow principles from traditional agricultural sys-
tems, it is important to emphasize that new regenerative
systems are not a step backwards in time. Indeed, it is
critical that modern knowledge of biological dynamics be
used in conjunction with appropriate scale technologies
to enhance traditional practices and meet the three policy
imperatives.


49


Road to Rio(7)+20.indd 59 2/10/11 1:53:54 AM




Extension education and community
investments


To begin transitioning agriculture from its current non-
sustainability into practices that regenerate fertility, cap-
ture solar energy, and produce adequate amounts of food,
national government and international entities must in-
vest in:


Creating regenerative practices appropriate for
each ecosystem,


Extension education with farmers about the value
of regenerative practices, and


Infrastructure to help farmers capture more of the
value of their goods.


It takes time, initial resources and knowl-
edge to transform land into regenerative
systems. Without massive efforts through
extension education, widespread adop-
tion may not result. Demonstration farms
should be established within travelling
distance of every farmer to demonstrate
and test locally-adapted regenerative
practices. The old adage ‘seeing is believ-
ing’ holds very true for the world’s farm-
ers. By seeing the new practices in action,
farmers will more likely adopt them, lead-
ing to further adoption by neighbours.


Agricultural infrastructure investment has typically
meant more roads, ports and large storage facilities.
Future infrastructure investments must be in line with
future energy decline and the needs of successful agri-
cultural systems in such an environment. Investments
in electric railways and waterway transportation may be
in line with declining traditional liquid fuels. Paving or
graveling smaller roadways will increase access to popu-
lous markets which may otherwise be inaccessible during
certain times of the year.


While large-scale national investments will be important,
the most important infrastructure needs may be at the lo-
cal and even farm level. At the farm level, the transition to
a locally-adapted regenerative agriculture may begin with
construction of ponds and swales or planting orchards.
Investments in small-scale appropriate technologies, like
simple bicycles, can have significant effects on poorer
farmers’ profitability.28 Microprocessing technologies,
such as canning equipment or oil presses, could enable
farmers to process their harvest into higher value com-
modities closer to home.


Role of biofuels


The three policy imperatives of agricultural transition
must be the primary guide in setting biofuels policy. How
can biofuels help facilitate the transition to a sustainable
agricultural system that will adequately feed people, build
soil and meet its own energy needs? Viewing agriculture
simply as a potential source for meeting the greater
economy’s fuel demand will not guarantee the necessary
transition, and could even exacerbate soil destruction, in-
crease agriculture’s input consumption and lead to food
shortages. If appropriate, biofuels could be a vital part of
long-term agricultural policy, but agriculture should not
simply become a part of energy policy.


How can biofuels policy help the transition of agricul-
ture to sustainability over the next several decades? The
relevant question is not the potential contribution of
biofuels to reduce dependence on fossil fuels, but rather
the optimal level of biofuels production to encourage the
transition of agricultural to a system that enhances food
security, reduces poverty and improves the earth’s soils.
Biofuels demand could be a catalyst creating the right
conditions for a transition to a truly regenerative agri-
culture, particularly if that demand moderately increases
all commodity net returns. If crafted within a larger agri-
cultural policy matrix, biofuels policy can be part of the
solution.


As energy becomes scarce in the coming decades, agri-
culture must transition to practices that run on solar and
other renewable energies, regenerate soil fertility and
produce in abundance. These three policy imperatives
should be the long-term guideposts in setting all policies
that affect agriculture. The importance of meeting this
transition should not be undervalued—if we fail, the fu-
ture of our complex society could be in jeopardy.


50


Although
there is great


potential
in the


widespread
application
of existing
successful


regenerative
systems, they
are not being
adopted on a


large scale.


C


C


C


Road to Rio(7)+20.indd 60 2/10/11 1:53:57 AM




51


Endnotes


1 IEA (2008) World Energy Outlook 2008, International Energy Agency, December.


2 Heller M, Keoleian G (2000) Life-Cycle Based Sustainability Indicators for Assessment of the U.S. Food System. Ann Arbor, MI: Center for Sustainable
Systems, University of Michigan.


3 Green, M (1978) Eating Oil: Energy Use in Food Production. Westview Press, Boulder, CO.


4 Gifford RM (1976) An overview of fuel used for crops and national agricultural systems. Search 7:412-417.


5 Bender MH (2002) Energy in Agriculture: Lessons from the Sunshine Farm Project. Proceedings of the Third Biennial International Workshop, Advances in Energy Studies:
Reconsidering the Importance of Energy, Porto Venere, Italy, 24-28 September.


6 Hall CAS, Cleveland CJ, Kaufmann R (1986) Energy and Resource Quality: The Ecology of the Economic Process. John Wiley, New York.


7 Myers N (1993) Gaia: An Atlas of Planet Management, Garden City, NY, Anchor/Doubleday.


8 Faeth P, Crosson P (1994) Building the case for sustainable agriculture. Environment 36(1): 16–20.


9 Montgomery DR (2007a) DIRT: The Erosion of Civilizations.


10 King FH (1911) Farmers of Forty Centuries: Permanent Agriculture in China, Korea, and Japan. Published by Carrie Baker King.


11 Pimentel D (2006) Soil Erosion: A Food and Environmental Threat Journal of Environment, Development and Sustainability, Volume 8,
Number 1 / February.


12 Montgomery, DR (2007b) Soil erosion and agricultural sustainability, Proceeding of the National Academy of Scientists 104: 13268-13272.


13 USDA (2000a) Changes in Average Annual Soil Erosion by Water on Cropland and CRP Land, 1992 –1997, Natural Re sources Conservation Service, USDA,
Revised December.


14 USDA (2000b) Changes in Average Annual Soil Erosion by Wind on Cropland and CRP Land, 1992 – 1997, Natural Resources Conservation Service, USDA,
Revised December.


15 Altieri M (2008) Small farms as a plantary ecological asset: Five key reasons why we should support the revitalization of small farms in the global south.
Food First. U.S.


16 Pretty J (2005) The Eathscan Reader in Sustainable Agriculture. Earthscan, UK.


17 The Rodale Institute first used this term over 30 years ago to refer to systems that continually recreate the resources that they use.


18 Gitau T, Gitau MW, Waltner-Toews D (2009) Integrated assessment of health and sustainability of agroecosystems. Boca Raton: CRC Press/Taylor
& Francis.


19 Savory A (1998) Holistic management: a new framework for decision making. Island Press.


20 Dagget D (2000) Beyond the rangeland conflict: toward a West that works. University of Nevada Press.


21 Brundage AL , Petersen, WE (1952) A Comparison Between Daily Rotational Grazing and Continuous Grazing. J Dairy Sci 1952 35: 623-630.


22 Savory A (1998) Holistic management: a new framework for decision making. Island Press.


23 Yeomans, PA (1964) Water for Every Farm: Yeomans Keyline Plan, CreateSpace, Inc.


24 FAO (2001) Integrated agriculture-aquaculture: a primer, FAO Fisheries Technical Paper-T407.


25 FAO (2008) Climate, climate change and agropastoral practices in the Sahel region. Natural Resources Management and Environment
Department Publication, September.


26 Fukuoka, M (1978) One Straw Revolution. Rodale Press.


27 Jackson W (1980) New Roots for Agriculture, University of Nebraska Press.


28 Kwibuka E (2008) Coffee farmers get bikes on credit, The New Times, Rwanda, March 15, http://projectrwanda.org/news/coffee-farmers-get-bikes-on-credit.
Cited March 30 2009.


Daniel De La Torre Ugarte Chad Hellwinckel
Professor at the Department of Agricultural Economics and Associate
Director of the Agricultural Policy Analysis Center of the University
of Tennessee.


Research Assistant Professor at the University of Tennessee’s Agricultural
Policy Analysis Center. His interests are in regenerative agricultural


practices, biofuels modeling and carbon sequestration modeling.


This paper won the Farm Foundation’s 30-Year Challenge Policy Competition in the area of Global Energy Security.


Road to Rio(7)+20.indd 61 2/10/11 1:54:00 AM




The associated “green revolution” will afford many op-
portunities, but will require up-front investment and
yield changes in global comparative advantages. Green
finance and technology sharing will be necessary both
to incentivise investment and innovation and to com-
pensate those sectors that lose out over the transition.
This is necessary to achieve an efficient, pareto-superior
outcome, where the winners compensate the losers, and
in many cases it is necessary for a fair outcome. The long
term goal is a coordinated global policy effort to reduce
emissions with the aid of a broadly comparable global
carbon price. Before then, developed economies must
demonstrate the virtues of green growth, before devel-
oping countries risk compromising growth and poverty
reduction aspirations. It may sound obvious, but a col-
laborative approach which acknowledges and builds on
these principles is vastly preferable, in terms of efficiency
and equity, to one based on coercion, partial pricing,
trade sanctions and threats.


The science of action versus delay


The Copenhagen Accord put forward by Brazil, China,
India, South Africa, and the U.S. recognised that climate
policies should seek to limit the rise in global average tem-
perature to no more than 2oC above preindustrial levels.
Analysis at the Grantham Research Institute on Climate
Change and the Environment at the London School of
Economics showed that in order to have a reasonable,
or 50 per cent, chance of reaching the 2oC goal the stock
of greenhouse gasses would need to stabilise at close to
450 ppm CO2 equivalent (CO2 e). We are already around
440 ppm CO2 e. Holding concentrations below 500 ppm
CO2 e and eventually stabilising at 450 ppm CO2 e would
require emissions to peak before 2020 and decline by 2-3
per cent per annum (p.a.) thereafter. It is important to
note that emissions are the annual flow into the stock
of greenhouse gases. These gases stay in the atmosphere
for tens even hundreds of years, depending on the gas.
In order to stabilise at any level of the stock, the inflow
of GHGs needs to fall to the level at which the earth can
naturally absorb them. This means global annual emis-
sions of greenhouse gases should be reduced from about
47 billion metric tons of carbon-dioxide-equivalent today
to about 44 billion metric tons in 2020, to much less than
35 billion metric tons in 2030, and to much less than 20
billion metric tons in 2050. To give a sense of the scale
of the transformation, under business as usual where no
action is taken, emissions are set to double to between 80
and 90 billion metric tons by 2050.


ver the coming few decades,
the global economy will
transition towards carbon
neutral production.


Trade, finance and
the green economy


Dmitri Zenghelis contends that, with the right policies and incentives in place and commitments respected, environmental targets are achievable.
Developed countries, he says, should demonstrate the advantages of green growth in advance of implementation by developing countries. He places
emphasis on good governance and institutions, a competitive market for green technology, and a willingness to cooperate, share and co-finance
technology. Further, Zenghelis calls for open trade in environmental goods and services, clear policy frameworks to deliver low-carbon growth and
investment incentives, rapid translation of innovation into green product development and a collaborative approach to reducing emissions and
carbon pricing.


Dimitri Zenghelis52


O


Road to Rio(7)+20.indd 62 2/10/11 1:54:01 AM




53


With a projected 9 billion people on the planet, a fall in
total emissions to less than 20 billion metric tons in 2050
would require the world to emit an average of around
two metric tons per capita of carbon-dioxide-equivalent.
The current average is about seven tons per capita, with
the United States averaging more than twenty metric
tons, Europe ten to twelve metric tons, China about six
metric tons, India less than two metric tons. Due to a
lack of public consensus, we have lost critical decades
in the battle to cut greenhouse gas emissions. Now only
sound analysis, visionary leadership, and a collaborative
spirit can tackle the immense risks we are facing.


So far, 75 nations collectively responsible for more than
80 per cent of global emissions of greenhouse gases have
set targets outlined in the annex to the Copenhagen Ac-
cord. If countries deliver these “high intention” reduc-
tions, the plans would result in global annual emissions
of about 48 billion metric tons of carbon-dioxide-equiv-
alent by 2020. While this would imply that emissions
would peak before 2020, it would nevertheless fall short
of a “climate responsible” target of 44 billion metric tons.
Nevertheless, this could still—at a stretch—be consis-
tent with a 2oC goal, but would involve more rapid and
costly annual emissions reductions during the decades
after 2020. When compared with an estimated level of
emissions of 55-56 billion metric tons under “business as
usual”, the ambitious actions would take us two thirds


of the way towards what is required – a modest but im-
portant start.


The longer it takes for emissions to peak, the faster they
have to fall thereafter. This raises the costs of meeting a
given stabilisation. Reductions in excess of 5 per cent per
year would mean scrapping working capital and bringing
on technologies before they fully mature. The alternative
of an early managed transition would mean working with
the capital depreciation and replacement cycle and wait-
ing for the costs of technologies to fall through learning
and experience. Every year of delay raises the costs and
a 10 year delay almost doubles the annual rate of decline
required. Unlike, say WTO talks, which when stalled, can
be picked again up several years down the line; delaying
climate action raises costs and opens humanity to ever
greater climate risks. Without an early start, the prospect
of a 2 degree world will slip over horizon in a few years.


Many studies have demonstrated the feasibility of attain-
ing ambitious emissions reductions necessary to have a
fighting chance of keeping temperatures below two de-
grees. Savings can be found in a broad range of sectors
including energy efficiency, power, transport, avoiding
deforestation and –as a significant proportion of global
energy supply is still likely to be from hydrocarbons by
mid-century– carbon capture. The question is how can
policy catalyse action?


Road to Rio(7)+20.indd 63 2/10/11 1:54:05 AM




54


Creating new markets to drive
an effective transition


What are the key elements driving trade and finance in
the context of the green sustainable economy? First, the
world needs to create profitable, large-scale markets in
energy efficiency and low-carbon transport, power and
land use. Many of these markets are likely to develop ini-
tially in rich countries, as a result of explicit policy mea-
sures, but trade will quickly transmit the benefits and op-
portunities globally as new markets for low-carbon goods
and services emerge. An open competitive environment
is required to share ideas and technologies and take ad-
vantage of new opportunities, as well as build produc-
tion capacity in developing countries and encourage the
transfer of technological know-how. By virtue of their
size, and in recognition of the historic responsibility of
the developed world (most of the change occurring in
the next 20 years will be as a result of past emissions, the
majority of which came from rich countries), developing
countries will hold the key to designing the world’s low
carbon –future and rightly play the driving role in the
negotiations.


Most major developing countries have already outlined
domestic low-carbon action plans, but before they take
on their own emissions caps, the developed world needs
to demonstrate by example how green investment can
support growth. The promised finance must flow and
technologies must be shared. Such plans can shift devel-
oping country economies to a higher value-added more
knowledge-intensive sectoral composition of growth.


Carbon finance


The High-level Advisory Group on Climate Change
Financing (AGF) is crucial to generating support from
developing countries. Its task was to propose measures
to find USD 100 billion p.a., new and additional, by 2020
(to support adaptation, forestry and the transition to the
low-carbon economy in developing countries).1 The
extra cost of financial support to catalyse mitigation in
developing countries, sufficient to deliver a 2 degree con-
sistent pathway, has been estimated to be EUR 60 billion
per annum (p.a.) by 2020.2 Extra adaptation costs result-
ing from a more hostile climate are likely to be at least
EUR 80/USD 100 billion p.a. extra flows by 2020.3


Both public and private sources of finance will need to
be utilised to achieve such transfers . In addition, private
sources such as global carbon markets, private sector
flows and private finance leveraged through the multi-
lateral development banks, could all deliver significant
net flows. The report argues that such sums are readily
achievable if the appropriate policy frameworks and in-
stitutions are put in place. Revenue potential from pri-
vate finance was estimated to be up to USD 500 billion in
2020, generated with a leverage factor of 2-4 on public
flows/carbon market offsets.


Inducing low-carbon technology


There is deep suspicion in developing countries that the
rules of the game will be designed to require poor coun-
tries to pay for rich world technologies in order to meet
emissions targets. Sharing technologies will require the
opening up of patents, as has been seen in some parts
of the essential drug industry. But the buying out of in-
tellectual property rights, and the design of intellectual
property (IP) resolution mechanisms will only form part
of the solution. Many energy efficiency technologies are
not protected by patents or face competition from ready
substitutes. The key knowledge-based component in
many renewables technologies is often not formula-based
IP (as in for example pharmaceuticals) but specialist equip-
ment, expertise, logistics, scientists, engineers and finance
know-how. It is predominantly private companies that re-
tain ownership of technologies and know-how, so policy
must be designed to incentivise private involvement in the
sharing of this know-how for example through joint ven-
tures with international financial institution support.


Beyond joint ventures, a number of ideas can help the
diffusion of ideas and know-how, these include the
building of local innovation centres; R&D funds for de-
veloping country-specific technologies (for example very
simple but effective solar powered cooking stoves); inter-
national research networks; prize funds for advances in
technology; pilot, demonstration and deployment funds,
“smart-grid” demonstration projects; policy and planning
support for connected urban development; patent buy-
out funds and so on.


Road to Rio(7)+20.indd 64 2/10/11 1:54:13 AM




55


Preserving forests


Direct action on reduced deforestation, degradation and
reforestation will also be of central importance. An inter-
nationally-funded strategy for halting deforestation
must include direct support for forest funds such as the
Amazon Fund. The ultimate aim must be to give econom-
ic value to trees left standing and allocate the rent to those
responsible for the use of the land. Introducing forests into
carbon trading and carbon finance would be a powerful
way of commoditising standing trees, but this will require
some careful design. Particular attention must be paid to
the problems of corruption and property rights in forest
governance to insure that money is not wasted and incen-
tives are targeted effectively at property managers.


Carbon pricing and carbon markets


The restructuring and scaling-up of carbon markets, with
improved regulation and good co-ordination across the
trading schemes of different countries or regions, will be
a vital means of harnessing the power of the market to
deliver cost-effective, low-carbon investments. Carbon
taxes can play a powerful supporting role too in deliver-
ing a carbon price, though international co-ordination
may be harder to realise.


Developing countries will need to take on quotas eventu-
ally: China perhaps around 2020; India sometime before
2030. But in the meantime, there will need to be a period
of one-sided trading where developing countries can sell
credits in to carbon markets if they make verifiable addi-
tional GHG reductions, but will not be penalised if they
don’t. The son or daughter of the Clean Development
mechanism (CDM) will require greater scale and less ad-
ministration. It will need to move away from the admin-
istratively burdensome project-by-project approach to
large-scale programmatic approaches, using standards on
technologies and sectoral benchmarks and other ‘whole-
sale’ offset schemes. For example, an energy efficiency
programme, land-use reform, or technology standard
will be credited in proportion to the estimated emissions
reductions the scheme delivers. This would mean los-
ing the strict one-to-one link between a dollar’s worth of
carbon credit and a unit of GHG emissions reduced, and
there will be some error, but it should yield administra-
tive savings that could make up for any loss due to the


presence of some less effective projects, making the unit
cost of leaving emissions reduction cheaper.6


The ability of developed economies to ‘offset’ domestic
emissions reductions by investing in reductions else-
where will provide much needed finance to developing
countries. It is also inefficient and impractical to expect
developed countries to meet targets entirely with physi-
cal domestic emissions. Take the U.S. for example. It
would need to make physical cuts of 80 per cent by 2050
relative to 1990 levels to play its part in a two degree
pathway. It is already more than 15 per cent above 1990
levels, and would need to lose this addition by 2020 and
then reduce emissions by a further 25 per cent each de-
cade if it is to reach the 2050 target. That is clearly too
ambitious to handle domestically and would require
costly scrapping or retrofitting of existing capital. The
U.S. could more effectively aim to meet its commitments
by providing finance to support a tropical forest fund or
investment in renewables and energy efficiency in poor
countries, for example. By the same token, international
offsets provide cost-effective opportunities for emissions
reductions and opportunities for developing countries to
attract investment and finance.


Organisation and institutions


Cost-effectively financing global investment in low car-
bon infrastructure requires a new and evolving climate
finance architecture; one that builds on existing struc-
tures, including bilateral and multilateral flows, but
which facilitates other forms of investment and devel-
opment finance. The new and evolving climate finance
architecture is likely to include a registry, or schedule of
actions, to capture domestic commitments and policies,
creating transparency and trust. It will also require an ef-
fective system to measure, report and verify emissions
from countries on a regular and frequent basis. Trans-
parency of method and data is a key issue. Emissions
reductions need to be credible and verifiable, but with-
out intrusive infringements of sovereignty – a source of
sensitivity in the developing world. That is, there will
need to be trustworthy alternatives to foreign inspectors
on the ground if key countries are to participate. New
remote sensing technologies together with earth obser-
vation/data management systems will play a key role in
overcoming intrusiveness and sovereignty.


Road to Rio(7)+20.indd 65 2/10/11 1:54:19 AM




56


Trade and competitiveness


The revolution heralding a low carbon economy will
mean that the balance of opportunities and costs will
not be spread evenly. To begin with, those countries that
take a stronger stance on climate action may impose
additional costs on their carbon–intensive production
sectors relative to those which do not. If the products
are tradable, this may mean a loss of market share and
a relocation of production (and emissions) to countries
with more relaxed regimes. In the longer run, the oppor-
tunities are likely to be reversed, with businesses in those
countries that moved earliest, or received finance and
technology support, being best placed to take advantage
of new opportunities in growing markets and develop
new technologies and exploit changing comparative
advantages.


There remains a strong political economy element to
the discussion that dictates the understanding of com-
petitiveness issues as vested interests are prone to lobby
hard against change, so it is important to be quantitative
about likely impacts.


There is strong body of evidence to draw on which sug-
gests that the unilateral application of the kinds of car-
bon policies described here, applied broadly across sec-
tors and sustained through time, are unlikely to lead to
significant loss of market share, even among tradable
carbon intensive sectors (which is limited mostly to a
narrow industrial sector including steel, cement, ceram-
ics, aluminium, minerals and paper). Yet they are likely
to prove sufficient to instigate the necessary behavioural
and technological change.3


Part of the reason is that the impact of carbon pricing
on costs is limited. To give an illustrative example, ap-
plication of a USD 40 per ton cost of CO2 would raise the
cost of a barrel of Brent crude -approx. USD 15-USD 20/
bbl. Resulting energy cost changes will be small relative
to the underlying costs and revenue drivers that deter-
mine a firm’s long-term location. Such decisions depend
on access to markets; access to raw materials; access to
skilled competitively priced labour; access to technology;
fiscal incentives; political stability, legal jurisdiction; in-
frastructural networks. Carbon costing of the kind sug-
gested is a small factor with a small impact relative to


regular changes in exchange rates and fossil fuel prices.
Moreover, before relocating, businesses must be confi-
dent that differentials in carbon policy are likely to en-
dure for the duration of their capital stocks’ lifespans,
which may run into decades. This would be a brave bet.
Studies of bordering U.S. states that apply differing envi-
ronmental policies show that even where language, law
and currency would not provide barriers to relocation,
polluting firms in exposed tradable sectors usually stay
put and adhere to policy.8


Nevertheless, for a few sectors such as aluminium, steel,
cement and one or two others, costs are likely to be
higher and transition arrangements would have to be
carefully managed. And the reality must be recognised
that from a political economy perspective, the mere pos-
sibility that policy may undermine a sector and cost local
jobs without reducing emissions is a political time bomb.
Governments will therefore need to make financial and
technology support available for re-skilling and re-tool-
ing vulnerable sectors in transition to a green economy.
However, competitiveness concerns that affect only a few
sectors should not hold the course of green development
to ransom. The temporary losers from the transition to a
green economy know who they are and their voice tends
to be relatively loud. The voice of potential winners in
the private sector, on the other hand, is not being heard
loudly enough, with many of these sectors yet to emerge,
being just that: potential.


Trade policy options


The most efficient and equitable choice would be for all
countries and sectors to move forward together in the
application of green policies, collaborating in the ap-
plication of policies to reduce emissions. This is not as
banal or dreamy as it may sound. Key constituencies in
business and government in most major economies are
profoundly concerned about the challenges of climate
change. The Chinese are worried about vulnerabilities
to their urban and rural development and the changes
in business opportunities as green technologies and
markets emerge, as are many Americans. This provides
the basis for a common collaborative understanding on
which to advance.


Road to Rio(7)+20.indd 66 2/10/11 1:54:23 AM




Open trade is essential in creating large markets in clean
goods and services and transmitting innovation across
the world (see next section). It is already creating such
markets. The decision by Walmart to reduce emissions
along its supply-chain has prompted Chinese producers
to innovate to reduce emissions. This means policy must
continue to aim at reducing tariff and non-tariff barriers
(such as fuel subsidies) for environmental goods/services
and aspire to setting something akin to a “level playing
field” with a broadly comparable global carbon price.
This is not likely soon, but a roadmap towards this desti-
nation is required.


In the meantime, and in order that unilateral policy can
effectively reduce emissions with limited risk of produc-
tion and emissions relocating, alternative policy arrange-
ments need to be deployed. A second best pragmatic ap-
proach, in the absence of an early global agreement, is
the establishment of sectoral agreements to establish a
“sectoral level playing field”.9 Where such agreements
cannot be reached then, and only then, should the threat
of trade policy in the form of domestic subsidies or bor-
der taxes be deployed. This can take the form of tran-
sitory allowances in tradable permit schemes (though
these must be withdrawn to the extent that production
diminishes and markets relocate) as has been deployed
in the early years of the EU Emission Trading System
(ETS). Or it could take the form of a unit price subsidy
equal to the difference between the actual global price
for a traded good or service and that which would pre-
vail with the application of a uniform global carbon price
(as recommended by the Garnaut review in Australia10).
Finally, it may take the form of a non-discriminatory
border tariff tax adjustment, which adjusts the price of
foreign imports in accordance with their carbon content
to make them compatible with domestic sectors facing
carbon pricing. Such tools must be retained as a “credible
threat” and a deterrent of last resort, but measures such
as these do risk a broader trade war which may hurt a
range of traded sectors for little gain.11 Yet in the pres-
ence of persistent lack of collaboration, especially from
developed economies, there needs to be a clear signal
that if the rest of the world moves ahead, these countries
must expect to miss out on new technological opportu-
nities and eventually face tariffs.12


Trade and business opportunities and costs


For all the commercial risks associated with early action
to reduce emissions, there are at least an equal number
of commercial risks associated with delayed action. The
world is becoming increasingly carbon constrained and
those businesses, governments and regions that plan
ahead and prepare to manage the transition stand to
gain the most from developing new technologies, taking
advantage of fast growing new markets and minimis-
ing costs by working with the investment replacement
cycle.


Firms in developed and developing countries have al-
ready begun to take advantage of the fast growing new
market. Toyota, Honda, GE, Duke Energy, Dupont,
Chevron, Shell and BP are all carbon exposed businesses
actively engaged in low-carbon innovation to prevent
being written out of a business. IT companies like IBM
and Cisco are also actively seeking to invest in smart con-
nected technologies like smart grids, smart buildings and
travel virtualisation, which reduce resource intensity.13


Some of the most successful and productive companies
providing the world’s renewable technologies are in de-
veloping countries. Suntech in China is among the
leading providers of solar technologies selling to over 80
countries worldwide, while Suzlon in India has become
one of the largest wind power companies. Indian compa-
nies are also busy developing electric cars and scooters,
improved efficiency in steel production, waste to energy
technologies and smart IT solutions.14 So trade itself
promotes growth and technology transfer and the global
transmission of technology and efficiency standards, and
it is vital thus that free trade is promoted as part of the
collaborative global solution to climate change.


In addition, South Korea is planning for green growth at a
national level and China is centring its Twelfth Five Year
Plan on the development of green industries.15 Crucially,
these strategic national plans are based not solely—or
even primarily—on concerns about the climate, they are
seen as part of a short- and long-term business opportu-
nity in leading the green revolution.


Even in the present more uncertain global green policy
environment, without as much of an ambitious and co-
ordinated a global policy response as might have been
hoped, private investment in new energy generation and
energy efficiency has quadrupled since 2004 according to
Bloomberg New Energy Finance (NEF). New investment
in clean energy is expected to surpass investment in con-
ventional energy generation in 2010, rising to between
USD 180 and USD 200 billion, 30 per cent up on the previous
year and compares with USD 46 billion invested in 2004.
The International Energy Agency estimates that energy
infrastructure investment will average more than USD
1 trillion per year over the next twenty years. To move to a
low carbon pathway consistent with 2º C warming, Project
Catalyst16 estimates that about USD 290 billion per annum
by 2020 of this total capital investment will be needed for
low carbon infrastructure in developing countries.


The opportunities for developing countries to receive
additional investment finance in the short term are also
significant. Developing countries can benefit from sell-
ing credits in carbon markets as well as official financing
designed to leverage private funds. Developing coun-
tries also stand to benefit from new technology trans-
fer and demonstration and in some case, opportunities
to leapfrog developed countries by establishing new
infrastructure.


57


Road to Rio(7)+20.indd 67 2/10/11 1:54:24 AM




The scale of new technologies, services and products re-
quired to shift to a low carbon economy is vast Most of
this will need to be delivered by the private sector, but
in order for businesses to invest, public intervention will
be necessary to drive new markets. This requires clear,
long-term market signals through credible policy and
transparent frameworks.17 Market instruments remain
the most efficient means to change behaviour without
discriminating between technologies and processes.
Consequently they are both more efficient and less
susceptible to rent-seeking activities where influential
vested interests seek to influence policy decisions at the
expense of consumers and citizens. Market mechanisms
can include carbon prices, standards and regulations
across product, technology and supply-chains18 and an
easing of planning restrictions to further drive energy ef-
ficiency and renewable energy. It also requires incentives
for accelerated investment in low-carbon technologies
so as to induce innovation that may not be privately vi-
able and measures to avoid deforestation, plan land-use
change and reduce and better re-use waste. Policy also
needs to apply to institutions, including common carbon
accounting standards, calculation methods, budgeting
and disclosure processes.


How much will the green revolution cost? It is extremely
difficult to quantify formally the dynamics of this pro-
cess. Standard economic models calculate the additional
marginal cost of deploying and operating new technolo-
gies relative to existing processes (for example renewable
versus conventional energy). Such models suggest that
stabilising at around 450 ppm CO2 equivalent might cost
one or two per cent of GDP.19 However, models do less
well at costing the dynamic of such a non-marginal eco-
nomic transformation of the kind we are likely to see this
century. Applying new technologies yields smarter ways
of using them through learning and experience, which
spurs further innovation. Knowledge spillovers from
such innovation can then be applied across other sectors,
as has been the case with technologies originating from
US military and aerospace programmes. Standard eco-
nomic models score most policy intervention as a distor-
tion in an otherwise efficient and optimal environment.
It therefore always constitutes a cost. But here we are
dealing with massive non-marginal changes in an exist-
ing inefficient system. Some models are just now coping
with market failure and waste, as well as with learning
and experience associated with new innovation. A few
even include knowledge spillovers. But all struggle to


model the ‘animal spirits’ and innovative dynamism usu-
ally associated technological revolutions. Entrepreneurs
understand the transformative value of such processes
even where economists fail to do so.


Conclusion


There is only one growth and development story, and that
is the story of green growth and resource efficiency. High
carbon growth will kill itself, ultimately because of the hos-
tile climate it generates, but before then through spiking
energy, mineral and raw material prices. With clear policy
frameworks, businesses in the developing and developed
world will supply innovation, entrepreneurialism and
manufacturing capabilities to transition to a low carbon
economy. But inducing the innovation required to deliver
the necessary growth requires the right policy framework,
founded on global collaboration across countries and sec-
tors. It requires a non-discriminatory, long-term price sig-
nal to encourage market dynamism, entrepreneurship and
creativity. There is also a need for openness, competition
and sharing of ideas and technologies.


The first-best outcome requires the developed world to
demonstrate the virtues of green growth to developing
countries, providing support and financing before ask-
ing developing countries to take on their own targets (at
which point further support and financing will become
necessary). This is vastly preferable in terms of efficiency
and equity to uncoordinated policy action applied at
different speeds and subject to border tariffs and other
threats and penalties.


Meeting the challenge is likely to generate a new revolu-
tion comparable to or exceeding that of electricity, tele-
graph, railways or internet – each of which promoted
a global productivity surge. To get there, businesses re-
quire clear, creditable long-term policy frameworks to
foster new innovation. We know the technologies and
economic incentives for effective action are available or
can be created. The blockages to progress are not eco-
nomic or technological; they are institutional, cultural
and political. Valuable time has been lost. The onus is on
policymakers, businesses and civil society to build a com-
mon understanding of the challenge and drive forward
human ingenuity. This will trigger the kind of open,
global collaborative creativity and innovation necessary
to drive global smart, clean and sustainable growth for
decades to come.


Dimitri Zenghelis
Senior Research Fellow at the Grantham Research Institute on Climate Change and the Environment at the London School of Economics and
a Senior Advisor to Cisco. He is also an Associate Fellow in the Energy, Environment and Development Programme at Chatham House, UK.
He was an Economic Adviser to the UK Government, worked with Sir Nicholas Stern on the ‘Stern Review on Economics of Climate Change’


and was Head of Economic Forecasting at HM Treasury. Prior to joining HM Treasury, Dimitri worked as a consultant with Oxford Economics and at the Institute
of International Finance, Washington DC on East Asia and S.E. Asia trade and investment flows, and macro economic policy. He also worked for Tokai Bank Europe.


AuthorTH
E


58


Road to Rio(7)+20.indd 68 2/10/11 1:54:25 AM




Endnotes


1 Details on the AGF co-chaired by the Prime Ministers of Ethiopia and Norway can be found at: http://www.un.org/wcm/content/site/climatechange/pages/
financeadvisorygroup.


2 See Project Catalyst: From Climate Finance to Financing Green Growth (November 2010).


3 The UNDP (HDR 2007/2008) estimated global extra costs for meeting Millennium Development Goals of USD86 billion p.a. by 2015. Fankhauser and Schmidt-Traub (2010)
estimate extra external financing necessary for meeting MDGs for Africa alone of USD 30 billion p.a. for next decade.


4 The report provides analysis of a full range of potential climate finance sources and quantifies the levels of finance that could flow from each in 2020. Sources include:
auctioning of emissions allowances, instruments in the aviation and maritime sectors, and the redirection of fossil fuel subsidies.


5 Full details can be found at http://www.un.org/wcm/content/site/climatechange/pages/financeadvisorygroup/pid/13300.


6 One-sided trading might yield large economic rents for low-carbon reductions in some poor countries and it may be pragmatic to consider some price differentiation to limit
excessive profits and reduce costs. Mixed price mechanisms might make mitigation finance stretch further, incentivise more marginal activities and limit an over-blown bonanza
in the cheapest opportunities.


7 The evidence base is not small: Input-Output studies, specific sectoral/industry studies, instrumental variable panel studies: U.S. state and global cross-border activity
following differential application of environmental policies. Stern Review: PIK; WRI; Peterson Institute; Carbon Trust; Climate Strategies; Climate Group; Australian Treasury;
Garnaut Review; IEA; McKinsey; and numerous academic papers.


8 See Antweiler, Copeland and Taylor (2001).


9 This can take the form of the global application of a uniform carbon price in a specific sector or commonly agreed efficiency or technology standards. Agreement between
firms may not be much easier than between countries and targeted assistance may be required to support exposed firms that must invest to reduce emissions.


10 See http://www.garnautreview.org.au/domino/Web_Notes/Garnaut/garnautweb.html.


11 There remains a complex and lengthy debate about whether such tariffs would be WTO compatible. Each case will have to be argued out, resulting in likely long and
protracted legal wrangles involving claims and counter claims over the definition of “comparable effort”.


12 However, the value of such instruments should not be overstated and they remain a last resort. For example, from a U.S. perspective imported Chinese steel is not a major
threat to domestic production whereas imported European and Canadian steel is, and yet these sources are likely to incorporate ‘comparable’ or greater effort on carbon
abatement than the US.


13 See Esty and Winston (2006) and also Friedman (2008).


14 Companies include Reva, Vijiya, SELCO, Tata steel and Wipro technologies.


15 Of the seven “Magic Growth sectors” identified in the Twelfth Five Year Plan, three are low-carbon industries: clean energy, energy efficiency, clean energy vehicles; the
others are high-end manufacturing.


16 For more information, see www.project-catalyst.info.


17 Though substantial short run benefits are also likely to accrue, see Zenghelis (2011) and Bowen et al, (2010). See also ILO Green Jobs Report (2008).


18 For example by rationalizing the 15 or so international smart grid standards currently in operation.


19 See Stern Review 2007. Models of course vary greatly in their assumptions and the variations lead to different results. Key assumptions include: levels and growth rates of
emissions; flexibility between sectors, technologies, gases, countries; and the rate of discovery of new technologies.


References


Antweiler, W., Copeland, B. R. and Taylor, M. S.,
(2001), Is free trade good for the environment? Ameri-
can Economic Review 91(4): 877–908; and Copeland,
B.R. and Taylor, M. S., (2004), ‘Trade, growth and
the environment’, Journal of Economic Literature,
XLII: 7–71.


Bowen. A., and Stern, N. (2010). Environment Policy
and the Economic Downturn. Oxford Review of
Economic Policy, Volume 26, Number 2. pp. 137–163.


Esty, Daniel and Winston, Andrew, Green to Gold:
How Smart Companies Use Environmental Strategy
to Innovate, Create Value and Build Competitive
Advantage (Yale University Press, New Haven, 2006).


Fankhauser and Schmidt-Traub (2010). From adap-
tation to climate-resilient development: the costs of
climate-proofing the Millennium Development Goals
in Africa. http://www.uneca.org/adfvii/documents/
Resources/CCCEP_Grantham%20-%20Cost%20
of%20Climate-proofing%20MDGs%20in%20Africa.
pdf.


Friedman, Tom, Hot, Flat and Crowded: Why the
World Needs a Green Revolution – and How We Can
Renew Our Global Future (Farrar, Straus & Giroux,
New York, 2008).


Garnaut R (2008) The Garnaut Climate Change
Review. Cambridge University Press. Commissioned
by all of the governments of Australia’s federation.
http://www.garnautreview.org.au/.


Houser, Trevor et al., Leveling The Carbon Playing
Field: International Competition and US Climate
Policy Design, Peterson Institute for Interna-
tional Economics and World Resources Institute,
Washington DC, May 2008.


IEA (2008), World Energy Outlook 2008, Paris,
International Energy Agency.


IEA. (2009). The Impact of the Financial
and Economic Crisis on Global Energy Investment.


ILO/UNEP/IOE/ITUC. (2008) The Green Jobs
Report: Towards Decent Work in a Sustainable,
Low-Carbon World.


See: http://www.ilo.org/wcmsp5/groups/public/
---dgreports/---dcomm/---webdev/documents/
publication/wcms_098487.pdf.


Project Catalyst From Climate Finance to Financing
Green Growth Briefing paper, 23 November 2010.
Stern, Nicholas, The Economics of Climate Change:
The Stern Review (CUP, Cambridge, 2007).


Stern, Nicholas (2009a), A Blueprint for a Safer
Planet, London, Bodley Head.


U.N. Human Development Report 2007/2008, the
United Nations Development Programme published
in November 2007.


U.N. Secretary-General’s High-level Advisory Group
on Climate Change Financing (AGF) Report of
the Secretary-General’s High-level Advisory Group
on Climate Change Financing (2010) http://www.
un.org/wcm/content/site/climatechange/pages/
financeadvisorygroup/pid/13300.


WEF (2009) Task Force on Low Carbon Prosperity-
ity Report. https://members.weforum.org/pdf/
climate/SummaryRecommendations_TFLow
Carbon Prosperity.pdf.


Zenghelis, D. A. (2011) A macroeconomic plan for
a green recovery, Greantham Research Institute on
Climate Change and the Environment, policy paper,
January. http://www2.lse.ac.uk/GranthamInstitute/
publications/Policy/docs/PP_macroeconomic
green-recovery_Jan11.pdf.


59


Road to Rio(7)+20.indd 69 2/10/11 1:54:26 AM




Existing climate-related funds and UNFCCC mecha-
nisms have failed to generate significant new and ad-
ditional finance to support what Lord Nicholas Stern, a
member of the High Level Advisory Group on Climate
Change Financing1 (AGF), calls the “new industrial revo-
lution” towards a low carbon future. Moreover, past ex-
perience shows that this daunting challenge requires sig-
nificant new investment but also greater efficiency with


financial proposals, and greater access and effective use
of climate-related resources. The highly pressing need for
coordination and harmonization is evident if one consid-
ers the status quo: lack of transparency, weak regulation
or the inexistence of compliance mechanisms governing
eligible funds administered by the Conference of the Par-
ties (COP) authority, public and private sector investment
channels or carbon finance.


The current climate change financial governance system
is fragmented. It is characterized by a myriad of funds
and instruments autonomously managed through ad-hoc
rules and governance structures which make them diffi-
cult to access. More than 50 international public funds, 60
carbon stock markets and 6,000 private equity funds are
already providing green finance.2


ntil now it has been obvious
that the existing sources of climate
change finance for both mitigation
and adaptation fall short of
the needs identified by developing
countries.


GEF


CARBON MARKET


WB CLIMATE
INVESTMENT FUNDS (CIF)


OTHER


TOTAL


LDCF & SCCF


ADAPTATION FUND


WB CLIMATE
INVESTMENT FUNDS (CIF)


OTHER


TOTAL


0.25


8+


5+


10


0.3


0.1


0.5


0.6+?


10


P.A. (per annum)


P.A.


TOTAL


P.A.


P.A.


P.A.


TOTAL


P.A.


P.A.


MITIGATION (USD BILLIONS) ADAPTATION (USD BILLIONS)


Current dedicated resources for climate change in developing countries


Making climate change
finance work for human
development


Lucas Assunção and Gilles Chevalier argue that the future climate change financial regime should enable the design and implementation of adapta-
tion and mitigation measures that match developing country and vulnerable community needs. They call for a bottom-up approach to climate change
policy making, derived from Aid Effectiveness Principles and linked to the Millennium Development Goals Tracking System. There is, they say, a need
for technology transfer and capacity building to ensure that climate financing can be effectively absorbed by developing countries and become, as a
side effect, a catalyst for poverty alleviation. The authors propose a financial and governance framework that helps vulnerable communities minimize
the risks of climate change while focusing on their development strategies. This, in their view, will enable developing countries to engage effectively
in the global green economy through technological and business synergies.


Lucas Assunção and Gilles Chevalier60


U


Source: World Bank, April 2009


Road to Rio(7)+20.indd 70 2/10/11 1:54:29 AM




Host country
approval


Project
validation


Project
registration


Project
verification


CER
issuance


61


Regrettably, most of these financial windows do not
necessarily take into consideration the explicit needs of
developing countries nor do they involve them in the
decision-making process of fund allocation. Moreover,
they require extensive and costly national expertise for
recipient countries and investors who need to perma-
nently adapt to this opaque fragmented supply model
and struggle to identify the most suitable financial instru-
ment for each situation.


For instance, the Clean Development Mechanism (CDM)
created by the cap-and-trade Kyoto Protocol shows a very
high potential in promoting sustainable development as-
sociated with greenhouse gas (GHG) emission reductions
in developing countries. Despite its success in generating


roughly USD 5 billion in new investments in just five years
since 2005, it remains a modest portfolio of projects.3 Fur-
thermore, due to the technical complexity and the length
of the project approval procedure, only five countries are
expected to generate 80 per cent of carbon market credits
by 2012. Considering the major beneficiaries of the CDM
have been China, India, Brazil, South Korea and Mexico
and that less than 2 per cent of the benefits will go to Sub-
Saharan Africa, one can conclude that under the current
state-of-play the supposedly win-win CDM model partly
misses its objective. To that extent, the recent steps for-
ward registered by the COP16 4 to streamline and simplify
the CDM and CER (Certified Emission Reductions) regis-
tration and emission procedure as well as the encourage-
ment for further standardization of the baselines,5 dem-
onstrate negotiators are on the right track.


In order to design an appropriate climate change financial
framework, negotiators must address the following ques-
tions: what is the ultimate objective of a much needed
new climate finance governance structure? And, what are
the fundamentals it has to rely on to fulfill its objectives?


The need for a paradigm shift: human develop-
ment as leitmotiv for tackling climate change


Climate change remains a daunting development chal-
lenge, requiring a fundamental structural transforma-
tion of the way we produce and consume products and
services. Moreover, emerging consensus that the costs
of inaction tend to increase with time creates additional
pressure to act now both in mitigating emissions and in
adapting to adverse effects. It follows that unless the in-
ternational community makes an important effort for a
profound paradigm shift, unabated climate change and
its impacts may reverse the progress made in achieving
the Millennium Development Goals and in reducing hu-
man poverty. This serious predicament underscores the


need to ensure that integrated strategies implemented
to tackle climate change contribute directly to poverty
eradication and sustainable development.


An effective response to climate change therefore needs
to be seen in the context of comprehensive action towards
meeting sustainable human development goals. Such a
‘human development approach’ includes the various pa-
rameters that enable the process of enlarging people’s
choices and capabilities, for example by enabling them to
live a longer and healthier life, having access to knowl-
edge, having a decent standard of living and participating
in the life of their community and the decisions that af-
fect their lives.6


Among today’s scientific community, few contest that
GHG concentrations in the atmosphere are induced
by human activity and that climate change has already
started to intensify, causing an increase in the frequency
of extreme weather events such as droughts, floods, or
rising sea levels. This in turn will exacerbate the stress
on economic and humanitarian aid systems. Over the


6 to 12 months


Project
Developer


DNA


DOE


CDM
Executive


Board


1.5 months Crediting period of the project


Source: The Project Cycle, CDM & MDG Carbon Facility, Robert Kelly, UNDP EEG


The CDM project cycle


Project
feasibility


assessment
/PIN


CDM
project


development
/ PDD


Road to Rio(7)+20.indd 71 2/10/11 1:54:30 AM




past twenty years the number of natural disasters has
increased by 400 per cent while the number of people
affected each year has risen from around 174 million to
over 250 million, with over 90 per cent of those affected
living in developing countries.7 Climate change has had
an effect on rainfall, randomness in extreme temperature
variation and water availability in developing countries.
The World Bank estimates that 2 billion people may lack
sufficient drinking water by 2050. And, according to
the 2007-2008 Human Development Report, drought-
riden areas in Sub-Saharan Africa could expand by 60 to
90 million hectares with dryland zones suffering losses
worth up to USD 26 billion by 2060. As a result, climate
change impacts will likely trigger human security con-
cerns as vulnerable groups will have to fight to preserve
their vital subsistence needs and basic human rights.


Short of being alarmist or fatalistic, this frightening pic-
ture should prove the case that the interplay of environ-
ment, social and economic impacts of climate change
calls for a strategy built on collective and collaborative ac-
tion including both developed and developing countries.
This means that response measures must go beyond only
mobilizing new climate finance, but should take into con-
sideration implications across different sectors, including
energy, health, education, agriculture, water resources,
transport, trade and the economy, as well as research and
development policies.


Experience has shown that comprehensive and coherent
development planning frameworks, including national
and decentralized sustainable development strategies,
are useful means of integrating all of the aspects related
to climate change and human development. Therefore,
UNFCCC Parties may wish to go beyond emission re-
duction and adaptation measures and consider the ex-
perience gathered with human development strategies
in order to ensure that the climate regime is not discon-
nected from human development objectives. Useful tools
and principles that have been developed to maximize aid
effectiveness and address poverty alleviation could be in-
corporated in the forthcoming climate change financial
governance.


An existing cross-sectoral tracking system
for strategic impact assessment: the MDGs


Adopted by world leaders during the 2000 Millennium
summit and set to be achieved by 2015, the Millennium
Development Goals (MDGs) represent a framework of
cooperation and partnership for tackling extreme poverty
in its many dimensions.


If this global strategy is to deliver more than just politi-
cal wishful thinking, it might result in a 50 per cent re-
duction in poverty levels, tens of millions of lives being
saved and in promoting access to the global economy to
a significant percentage of the world population. One of
the ambitious paradigm shifts the MDGs suggest lies in
the de-compartmentalization of the traditional “silo” de-
velopment approach by offering a universal framework
where all actors (multilateral, bilateral, public and the pri-
vate sector, civil society and NGOs) can effectively inter-
act and share their expertise, political support and bring
their added value to reach a common target.


Even though the overall MDG framework includes com-
bating climate change as a cross-sectoral prominent objec-
tive, and as a specific quantifiable and measurable target,
UNFCCC parties have not utilized the MDG roadmap as
an Ariadne’s thread for the future financial regime. That
clearly shows a disconnect in current multilateral policy-
making and calls for greater understanding of climate
change as a development policy challenge.


To illustrate this lack of policy coherence and the recur-
rent tunnel vision in international negotiations, one only
has to go as far back as September 2010 in the MDG Sum-
mit conclusions,8 where Heads of State reiterated their
commitment to achieve the MDGs by 2015. Yet, at the
UNFCCC COP15 in Copenhagen less than 90 days later
the same Member States did not agree on a climate jus-
tice approach which would recognize the inter-connect-
edness of climate change and the need to give special at-
tention to its effect on poor people, the disempowered,
the marginalized and vulnerable groups such as women
or indigenous groups.9


Thus, in recognizing the close correlation between combat-
ing climate change and human development it would seem
that policy- and decision-makers currently negotiating on
the partnerships and governance for the climate finance
framework stand to gain by adopting the MDG implemen-
tation tracking system. Likewise, by referring to past experi-
ence with aid effectiveness principles they can build an effi-
cient and coherent financial mechanism under the climate
regime in general and the Kyoto Protocol in particular.


62


Road to Rio(7)+20.indd 72 2/10/11 1:54:32 AM




1. Eradicate Extreme Poverty and Hunger
Agricultural production and food security, access to clean and abundant water resources and gainful
employment that underpin the solution to extreme poverty and hunger are vulnerable to climate change.


2. Achieve Universal Primary Education
Climate change stresses pose additional burdens on agricultural production and other subsistence activities
like water collection, which may burden families enough to remove children from school. Livelihood activities
must become more resilient to future climate for education goals to be met. Climate change also threatens
to destroy infrastructure (e.g. schools) and increase the displacement and migration of families thus
disrupting and limiting education opportunities.


3. Promote Gender Equality and Empower Women
Women, the majority of the world’s poor, are the most vulnerable to climate change. Their traditional roles
as the primary users and managers of natural resources, primary caregivers, and unpaid laborers mean they
are involved in and dependant on resources that are put most at risk by climate change. Further women lack
rights and access to resources and information vital to overcoming the challenges posed by climate change.


4. Reduce Child Mortality
Climate change will worsen health primarily through: increased vulnerability to poor health due to reduced
food security and water security; water-borne diseases associated with reduced water quality due to floods
and drought; more favourable conditions for the spread of vector-borne and air-borne diseases; and the
direct link between temperatures and heat stress.


5. Improve Maternal Health
Climate change will worsen health primarily through: increased vulnerability to poor health due to reduced
food security and water security; water-borne diseases associated with reduced water quality due to floods
and drought; more favourable conditions for the spread of vector-borne and air-borne diseases; and the
direct link between temperatures and heat stress.


6. Combat HIV/AIDS, Malaria and other Diseases
Climate change will worsen health primarily through: increased vulnerability to poor health due to reduced
food security and water security; water-borne diseases associated with reduced water quality due to floods
and drought; more favourable conditions for the spread of vector-borne and air-borne diseases; and the
direct link between temperatures and heat stress.


7. Ensure Environmental Sustainability
Climate change threatens environmental sustainability because it will cause fundamental alterations in
ecosystem relationships, change the quality and quantity of available natural resources, & reduce ecosystem
productivity. The poor depend on these resources for their day-to-day survival and livelihoods in many
parts of the developing world.


8. Global Partnership for Development
Climate change threatens to exacerbate current challenges to the achievement of the MDGs.
Funding for development and adaptation must be greatly increased to meet the needs of the poor.


Below are some of the ways climate change affects the MDGs


Source: http://www.undp.org/climatechange/cc_mdgs.shtml


63


Road to Rio(7)+20.indd 73 2/10/11 1:54:33 AM




Why reinvent the wheel when the founding principles
of a successful climate cum development strategy
already exist?


In the scenario of a considerable increase in new and
additional climate finance, some indisputable lessons
gathered through 60 years of international development
aid may be a useful guide in paving the way for a success-
ful climate cum development strategy.


The 2005 OECD Paris Declaration and the 2008 Accra
Agenda for Action (AAA) established targets and indica-
tors that provide benchmarks for the quality of develop-
ment aid10 allocation. This matrix was originally designed
to assess and enhance Official Development Aid (ODA)
but it may perfectly fit the complexity associated with the
efficient disbursement of new climate change finance for
mitigation and adaptation.


As in the case of climate change negotiations, the well-
established Paris and Accra aid framework addresses issues
and principles such as ownership, alignment, harmoniza-
tion, capacity building, effective result monitoring and
mutual accountability. These have been present in climate
negotiations and deliberations. Importantly, this very
same developmental approach was used in the definition
of the AGF principles.11 Linking the relevant experience
in setting up the AAA aid framework with the principles
that helped guide the mobilization of new and additional
climate finance could thus inspire climate negotiators
as they define the future climate change financial aid
framework.12


A good example of the symmetry between the two sets
of principles is the ownership and alignment principles
contained in the founding 2005 OECD Paris declaration.
These prescribe that all kinds of external assistance must
directly support developing country development efforts,
while fully respecting their needs and ensuring policies
emerge out of genuinely country-led processes.13 This
is most appropriate when talking about mitigation and
adaptation funds. The new financial strategy will be suc-
cessful only if the financial aid delivery system guarantees
that beneficiary countries are fully involved and commit-
ted at all levels of decision-making. It therefore follows
that we should question the management and disburse-
ment principles of the current vertical funding systems
that do not sufficiently associate developing countries in
policy or decision-making processes. Emerging models
such as the new Technology Executive Committee14 or
the Adaptation Fund, which ensure representation from
the five U.N. regional groups, the small island developing
states, the Annex I Parties as well as the non-Annex I Par-
ties, should be inspiring in terms of political empower-
ment and ownership.


However, recent experience indicates that mitigation
and adaptation projects are often unrelated with national


development strategies and tend to be mostly supply-
driven. In attempting to reduce the so-called transac-
tion costs, such projects tend to be formulated with a
top-down approach, often imposing foreign aid rules
to national circumstances in beneficiary countries. This
breaches the alignment principle and would prove to be
counterproductive over time. Directly relating climate
finance to country priorities and strategies is a sine qua
non condition for new mitigation and adaptation finance.
Additionally, greater predictability and reliability of the
new finance must be secured to preserve the coherence of
climate policy with national development strategies.


For these reasons, the new climate finance mechanism
must make subsidiarity15 the cornerstone of project im-
plementation. This would allow developing countries
to identify climate policy cum development priorities,
decide where to direct funding and how to connect it,
for instance, to their Nationally Appropriate Mitigation
Actions (NAMAs). It would also enable governments
to appoint a lead ministry that would manage national
climate strategies and the interface with other sectoral
ministries. Instead, current supply-driven practices often
make national entities dependent on donor priorities and
preferences to work with selected ministries.16 This calls
for greater alignment of climate finance to capacity needs
of beneficiary countries. Similarly, this “ownership and
alignment shift” implies that beneficiary country govern-
ments take full responsibility to align national climate
change strategies with benefits for local communities and
vulnerable groups. As more than half of GHG emissions
are influenced by local investment options, including lo-
cal land use, transport and energy planning, sub-national
authorities must be part of decisions, choices and climate
policy-making processes.17 One way to reflect national re-
alities and specific needs in the planning and delivery of
climate change cum development strategies is to rely on
an inclusive approach that ensures active participation of
stakeholders, including public and private sectors, repre-
sentatives of civil society and decentralized cooperation
partners.


The effectiveness of the future architecture for global
climate change finance will also very much depend on
its capacity to foster harmonization and coordination
among existing funds and funding mechanisms. Today’s
patchwork of instruments tends to duplicate and overlap,
leading to competition and confusion. More damaging,
the fragmented financial mechanism landscape limits
the impact of climate projects. A number of financing
sources are under-represented among certain developing
countries. For instance, the Sub-Saharan region accounts
for less than one per cent of total private investment in
clean energy whilst it remains the region with the great-
est needs. Taking that into consideration, the 16th Confer-
ence of the Parties moved forward. Indeed, the establish-
ment of the Green fund should facilitate the channeling
of resources as well as the geographic and thematic allo-


64


Road to Rio(7)+20.indd 74 2/10/11 1:54:34 AM




cation of climate finance. Aside from that, Parties agreed
to revise the Clean Development Mechanism by boosting
the development of top-down baseline and monitoring
methodologies that are applicable to underrepresented
project activity types. Moreover, Cancun provided a loan
scheme to support the development of CDM project ac-
tivities in countries that support a programmatic shift and
that so far have faced difficulties to access these funds.


Greater climate finance harmonization would thus ben-
efit donors and recipients alike. However, national ca-
pacity building is the vehicle to efficient funds and is the
counterpart of ownership. Indeed this development of
knowledge and technical transfer is crucial for developing
countries to access and absorb climate change funding
and ensure integration in national strategies. Capacity
building enhances the ability of countries to evaluate and
choose the right options to address their country con-
cerns thus reinforcing their leadership in the process.


Developed countries and private companies share a re-
sponsibility to cover incremental financial costs and
transfer of technology required to achieve a low carbon
transition and respond to the irreversible impact of cli-
mate change through adaptation measures. For their part,
developing countries assumed their responsibility to ef-
fectively utilize these investments. Without this binding
and mutual commitment, developing countries will not
have any incentive to take part in a global agreement and


will not be able to embark on a long-term energy policy
reform process.


The COP13 Bali Action Plan had already called for effec-
tive responses to climate change with actions undertaken
by the Parties that are measurable, reportable and verifi-
able (MRV). Taking into account differentiated responsi-
bility and respective capabilities, the Cancun Agreement
strengthened the idea that all initiatives are designed so
as to generate performance information and use it for
continuous improvement. Keeping in mind the comple-
mentarity between climate change actions and human
development strategies, there is much to gain in con-
necting the MRV principle with the Results Base Manage-
ment framework that was applied to the MDGs. Indeed,
MDG goals, targets and indicators were screened for how
‘SMART’ (specific, measurable, agreed, realistic and time
bound) they were. This tracking system constitutes one
of the most detailed cross-sectoral evaluation matrixes
for measuring policy impact on human development. It
relies on a joint commitment and mutual responsibility
of both donors and beneficiaries. By making reference to
the MDG tracking system, UNFCCC negotiations could
also help address the shared but differentiated respon-
sibility that exists between developed and developing
states when referring to financial accountability. More-
over it would underpin the necessity to provide develop-
ing countries with the capacity to monitor and evaluate
their nationally-led strategies.


65


BILATERALS


MULITILATERALS


MULTI-DONOR TRUST FUNDS


Dedicated Climate Funds in an Emerging Global Climate Finance Architecture


ETF-IW
(UK)


Climate
Investment


Funds


SCF CTF


PPCR SREP FIP


FCPF


ICI
(Germany)


World Bank


Hatoyama
Initiave
(Japan)


IFCI
(Australia)


Indonesia
Fund


Amazon
Fund


GCCA
(EC)


Adaptation
Fund Board


KPAF CBFF GEEREF


MDG-F
(Spain) UN - REDD


SCCF GEF
Trust Fund


LDCF


SPA


UN
Development
Programme


Global
Environment


Facility


African
Development


Bank


European
Investment


Bank


Source: www.climatefundsupdate.org


UNFCCC and other UN bodies


Multilateral Development Banks


Bilateral


Multi-donor trust funds


Direct funding to projects


Funding to Multilateral funds


Road to Rio(7)+20.indd 75 2/10/11 1:54:35 AM




The distinct role of the UN system


Considering the interdependency of human develop-
ment and climate change impacts, and given the neces-
sity to significantly scale-up, harmonize and coordinate
funding, the future finance and partnerships framework
will have to be effective.


Predictability and sustainability in financing are impor-
tant not only for developing countries but for all stake-
holders, especially private investors, whether domestic or
foreign. As the AGF report mentioned, reducing green-
house gas emissions will require significant levels of in-
vestment, both private and public. And the UNFCCC
estimates that 86 per cent18 of the financing required to
address climate change will need to come from the pri-
vate sector. Indeed scarce public resources will need to be
used in a highly catalytic manner, and governments must
make sweeping efforts to create an enabling environment
for private investment.


U.N. agencies can help build absorptive capacities and
an enabling policy environment in developing countries
to attract private investment flows. They can also assist
developing countries in improving their country risk pro-
file to increase the return on projects funded by private
investors.


The U.N. system already develops, manages and coordi-
nates various financial mechanisms, which provide funds
for catalyzing capital flows towards low carbon and pro-
poor measures. It also has unparalleled experience in


ensuring that funds are used in meeting development
objectives and priorities. With more than USD 4 billion be-
ing managed through multi-donor trust funds and over
USD 2.6 billion channeled through the Multilateral Fund
of the Montreal Protocol alone, the United Nations has
established itself as an effective manager and efficient dis-
burser of climate-related funds. The United Nations’ well
tested and increasingly effective asset base can play an
important role in helping countries mobilize the needed
climate investment.


Due to its uneven geographical distribution of adverse im-
pacts, climate change is expected to exacerbate inequality
among countries. Taking into consideration differences
in economic development paths, there is a need to prop-
erly address the issue of mitigation and adaptation costs,
the shared of responsibility and the transfer of knowledge
and technology necessary for successful implementation
of national strategies in developing countries. Therefore,
the future financial governance body will have to ensure
“equity” in financial efforts and balance in the thematic
allocation of funds (i.e. funds for mitigation, adaptation,
transfer of technology and for capacity building). Once
more, by establishing a Technology Executive Commit-
tee whose aim is to analyze needs and technologies to be
transferred to developing countries and by setting up a
Climate Technology Centre Network that matches tech-
nology needs and suppliers, the Cancun Agreement19


provides an operational tool to help developing coun-
tries access low carbon technology and adapt to climate
change.


66


Source: www.climatefundsupdate.org/graphs-statistics/areas-of-focusorg/graphs-statistics/areas-of-focus


Adaptation


Mitigation - general


Mitigation - REDD


Multiple foci


64.9 %
2.8 %


18.5 %13.8 %


Current thematic allocation of funds


Road to Rio(7)+20.indd 76 2/10/11 1:54:36 AM




To date, mitigation and adaptation strategies have been
top-down, supply-driven and project oriented, however
the U.N. advocates an approach that is country-led, pro-
gramming-oriented and integrated to national develop-
ment strategies. The U.N. assists developing countries in
aligning proposed climate activities with national devel-
opment priorities and needs –a key factor in determin-
ing policy and investment success and yielding a double
dividend of climate and development impacts. It works
to ensure developing countries can exercise choice and
ownership over their climate strategies and policies and
can benefit from equitable access to climate financing
and support.


Furthermore, scaling up and managing the global fund-
ing of the post Kyoto regime is an important part of the
future climate finance governance mission. Equally, it is
crucial to deploy the best know-how in allocating these
funds and in implementing effective climate policy in the
field.


Through this lens, the United Nations system delivers
incomparable value added to multilateral and regional
development bank lending: it provides a global presence
through country and regional offices with unmatched in-
country networks of staff and experts, as well as expertise


in climate-relevant sectors. It has the mandate, the ex-
perience, and the human resources to assist countries in
developing their own national capacities to access climate
finance. The agencies of the United Nations have a long
and proven track record in supporting governments to
address various barriers to create a conducive environ-
ment or ‘readiness’ for climate investment. This technical
assistance and capacity building can have a high leverage
ratio, creating the demand for financing that can then be
fulfilled through public funds and direct private invest-
ment. In doing so, the special circumstances of small de-
veloping and least developed countries are considered.


However, the U.N. will only fulfill its mission if it also in-
tegrates and associates itself with other climate change
actors’ expertise and creativity. Taking into account the
unprecedented amount of money that will have to be
channeled, disbursed and implemented through a single
coordination mechanism, it will be crucial to seek syn-
ergies with major multilateral and regional development
banks in order to benefit from their know-how and avoid
creating parallel competing structures. The time has
come to build an attractive and highly competitive hu-
man resources base within the U.N. in order to face and
respond efficiently and effectively to the titanic amount
of work a successful global climate change strategy will
bring about.


67


Lucas Assunção
Gilles Chevalier


Economic Affairs Officer in UNCTAD’s Trade, Environment,
Climate Change and Sustainable Development Branch.


Prior to that, he worked at UNDP, specializing in local development and integrated
planning frameworks and served the Belgian Government as Advisor for
International Affairs. Mr. Chevalier holds a Masters in European Political and
Administrative Studies from the College of Europe, in Political Sciences and
International Relations from the Université Libre de Bruxelles and a Bachelor of
Arts in Communication and Journalism from IHECS.


AuthorsTHE


Head of UNCTAD’s Trade, Environment, Climate Change and
Sustainable Development Branch, where he is responsible
for coordinating and implementing activities related to


trade, investment and development aspects of biodiversity, climate change, bio-
fuels including investment opportunities under the Kyoto Protocol. Mr. Assunção
has over twenty years of work experience on issues related to environment and de-
velopment. He worked previously as Executive Assistant to the Secretary-General
of the 1992 Earth Summit, and Economist at the Climate Change secretariat. He
initiated his education at the University of California, Berkeley and holds an M.Sc. in
Economics from the Pontificia Universidade Catolica of Rio de Janeiro, later pursuing
studies at the Harvard Institute for International Development.


Road to Rio(7)+20.indd 77 2/10/11 1:54:38 AM




Endnotes


1 High Level Advisory Group on Climate Change Financing website: http://www.un.org/wcm/content/site/climatechange/pages/financeadvisorygroup


2 Yannick Glemarek et al., Charting a New Low Carbon Route to Development: A Primer on Integrated Climate Change Planning for Regional Governments,
chapter 2, UNDP, New York, June 2009.


3 In State of Play of CDM Investment, UNCTAD document: UNCTAD/DITC/BCC/2009/3, and Report of Expert Meeting on Trade and Climate Change
UNCTAD document: UNCTAD/DITC/TED/2010/6.


4 Further guidance relating to the Clean Development Mechanism, UNFCCC COP16, December 2010, Cancun (see: http://unfccc.int/2860.php).
5 “Standardized baseline” as a baseline established for a Party or a group of Parties to facilitate the calculation of emission reduction and removals and/
or the determination of additionality for Clean Development Mechanism project activities, while providing assistance for assuring environmental integrity,
UNFCCC, COP16, Cancun, December 2010.
6 Definition from UNDP Human Development Report, 1990: www.hdr.undp.org.


7 Magrath, I. Bray & K. Scriven, Climate Alarm: Disaster Increase as Climate Change Bites. Oxfam International, London, 2007. See: http://www.oxfam.org.uk/
resources/policy/climate_change/bp108_weather_alert.html.


8 Sixty-fifth session of the U.N. General Assembly: Keeping the Promise: United to Achieve the Millennium Development Goals, New-York, 2010.
http://www.un.org/en/mdg/summit2010/


9 Mia Mc Donald, Climate Change Impacts on the Achievement of the Millennium Development Goals: Can We Afford Not to Integrate? Realizing Rights,
GCAP & GCCA, September 2010.


10 The Paris Declaration on Aid Effectiveness (2005) and the Accra agenda for Action (2008), OECD: http://www.oecd.org/dataoecd/11/41/34428351.pdf.


11 AGF principles: efficiency, predictability, incidence and equity, practicality, acceptability, additionally, reliability.


12 For the High Level Advisory Group on Climate Change Finance Terms of Reference and guiding principles see http://www.un.org/wcm/content/site/
climatechange/pages/financeadvisorygroup.


13 The Paris Declaration on Aid Effectiveness (2005) and the Accra Agenda for Action (2008), OECD: http://www.oecd.org/dataoecd/11/41/34428351.pdf.


14 Outcome of the work of the Ad Hoc Working Group on long-term Cooperative Action under the Convention, Annex IV, UNFCCC COP16, Cancun,
December 2010 see: http://unfccc.int/files/meetings/cop_16/application/pdf/cop16_lca.pdf.
15 The Oxford English Dictionary defines subsidiarity as the idea that a central authority should have a subsidiary function, performing only those tasks
which cannot be performed effectively at a more immediate or local level. The concept is applicable in the fields of government, political science and in the
management of large organizations. Subsidiarity is, ideally or in principle, one of the features of federalism. Source: http://www.wordiq.com/definition/
Oxford_English_Dictionary.


16 Nigel Thornton, Realizing Development Effectiveness: Making the Most of Climate Change Finance in Asia and Pacific, Capacity Development for
Development Effectiveness Facility, October 2010.


17 Charting a New Low Carbon Route to Development: A Primer on Integrated Climate Change Planning for Regional Governments, UNDP, New York, 2009


18 Report on the analysis of existing and potential investment and financial flows relevant to the development of an effective and appropriate international
response to climate change, Secretariat of the UNFCCC, Bonn, Germany, 2007.


19 See Part II. Enhanced Action on Adaptation, Outcome of the work of the Ad Hoc Working Group on long-term Cooperative Action under the Convention,
UNFCCC COP16, Cancun, December 2010. See: http://unfccc.int/files/meetings/cop_16/application/pdf/cop16_lca.pdf.


68


www.unctad.org


Road to Rio(7)+20.indd 78 2/10/11 1:54:40 AM




Against a background of political commitment to include environmental, social and governance (ESG) concerns in business prac-
tice, the Global Reporting Initiative (GRI) presents the GRI Sustainability Reporting Framework. GRI describes this as an integrated
approach to economic growth and sustainable development, where the mainstreaming of ESG disclosure leads to the convergence of
economic, social and environmental pillars. GRI argues that companies and organizations that follow the GRI Reporting Framework
are “transparent about their impact on society, paving the way to a green economy and ultimately sustainable development”.


Environmental, social and
governance disclosure to manage
the change to a green economy
on the path to sustainable
development
E x p E r i E n c E s • s u c c E s s F a c t o r s • r i s k s • c h a l l E n g E s 69


Introduction
It is now almost four decades since the sus-
tainable development principles and com-
mitments were first articulated in Stock-
holm in 1972; followed by Rio in 1992 and
Johannesburg in 2002. These principles
and commitments remain valid today.
Despite some achievements, substantial
challenges remain in the implementation.
The strong involvement and participation
of the business sector1 in implementing
internationally agreed goals is crucial. In
the last ten years, Corporate Social Res-
ponsibility (CSR) has spread impressively
and currently plays an important role, as
noted by several delegations and major
groups at the First Preparatory Commit-
tee for the U.N. Conference on Sustainable
Development.2


A study by UNCTAD highlighted that,
“CSR can present policy makers with new
options and tools for addressing key de-
velopment challenges”.3 The convergence
of environmental, social and economic
considerations in the economy represents
a key issue in achieving internationally
agreed objectives in the area of sustainable
development.


How can the change to a green economy
on the path to sustainable development
be managed? The Global Reporting Initia-
tive (GRI) strongly believes this is possible,
encouraging business and all organiza-
tions to disclose environmental, social and
governance (ESG) performance alongside
financial performance. Through ESG


disclosure, it is possible to monitor and
manage the change to a green economy,
paving the way to identifying the gaps that
need to be closed to achieve internationally
agreed objectives. GRI offers guidance
to organizations and companies that
want to manage their change to a green
economy and contribute to sustainable
development. Those that follow the GRI
Sustainability Reporting Framework –the
world’s most widely used ESG reporting
guidelines– are transparent about their
impact on society, and demonstrate com-
mitment to progressing the green economy
and, ultimately, sustainable development.


Road to Rio(7)+20.indd 79 2/10/11 1:54:41 AM




The Global Reporting Initiative (GRI) is a
multi-stakeholder organization that has
pioneered, through an inclusive and open
process, the development of the world’s
most widely used reporting framework
to disclose environmental, social and
governance (ESG) information: the GRI
Reporting Framework. According to the
KPMG International Survey on Corpo-
rate Responsibility Reporting, nearly 80
percent of the Fortune 250 companies
issued reports addressing sustainabil-
ity or ESG performance in 2008. KPMG’s
survey of the 100 largest companies in 22
countries found an increase in sustain-
ability reporting in every region of the
world. Approximately two-thirds of the
reports identified contained references to
the Global Reporting Initiative’s Sustain-
ability Reporting Guidelines.4 In 2009, of
the total number of reports identified, 308
came from non-OECD5 countries, an in-
crease of 33 per cent on the 2008 figure of
232 reports. 143 reports came from Brazil,
Russia, India and China, up 22 per cent
from 117 in 2008.


The GRI Framework is a free global public
good. Over 3,000 individual experts from
across business, civil society and labour
participated in the development of the
current generation of essential guidance
in the GRI Sustainability Reporting Frame-
work, the G3 Guidelines. This resulted in
guidelines that are more user-friendly
and adapted to diverse reporting needs.
The Guidelines outline core content for
reporting and include performance indi-
cators on the environment, human rights,
labour practices and decent work, society,
product responsibility, economic perfor-
mance and governance. The Guidelines
are relevant to all organizations regard-
less of size, sector, or location and can be
flexibly and incrementally adopted. The
Framework is voluntary and, through
monitoring sustainability and ESG infor-
mation, represents a tool for companies
and reporting organizations to:


Assess sustainability performance
with respect to laws, norms, codes,
performance standards, and volun-
tary initiatives;


Create a continuous platform for dia-
logue and stakeholder engagement
about expectations for responsibility
and performance;


Understand the impacts (positive and
negative) that organizations can have
on sustainable development; and


Compare performance within an orga-
nization and between different orga-
nizations over time to inform decisions.


GRI’s Consolidated Reporting Framework
builds on relevant internationally accepted
legal frameworks (e.g. the ILO, UNFCCC,
UNCBD and other main conventions), the
most widely used normative frameworks
and principles (e.g. OECD Multinational
Enterprises Guidelines, United Nations
Global Compact), and theme-specific re-
porting guidelines (e.g. CDP), all of which
are referred to in the Technical Protocols
of the G3 Guidelines. GRI was created
as a United Nations Environmental Pro-
gramme (UNEP) collaborating organiza-
tion at the U.N. Headquarters in 2000,
in the presence of U.N. Secretary General
Kofi Annan. In 2002, at the invitation of
the Netherlands government and through
a U.N.-led process, GRI settled its head-
quarters in Amsterdam. In the same year,
at the Johannesburg Summit, where the
second generation of the GRI Guidelines
was launched, governments endorsed and
encouraged the use of GRI’s Reporting
Framework by adopting the World Sum-
mit on Sustainable Development Plan of
Implementation.6 For GRI this represents
a global “licence to operate” in developing
countries. GRI has synergies and formal
relations with several international or-
ganisations, such as a Memorandum of
Understanding (MoU) with the UNEP,
United Nations Global Compact (UNGC),


OECD and United Nations Conference
on Trade and Development (UNCTAD).


Several international and regional or-
ganisations and initiatives refer to GRI 7 in
their policies. The GRI Guidelines are also
linked to the Millennium Development
Goals (MDGs): the majority of the MDGs
are covered by GRI Indicators.8 Through
its synergies and MoUs, GRI seeks the
alignment of the most important (CSR)
initiatives through the common language
of reporting, in the global public interest.
Ten governments9 have a formal reference
to GRI in their governmental corporate
responsibility guidance documents and/
or policies.


In the pursuit of its vision GRI, together
with the Prince’s Accounting for Sustain-
ability Project (A4S), announced the for-
mation of the International Integrated
Reporting Committee (IIRC)10 in August
2010. In making the change towards a
green economy, clear and comprehen-
sive information must inform decisions
around tackling current challenges such
as over-consumption of finite natural
resources, climate change, and the need
to provide clean water, food and a better
standard of living for a growing global
population. The IIRC’s remit is to create a
globally accepted framework for sustain-
ability: a framework that brings together
financial, environmental, social and gov-
ernance information in a clear, concise,
consistent and comparable format –an
“integrated” format. The intention is to
help with the development of more com-
prehensive and comprehensible informa-
tion about an organization’s total perfor-
mance, prospective a well as retrospective,
to meet the needs of the emerging, more
sustainable, global economic model.


70 C


C


C


C


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71In the Johannesburg Plan of Implementa-
tion (JPOI), states committed to enhance
corporate environmental and social re-
sponsibility and accountability through
legislative initiatives,11 with the aim of en-
couraging the business sector to improve
social and environmental performance
through voluntary initiatives, including
environmental management systems and
public reporting on environmental and
social issues.


Over the last few years the regulatory
landscape has evolved substantially all
over the world. More codes and regula-
tory measures are now available in more
countries. A review of mandatory and
voluntary sustainability reporting stan-
dards and legislation in 30 countries has
revealed that international and national
standards, codes and guidelines, and leg-
islation for sustainability reporting, have
been evolving strongly. Evidence suggests
the increasing number of reporters goes
hand in hand with this increasingly com-
prehensive regulatory network.


A research conducted by UNEP, KPMG,
GRI and the University of Stellenbosch
Business School12 revealed that the role of
governments is an important part of cur-
rent increases in sustainability reporting.
There are many choices available to regu-
lators, influenced by many factors includ-
ing geopolitical considerations. However,
some general trends are discernible. The
first is a stronger role for the state in its re-
gulatory function, to ensure a minimum
level of disclosure and risk prevention.
The second is an emerging emphasis on a
complementary combination of voluntary
and mandatory approaches. A third is the
trend of integration; the combination
of corporate governance, financial, and
sustainability reporting in one reporting
framework.13 This trend may be a response
to avoid new financial scandals and crises.
It is also a sign of the maturing field of
sustainability reporting, contributing to
the transition to sustainable markets and


economies. This overall regulatory trend is
exemplified by the political commitment
of governments to increase inclusion of
ESG concerns in business practice.


The transition towards a green economy
implies not only the mainstreaming of
green niches in specific sectors of the
economy but a change in the overall social
construct. Consequently it requires an in-
tegrated approach to economic growth
and sustainable development, where the
mainstreaming of ESG disclosure leads to
the convergence of economic, social and
environmental pillars. As highlighted in a
recent report from UNCTAD, “a number
of voluntary initiatives are taking a lead-
ing role in designing and facilitating CSR
and responsible investment instruments,
encouraging improved corporate com-
munication on ESG issues and creating
important benchmarks, based on uni-
versally agreed principles. Policy makers
can become involved in these initiatives
with the aim of promoting sustainable
development goals and identifying useful
tools to complement government rules”.14


At the same time regulators should play a
role against fragmentation by reinforcing
the demand and call for harmonization of
guidance, aiming for an international ref-
erence level.


As a key driver for growth and well-being,
trade represents an important tool in the
strategy for sustainable development.
Nevertheless, the formulation of trade
policy has mostly been dominated by
short-term commercial considerations,
with limited advances in sustainable de-
velopment concerns.15 Innovative policies
are required in the field. National and in-
ternational trade policy should include
environmental, social and governance
(ESG) considerations, along with econo-
mic, in a long-term perspective.


Recent interesting discussions and policy
developments have to be acknowledged,
such as the two Reports adopted with the


resolution of the European Parliament
on 25 November 2010: Report on Corpo-
rate Social Responsibility in International
Trade Agreements by Harlem Désir, Com-
mittee on International Trade, proposing
to include transparency and reporting in
CSR clauses for the international trade
agreements; and the Report on Human
Rights, Social and Environmental Stan-
dards in International Trade Agreements
by MEP Tokia Saïfi, Committee on Inter-
national Trade, stressing the importance
for trade agreements to effectively provide
for the highest levels of transparency and
reporting by businesses.16


It is clear that consideration of environ-
mental and social dimensions can lead to
a system aimed at global sustainable de-
velopment, contributing to the transition
to a green economy. Furthermore, CSR
and ESG concerns in trade policy would
not represent a barrier to free trade but
can increase competitiveness and create a
level playing field.


What is the role of policy-makers?


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72


Emerging challenges are increasing in urgency. GRI is committed to facing emerging challenges and contributing to the transition to
a sustainable and green economy. It has over the years developed a range of sectoral guidance, and thematic guidance and training
material, often in collaboration with sector-specific global centres of excellence:


Gender empowerment
guidance
GRI and IFC launched the resource docu-
ment Embedding Gender in Sustainabil-
ity Reporting - A Practitioners’ Guide in
2009. The extensive multi-stakeholder
consultation process supporting the de-
velopment of the Practitioners’ Guide in-
dicated that while gender-disaggregated
data in sustainability reports is rare, there
is demand for this information. With the
support of GTZ, the G3 Guidelines have
been updated on this matter. A geographi-
cally diverse international working group
used GRI’s characteristic consensus-seek-
ing approach to develop these recommen-
dations, which are currently under public
comment in line with GRI’s due process.
The Working Group contained represen-
tation from Iran, Mongolia, India, Brazil
and South Africa, among other countries.


Research and guidance
on community impacts
One of the most important stakeholder
groups for all organizations is the local
community. Working together with the
University of Hong Kong and CSR Asia,
GRI has conducted a survey in order to
gain a better understanding of current
practice in the reporting of community
performance and impacts.


Human rights and
business
GRI, the United Nations Global Com-
pact, and Realizing Rights: The Ethical
Globalization Initiative, marked the 60th
anniversary of the Universal Declaration
on Human Rights with the collaborative
project: “Human rights –A call to action”.
The project aimed to foster greater inte-
gration of human rights principles into
corporate sustainability reporting. GRI,
U.N. GC and Realizing Rights assembled
an expert multi-stakeholder working group
to shape greater consensus on what consti-
tutes good human rights practice and mea-
surement. The Working Group reached a
consensus which culminated in a report
submitted to GRI’s governance bodies.
The revisions address the policy frame-
work put forward by the United Nations
Special Representative of the Secretary
General on Business and Human Rights,
John Ruggie, and formulate disclosure
expectations in the field of human rights
due diligence and access to grievance and
remedy mechanisms. These endeavours
have also led to the development of prac-
tical resources to help companies improve
their human rights reporting: A Resource
Guide to Corporate Human Rights Re-
porting (2009), and Corporate Human
Rights Reporting - An Analysis of Current
Trends (2009).


Biodiversity and ecosystems
guidance
GRI, supported by the Dutch Ministry of
Foreign Affairs and in consultation with
stakeholders, developed a resource docu-
ment on biodiversity in 2007. Biodiversity
is among the core G3 Indicators, but is a
challenging area for reporting. The resource
document assists reporting organizations to
understand biodiversity issues, and their re-
lationship to their activities and operations.
It discusses how the GRI Guidelines can be
used to report on biodiversity, and provides
further resources to help organizations with
their biodiversity reporting.


The current work on ecosystem services is
intended to fill a gap in emerging thinking
by helping to translate concepts into mea-
surement and reporting approaches for use
at corporate level. By providing a blueprint
for how to address ecosystem services,
GRI’s work can set a vision and catalyze
practical steps by companies, investors,
civil society and others to measure, assess,
and benchmark corporate performance.
In addition, it can lay the groundwork and
provide the necessary intellectual base for
future updates to the G3 Guidelines.


The study “The Economics of Ecosystems
and Biodiversity” (TEEB) is also highly
important. TEEB is laying the economic
groundwork and argument for why eco-
systems matter for public policy and liveli-
hoods, translating this for different stake-
holder groups; government, business, etc.
It has the potential to shift environmental
thinking away from inputs and outputs to
the functioning of ecosystems, and how to
better reflect these values in markets, busi-
ness planning, and public policies. Nature’s
goods and services are not unlimited or free.
Markets must internalize the cost of losing
these goods and services. This has implica-
tions for how companies measure perfor-
mance and how markets value companies’
current and future prospects. Therefore,
reporting will play a key role in enabling this
understanding and integration.


Addressing new and emerging challenges


Road to Rio(7)+20.indd 82 2/10/11 1:54:44 AM




73


Climate change


The G3 Guidelines include 5 energy-
related indicators (EN3-EN7), and 3 GHG-
related indicators (EN16-18), and an in-
dicator on the financial implications and
other risks and opportunities related to
climate change (EC2). The G3 Guidelines
refer to the key global tool, the Green-
house Gas Protocol (GHG Protocol), de-
veloped by WRI and the WBCSD. The
Carbon Disclosure Project (CDP) is a pri-
vate initiative that uses surveys to collect
carbon information from global compa-
nies. They also use the GHG Protocol of
WRI/WBCSD, and the G3 Guidelines, as
the basis of their work.


In July 2010, GRI and the CDP released a
document linking the G3 Guidelines and
CDP’s 2010 Questionnaire. The guidelines
and questionnaire invite reporting on
GHG emissions and climate change. The
Guidelines, however, cover broader ele-
ments of sustainability and ESG reporting.
Both organizations will employ the link-
age document in the further development
of guidelines and questionnaires. Where
it will lead to more and better reporting,
CDP will seek alignment when preparing
its 2011 questionnaire. GRI aims to align
the next generation of its guidelines more
closely with the CDP.


In 2009, GRI and ACCA partnered for a
research project on climate change re-
porting entitled: “High Impact Sectors:
The Challenge of Reporting on Climate
Change”. The report provides unique in-
sight into the degree to which large com-
panies around the world have begun to
disclose their GHG accounting and strat-
egies for reduction. It not only provides
an overview of current climate change
initiatives and the changing landscape
ahead but presents an analysis of carbon
reporting disclosures across 14 high-im-
pact industry sectors from 2003 to 2008.
In particular, it includes an analysis of
carbon reporting disclosures in the BRIC
countries (Brazil, Russia, India and China)
and South Africa, and a series of expert
perspectives on the corporate response
to climate change. About half of the large
companies studied in China, Brazil, South
Africa and India measure their carbon
emission on the basis of a baseline, have
climate change policies that include risk
studies, and report all of this through the
G3 Guidelines.


Sectoral guidance


As mentioned, GRI has developed a whole
range of thematic guidance material. This
sectoral guidance usually takes the form
of Sector Supplements, which are widely
used.


Sector Supplements are available or under
development for the following sectors:
mining and metals, food processing, oil
and gas, textile and apparel, construction,
electric utilities, financial, tourism, public
agency reporting, and large events.17 They
will be used in capacity building in devel-
oping countries. In addition, new the-
matic guidance for developing countries
will be developed as need arises. There are
plans to develop a Forestry Sector Supple-
ment in collaboration with the Forest
Stewardship Council. There are also plans
to develop ESG Reporting Guidance for
Bio-Fuel Cultivation and Transport.


GRI strongly believes that the main-
streaming of sustainability practices all
over the world is crucial, in every organiza-
tion and company. Believing that it is pos-
sible to manage only what gets measured,
GRI offers guidance to organizations and
companies to monitor and disclose their
ESG performance. GRI contributes to the
mainstreaming of sustainability practices
by running special programs for SMEs and
on supply chains, as well as by means of
capacity building in developing countries
through its regional network presence
and training programs.


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74 Strong economic growth remains the
main route to poverty eradication and hu-
man development. Maintaining growth is
crucial and can be sustainable. Organiza-
tions and companies that consider their
impact on society and the environment
evince good economic performance. The
concept of the green economy highlights
the crucial importance of mainstream-
ing environmental and social concerns,
informing economic strategies and po-
licies.


Internationally agreed principles and objec-
tives have existed since 1972. Now there is
a requirement to manage the transition to
a green economy. ESG reporting offers a
tool for making this change.


GRI contributes to poverty eradication
and sustainable economic development
from an economic, social and environ-
mental point of view. GRI pursues this


goal by developing the content and own-
ership of sustainability reporting with the
G3 Guidelines.


Given the need for more transparency and
awareness on these matters, GRI has the
following strategic objectives for develop-
ing countries:


To enhance all stakeholders’ under-
stan-ding and ownership of sus-
tainability reporting, and its link to
sustainable development, poverty
reduction, resource conservation
and biodiversity protection; and to
increase the capacity to report.


To strengthen the sustainability per-
formance of local business actors in
order to positively impact sustainable
development, and strengthen their
competitiveness in the regional and
global market.


To empower stakeholders -in par-
ticular civil society, labour unions
and local authorities- to engage in
constructive dialogue with local and
multinational businesses on their
environmental, social and economic
performance, on the basis of sustain-
ability reporting. This should enable
the creation multi-stakeholder ap-
proaches that are specific to develop-
ing countries.


To increase transparency regarding
the impact of foreign/multinational
companies that invest and operate
in developing countries. This should
strengthen companies’ governance
around sustainability performance
and impacts in their host countries,
and increase their transparency for
investors and stakeholders.


The green economy in the context of
sustainable development and poverty eradication


For more about the Global Reporting Initiative please visit:


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www.globalreporting.org


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Endnotes


1 Co-Chairs’ Summary, First Preparatory Committee Meeting for the UN Conference on Sustainable Development, 2012, 20 May 2010, paragraph 28.


2 idem.


3 UNCTAD, Investment and Enterprise Responsibility Review, Analysis of Investor and Enterprise Policies on Corporate Social Responsibility, Switzerland, 2010.


4 KPMG, International Survey of Corporate Social Responsibility Reporting 2008, p.4; UNEP, KPMG, Carrots and Sticks for Starters, Current Trends and
Approaches in Voluntary and Mandatory Standards for Sustainability Reporting, 2006, p.4.


5 OECD stands for the Organisation for Economic Co-operation and Development.


6 U.N., Plan of Implementation of the World Summit on Sustainable Development, paragraph 18: “Enhance corporate environmental and social responsibility
and accountability. This would include actions at all levels to: (a) Encourage industry to improve social and environmental performance through voluntary
initiatives, including environmental management systems, codes of conduct, certification and public reporting on environmental and social issues, taking
into account such initiatives as the International Organization for Standardization standards and Global Reporting Initiative guidelines on sustainability
reporting, bearing in mind principle 11 of the Rio Declaration on Environment and Development; (b) Encourage dialogue between enterprises and the
communities in which they operate and other stakeholders; (c) Encourage financial institutions to incorporate sustainable development considerations into
their decision-making processes; (d) Develop workplace-based partnerships and programmes, including training and education programmes”.


7 Amongst others: the OECD, Commentary OECD MNE Guidelines, III. Disclosure; WSSD Implementation Plan, paragraph 18; G8 Summit 2007,
Heiligendamm Growth and Responsibility in a World Economy, Summit Declaration, 7 June 2007, paragraph 84; United Nations Global Compact, Policy for
the Communication of Progress, 3 April 2009; United Nations Principles of Responsible Investment, Principle 3.


8 With support of the Norwegian Government, GRI made a comparative analysis of the eight MDG’s and the GRI indicators. Of the eight goals, 5 are directly
related to GRI, and 3 indirectly. This led to a linkage document explaining the link between MDG’s and the GRI Guidelines. An unknown number of
companies specifically refer to their adherence to the MDG’s in their sustainability report. It should be noted that the MDG’s have been designed at country
level, and the GRI guidelines operate at organizational level.


9 Namely: Austria ,Belgium, Canada, Denmark, Finland, Germany, Netherlands, Norway, Sweden, United States.


10 www.integratedreporting.org


11 The so-called Johannesburg Plan of Implementation: U.N., Plan of Implementation of the World Summit on Sustainable Development, paragraph 18:
“bearing in mind principle 11 of the Rio Declaration on Environment and Development”, i.e. “States shall enact effective environmental legislation.
Environmental standards, management objectives and priorities should reflect the environmental and development context to which they apply. Standards
applied by some countries may be inappropriate and of unwarranted economic and social cost to other countries, in particular developing countries”.


12 KPMG Advisory N.V., United Nations Environment Programme, Global Reporting Initiative, Unit for Corporate Governance in Africa, Carrots and Sticks -
Promoting Transparency and Sustainability, 2010.


13 See paragraph 2.10 for more information about the International Integrated Reporting Committee and the role of GRI in it.


14 UNCTAD, Investment and Enterprise Responsibility Review, Analysis of investor and enterprise policies on corporate social responsibility, 2010.


15 European Parliament resolution of 25 November 2010 on Corporate Social Responsibility in International Trade Agreements, paragraph 26: “Proposes that
this ‘CSR clause’ should incorporate: […] (d) a requirement – which takes into account the specific situation and capabilities of SMEs within the scope of the
recommendation 2003/361/CE of May 2003 and according to the ‘think small first’ principle– for corporations to publish their CSR balance sheets at least every
two or three years; takes the view that this demand will reinforce transparency and reporting and encourage the visibility and credibility of CSR practices by
making CSR information available to all stakeholders, including consumers, investors and the wider public in a targeted manner”.


16 European Parliament resolution of 25 November 2010 on Human Rights, Social and Environmental Standards in International Trade Agreements,
paragraph 20: “ […] Calls for EU trade agreements effectively to provide for the highest levels of transparency, stringent public procurement standards and
country-by-country reporting by businesses in both developed and developing countries, […]”.


17 http://www.globalreporting.org/ReportingFramework/SectorSupplements/.


75


Pietro Bertazzi
Manager, Policy and Advocacy of the
Global Reporting Initiative (GRI).


AuthorTHE


Road to Rio(7)+20.indd 85 2/10/11 1:54:49 AM




In partnership with Leila Ghandi MOROCCAN PHOTOGRAPHER


Kingdom of Morocco
al-Mamlakah al-Maġribiyya


Member State of the United Nations
since 12 November 1956


Road to Rio(7)+20.indd 86 2/10/11 1:54:54 AM




4
PART


The green transition
of Morocco


The Government’s strategy
on the green economy
H.E. Ambassador Omar Hi la le


Swiss-Morocco Foundation
for Sustainable Development
Mohamed Mike Fani


Renewable energy
in Morocco
Saïd Moul ine


MANAGEM: 80 years of development
and valorisation of natural resources
Ismai l Akalay


79


82


83


87


Road to Rio(7)+20.indd 87 2/10/11 1:54:55 AM




4


The green transition
of Morocco


78


Road to Rio(7)+20.indd 88 2/10/11 1:54:59 AM




In 1992, as part of the implementation of
these commitments and within the con-
text of global sustainable and human de-
velopment efforts and initiatives, Morocco
developed a new strategy based on an in-
tegrated approach to development. It sets
the government’s guidelines to deal with
development needs, protection of the en-
vironment and reducing the destructive
impact of climate change.


In this regard, Morocco has adopted a
series of development strategies, notably


the National Strategy for Environmental
Protection and Sustainable Development,
the implementation of the National Ac-
tion Plan for the Environment (PANE),
the 2020 Strategy for Rural Development,
and the launch of the National Initiative
for Human Development (NIHD).


To realise its ambitions, Morocco has
committed itself to an extensive and broad
programme in the fields of renewable en-
ergy and the green economy, opting for a
new agricultural strategy called the Green
Morocco Plan. The results achieved in
these areas by Morocco in record time
confirm the strategic importance the gov-
ernment assigns to sustainable develop-
ment and rational management of natural
resources.


In 2009, conscious of the scope and sever-
ity of the degradation of its biodiversity
and determined to meet the challenges of
protecting its environment and in confor-
mity with the Royal guidelines, the King-
dom of Morocco issued the draft National
Charter for Environment and Sustainable
Development.


ince its participation
in the Earth Summit in
Rio de Janeiro, Morocco
has embarked on
an irreversible process
of implementing the
recommendations
of the United Nations
Conference on Environ-
ment and Development.


Thanks to its global vision of environment
and biodiversity, the National Charter
covers not only the environmental issue
but is also a social project and an authentic
reference for public policy in the country.
It reflects efforts made in the field of en-
vironment and major advances in the in-
stitutional and legal fields to include envi-
ronmental issues in public policies related
to development. It was for this reason that
all nation’s institutions and various stake-
holders responded to the call of His Maj-
esty the King to strongly join this initiative
and become involved in its implementa-
tion and achievement. Furthermore, the
choice of Rabat by the ‘Earth Day Network
as a world city to host the celebrations of
the 40th anniversary of the Earth Day is in-
deed a unique opportunity to demonstrate
our country’s commitment to the environ-
mental cause. It bears witness to all Mo-
rocco’s efforts to preserve the environment
that justify its being considered a Develop-
ment Model in Africa.


The designation of Morocco to host the
festivities is a clear recognition of the com-
mitment of the Kingdom, under the reign


s


H.E. Ambassador Omar Hilale, outlines his Government’s commitment to
environmental protection and sustainable development, detailing the work
of the Foundation for Environmental Protection as well as the leading role
of its diplomacy in environmental issues. He highlights national initiatives
in the fields of agriculture, industry and associated ‘green market’ oppor-


tunities, environmental impact studies, ‘green citizenship’, green coopera-
tion between government departments and green training programmes.
Emphasizing the boost to technical innovation from the green economy, he
further describes the country’s renewable energy choices and comments
potential savings in terms of dollars and CO2 emissions.


79


The Government’s strategy
on the green economy
Omar Hilale


Road to Rio(7)+20.indd 89 2/10/11 1:55:00 AM




80


of HM King Mohammed VI, to a proactive
environmental approach in all sectors, in
particular through a partnership approach
involving all social and economic actors
and a pragmatic approach with ambitious
and realistic programmes. It is also the re-
sult of the commendable and significant
efforts of Her Royal Highness Princess
Lalla Hasna, President of the Mohammed
VI Foundation for Environmental Protec-
tion, for the promotion and protection of
the environment and the eco-system with-
in a context of sustainable development.


Moreover, and by way of illustrating this
commitment in terms of concrete proj-
ects, on 22 April 2010, HRH presided over
the celebration ceremony of Earth Day
and Sustainable Development, marked by
the signature of several conventions and
the presentation of a large number of proj-
ects to be carried out within a long-term
environmental strategy. These projects
aim to protect resources and eco-systems
as well as monitoring the state of the envi-
ronment in all regions of Morocco.


The outcome of the various programmes
undertaken by the Foundation is note-
worthy, with several initiatives launched
since 2009. They include: the ‘Eco-Schools’
programme; the programme ‘Young Re-
porters for the Environment’, with two
international prizes awarded to Morocco
by an international jury in Paris; the co-
organization with the Islamic Educatio-
nal, Scientific and Cultural Organization
(ISESCO) of a national workshop dedi-
cated to sensitizing teachers to the rela-
tionship between environment, health
and sustainable development; and the
organization of a contest for ‘Young Re-
porters for the environment’ targeting
students from four Arab countries: Jordan,
Syria, Tunisia and Morocco.


Other initiatives launched under the aus-
pices of the Foundation include the ‘Clean
Beaches’ programme, many of which have
been labelled ‘Blue Flag’ and the ‘Qualit’air’
programme, which seeks to raise aware-
ness among mechanics, offering them
environmental training programmes; or-
ganize campaigns of vehicle control, re-
moving ordinary diesel and making provi-
sion for diesel 50 ppm; establish a national
air quality monitoring network in major
cities of the Kingdom; and launch an eco-
epidemiological study in partnership with


the Ministry of Health and with the assis-
tance of a WHO expert.


It is thanks to these achievements that the
Foundation has, since December 2009,
the status of observer at the UN Confer-
ence on Climate Change in Copenhagen.


In addition, many initiatives have been
undertaken in the field of clean devel-
opment, with important national pro-
grammes initiated, notably the establish-
ment of laws necessary for the protection
of the environment, namely to combat air
pollution and provide for waste manage-
ment, including prohibition of the use of
non-biodegradable bags.


The programme, adopted in 2008 and
called ‘the Green Morocco Plan’, consti-
tutes the new agricultural strategy in Mo-
rocco aimed at providing a boost to the
economy of the agricultural sector.


Morocco’s commitment is also reflected in a
number of initiatives taken by the different
Ministerial Departments to draw the atten-
tion of Moroccan companies to the various
business opportunities offered by the green
market, create the appropriate environment
for the its development and facilitate access
of Moroccan companies to major structural
projects of the Kingdom, namely sanitation
programmes and the solar plan.


Aware of the growing strength of the green
economy, commonly called ‘green busi-
ness’, and the opportunities it offers as the
global economy of tomorrow, Morocco is
determined to use it to trace a new path
towards sustainable development. It is


thus committed to transforming the con-
straints linked to the respect of the envi-
ronment into opportunities, advantages
and benefits for development in terms of
employment and industrialization. This is
evidence of the level of maturity reached
by Morocco after a number of structural
reforms in the political, human, social
and economic fields. Now, it is ready to
include in its progress and evolution the
concept of sustainable development in all
its dimensions.


Morocco has managed to respond to the
challenge thanks to the commitment of
all its industrial actors and the devotion
of all sectors, which have demonstrated a
great ability to adapt to new rules and act
in full compliance with the requirements
needed in this area. Indeed, all business
firms and companies feel involved with
the integration of sustainable develop-
ment into their management approach.
The correlation between climate change
and economic development is no longer a
strange concept to them, having opted for
a promising green approach leading to op-
timal economic, social and environmental
returns.


One of the authentic achievements in this
approach is the Environment law, which
states that every industrial project must
first carry out a thorough study of its en-
vironmental impact. Such a data base has
today become a principle and working
method for all stakeholders. This visible
conviction by everyone (government, eco-
nomic and political actors, associations,
NGOs and citizens) and widespread eco-
logical attitude constitute the beginning
of a new concept that has largely found its
place in Moroccan society, namely ‘green
citizenship’.


In addition to the contribution of national
media and press agencies, this new con-
cept has been translated into concrete


A major step
has been taken in the


agricultural sector
which is strategic for
the socio-economic


development of
Morocco, representing


15 to 20 per cent
of national GDP


Road to Rio(7)+20.indd 90 2/10/11 1:55:01 AM




Morocco, motivated by its achievements
at national level and experience in the field
and a fervent advocate of environmental
causes, has opted for an active diplomacy,
committed to the respect of the environ-
ment and sustainable development, which
has become its doctrine for action. In this
regard, Moroccan diplomacy is constantly
mobilized to serve the interests of both
Morocco and the African continent in all
international and multilateral fora.


The commitment to diplomacy in this
field resulted in 2011 in the designation of
Morocco as the coordinator of both the
African Group in charge of the environ-
mental issues and the World Meteorologi-
cal Organization (WMO). This coordina-
tion gave rise to the genuine involvement
of the Geneva African Group in environ-
mental issues.


In this respect, Morocco will chair several
meetings at both the ambassadorial and
expert levels, in order to develop the Afri-
can position and finalize the Group’s state-
ments for 2011, a special year full of impor-
tant meetings. This is especially the case
regarding the follow up to decisions taken
internationally on environmental issues
at the 16th United Nations Conference on
Climate Change in Cancun, which has just
ended, and the involvement in this event
of the African Group through its active
participation and contribution.


Omar Hilale
H.E. Ambassador Omar Hilale is Permanent
Representative of Morocco to the United
Nations Office in Geneva. Prior to that
he was from 2005, Secretary-General


of the Ministry of Foreign Affairs and Cooperation of Morocco.
Between 2001 and 2005, he served as Permanent Representative
of Morocco to the United Nations Office in Geneva. A career
diplomat, Mr. Hilale was Ambassador to Indonesia, Singapore,
Australia and New Zealand, from 1996 to 2001. He also served
as Deputy Head of Mission at the Moroccan Embassy in Monrovia
from 1979 to 1980; First Secretary at the Moroccan Embassy
in Addis Ababa from 1976 to 1979; and Second Secretary at the
Moroccan Embassy in Algiers from 1975 to 1976.


AuthorTHE


81


terms thanks to the emergence of a num-
ber of associations and civil society actors
that play a key role in initiating and pro-
moting it. Seminars and conferences have
been organized at national and regional
level to stimulate a debate, cover its chal-
lenges and launch an awareness campaign
around the concept. The latter is targeting
all sectors, private or public, all business
functions and all citizens without excep-
tion, with the slogan “Green Business is
everyone’s business”.


At Ministerial level, we notice synergies
coordination between different Depart-
ments involved in the advocacy and pro-
motion of the virtues of the green econo-
my. For example, the Ministry of Energy is
working with both the Ministry of Hous-
ing on energy efficiency in all buildings,
particularly in new cities, and with the
Ministry of Transportation to reduce
greenhouse gas emissions through better
management of urban space.


Regarding efforts in the field of education
and training, a training programme is being
set up making available qualified human
resources to teach students the principles
of sustainable development. Within this
context, the competent Department col-
laborates with other partners such as the
Agency for Solar Energy, and industries and
businesses to identify needs as accurately as
possible by 2015-2020, and translate them
into educational programmes. Morocco’s re-
ference base draws inspiration from foreign
experiences in the fields of training in green
technologies and ecological techniques.


Morocco’s implementation of the green
economy also implies giving a strong boost
to technological innovation as well as car-
rying out research and making progress
in the field of sustainable development.
This approach has led to developing in-
novative projects in renewable energy
and energy efficiency, in addition to other


major projects like the National Liquid
Sanitation Programme, whose total cost
is estimated at 80 million dirhams in 2030
(approximately 9.6 million USD in January
2011), and the National Household Haz-
ardous Waste Programme, whose total
cost is estimated at 40 million dirhams in
2020, directly allowing for the creation of
thousands of jobs.


As far as energy is concerned, several proj-
ects are underway including in the field of
renewable energy. Within the framework
of the strategy diversifying sources of sup-
ply of energy products initiated by H.M.
King Mohammed VI, Morocco announced
on 2 November 2009 an ambitious project
in Ouarzazate to produce electricity from
solar energy, with a capacity of 2,000 mega-
watts (MW), representing an investment
of 9 billion dollars.


Renewable energy—solar, hydraulic and
wind power—will contribute in equal
parts to the 2,000 MW. The future 500 MW
solar site will be established in Tamezghit-
ene, in the north-east of Ouarzazate and
will begin operating in 2015. The esti-
mated cost of the Morocco Wind Energy
Programme, based on the creation of new
wind farms to increase power output from
the current 280 MW to 2,000 MW by 2020, is
31.5 billion dirhams.


In addition to reducing Morocco’s energy
dependence from 97 per cent to 85 per
cent, the implementation of such projects
should allow annual savings of around one
million tonnes of oil equivalent (TOE), to
USD 500 to 700 million. Ecologically speak-
ing, such projects would avoid the emis-
sion of 3.7 million tonnes of CO2 per
year.


To support this momentum for renewable
energy development, Morocco has estab-
lished a legislative framework through
the adoption of a draft law on energy ef-
ficiency and involving several Ministerial
Departments.


The creation of such a large project, fo-
cusing on solar energy and wind power,
reflects Morocco’s irreversible choice to
promote sustainable development and
demonstrates its commitment to a clean
and green economy, which fits within the
framework of the Copenhagen process.


Road to Rio(7)+20.indd 91 2/10/11 1:55:02 AM




Switzerland-Morocco
Foundation for
Sustainable Development
Mohamed Mike Fani, President and Founder
Offers a brief description of the vision, values, goals and work of the FSMD


The Switzerland-Morocco Foundation for Sustainable Devel-
opment, FSMD (Fondation Suisse Maroc pour le Développement
Durable) was created in 2004 and has since been recognized as
a non-profit public service provider by the Finance Depart-
ment of the Canton of Geneva. The FSMD is a non-profit and
a non-governmental organization (NGO), with headquarters in
Geneva.


Today, the FSMD is highly acknowledged for its role in boost-
ing the socio-economic growth of Morocco. It has strong gov-
ernance in driving its organization and managing its projects
and has been granted the Consultative Special Status ECOSOC
by the United Nations. This facilitates the FSMD’s contribu-
tion as technical expert, adviser and consultant to the work
programmes and goals of the United Nations, as well as by par-
ticipating in ECOSOC and its various subsidiary bodies through
attendance at their meetings and oral interventions and written
statements on their agenda items.


Over the last two decades, Morocco has successfully imple-
mented courageous and impressive programmes of social and
economic growth. Moroccan leaders have continuously institut-
ed solid reforms to liberalize trade relations especially with the
E.U. and U.S., invested heavily in basic infrastructure, stabilized
macroeconomic policy, diversified investment opportunities,
improved education, and opened the political system. Strong
economic progress has been observed, with growth rates aver-
aging around 5 per cent during the last 10 years.


Despite progress, Morocco’s growth remains vulnerable to natural
and economic shocks, with social indicators out of sync with the
country’s income level. Morocco’s youth is still heavily touched by
unemployment (more than 30 per cent in urban areas) and large
segments of the population remain socially and economically
marginalized. Furthermore, Morocco’s economic sectors are still
tied to commodities highly dependent on foreign energy (97 per
cent of energy needs are imported) and technologies and its trade
balance is heavily linked to the E.U., especially France.


Within this context, the FSMD has emerged as a novel tool for
socio-economic growth through know-how and competency
transfer primarily between Switzerland and Morocco. The
FSMD model aims at helping provide Morocco increasing free-
dom in assimilating novel technologies tailored to the kingdom’s
specific needs. The NGO is especially focused on boosting Mo-
rocco’s transition from a fossil resources dependent economy to
sustainable green development, this being the only option for


the sustainable growth of a country not blessed with signifi-
cant fossil resources. The active integration of novel technolo-
gies through international partnerships is creating a new value
growth dynamism, in which education and training, especially
of young people, play a predominant role in securing the talents
and workforce necessary to drive emerging business opportuni-
ties in the country.


The FSDM believes in Switzerland, thanks to the latter’s dis-
tinctive culture of innovation and proven tradition of entrepre-
neurship, as a model strategic partner for Morocco, especially
in the sector of green economy, identified as the key driver for
Morocco’s sustainable growth. Switzerland’s extensive experi-
ence and expertise in this sector represent an interesting model
for Morocco in terms of capital market structure, environmen-
tal standards, industrialization of R&D results and economic
framework conditions.


The NGO, through its Swiss and Moroccan members, is today
well positioned to empower partnerships between the two
countries. Every two years, it traditionally organizes an econom-
ic symposium in Geneva bringing together leaders, decisions
makers and professionals from Morocco and Switzerland, from
which opportunities for partnerships and collaboration are likely
to stem. So far, the Foundation is very proud of the number of
projects successfully implemented between the two countries,
with around 10 projects realized in the sectors of health and so-
cial development.


The FSMD is constantly pushing to implement projects that
benefit the poor and the underprivileged regions by raising the
awareness of socially responsible and green investment among
the strategic players. The city of Oujda in the north-east of Mo-
rocco, with 20 per cent unemployment, provides a good illustra-
tion: three partnership agreements were signed at the Economic
Symposium the Foundation held in Geneva on 5 November 2010
relating to waste treatment, wastewater treatment, renewable
energy, good governance and E-government, respectively be-
tween: (i) the FSMD, the Urban Municipality of the City of Ou-
jda and Holcim Morocco, (ii) the FSMD, the Urban Municipality
of the City of Oujda and IFGRA; and (iii) the FSMD, the Urban
Municipality of the City of Oujda and SGS Morocco SA.


In line with this, the FSMD is adding another building block to
the green economy orientation by federating stakeholders from
the public and private sector to jointly create a regional model
that can be further leveraged across the country.


Fondation Suisse Maroc pour le Développement Durable (FSMD)
www.fsmd.ch


Road to Rio(7)+20.indd 92 2/10/11 1:55:03 AM




I N M O R O CCO
Saïd Mouline explains the commitment to renewables of the Moroccan National Agency for Development of Renewable Energy and Energy Efficiency
(ADEREE). He describes achievements in the fields of wind, solar, solar thermal, hydro and biomass energy. He outlines future plans to increase the capacity
of renewable sources of energy and hence the proportion of the country’s energy needs derived from renewable, with a focus on enacted laws, energy
funding and potential energy exports.


83


continuous commitment
to renewables


In the early 1980s, the creation of the Re-
newable Energies Development Centre
(CDER), which is now an Agency (National
Agency for Development of Renewable
Energy and Energy Efficiency, ADEREE),
demonstrated the Moroccan government’s
determination to promote renewable sourc-
es of energy. Current policy aims to develop
renewable energies in ways that comple-
ment other forms of energy and contribute
to security of energy supply, to develop
local industries and capacities, and to
implement a strategy of partnerships with
the private sector. The renewable energies
policy is currently in its generalized im-
plementation phase with large renewable
energy and energy efficiency programmes,
supported by national and international
institutions and banks. In fact, Morocco
remains committed to a vision of sustain-
able development in which sensitivity to
ecological and environmental issues is
considered essential.


Why renewable now?


Morocco has some of the best renew-
able energy (RE) resources in the world,
which have the potential to meet a rising
and significant share of national energy
demand. Many of the new technologies
that harness renewables (including wind,
solar, and biomass) are, or soon will be,
economically competitive with the fossil
fuels that meet 95 per cent of Moroccans’
energy needs (2009). On the other hand,
the electricity sector plays a crucial role in
the development of industrial activities
and socio-economics of the rural areas.
Morocco has launched huge national de-
velopment programmes in strategic sec-
tors (health, tourism, industries, agricul-
ture, education, infrastructure, etc.) and
the need for security of energy supply and
national energy production has become
critical. Moreover, dynamic growth rates
of RE in the world are driving down equip-
ment costs, which leads to cost effective
RE projects. Dependence on energy im-
ports remains one of the main reasons for
a key status being assigned to renewable
in official plans for the energy sector. RE,
including hydropower, accounted for 14.5
per cent of electricity produced in 2009.


A


Road to Rio(7)+20.indd 93 2/10/11 1:55:04 AM




84


With a 3,500-km long coast and average
wind speeds of up to 11 meters per second in
the north (Taza, Tangier, Tetouan) and south
(Tarfaya, Dakhla, Laayoune), Morocco's
wind power potential is estimated at
25,000 mw. The conditions for solar energy
are also extraordinarily favourable, 5.5 kwh/
m2/day and 3,000 h/year. Over 200 feasible
Micro Hydro Power projects ranging from
15 to 100 kw have also been identified.
Marine energy projects, including algae fuel
production and valorisation, are currently
under development.


A commitment at the highest
level of the state


In March 2009, a royal letter to the partici-
pants at the Energy Forum mentioned:


In our effort to secure our
energy supply, we must stress


how important it is to
diversify energy sources,


mobilise renewable
resources.


Together with renewable
energy, energy efficiency
can deeply transform the
sector thanks to the new


technologies and the social
attitudes they imply.


It also called for the expanded use of re-
newable energy to meet the twin chal-
lenges of increasing renewable energy
investments and social development. It
gave strong support to the use of renew-
able energy resources and to environment
protection. This strategy was reinforced


A huge potential


by the two national 2,000 MW solar and
2,000 MW wind energy programmes, which
call for an investment of USD 12.15 billion
(in solar and wind parks) over the next de-
cade to catalyze private efforts to build a
renewable energy future. Specifically, the
plan calls for renewable energy to reach 42
per cent of electrical capacity by 2020.


Solar energy targets and
initiatives


The 2,000 MW Solar Energy
Programme


On the 2nd of November 2009, Morocco
launched an ambitious 2,000 MW solar po-
wer programme, estimated at USD 9 billion,
to be completed in 2020. It is, in fact, an
energy revolution in Morocco’s efforts to
respond to the global increase in the cost
of energy, growing national demand and
environmental protection. With high so-
lar potential, the five sites selected for the
programme — Laayoune, Boujdour, Tar-
faya, Ain Beni Mathar and Ouarzazate —
will soon be host to photovoltaic and solar
thermal energy plants. The sites will cover
10,000 hectares and should produce up to
2,000 MW of electricity, with an annual sav-
ing of one million tons of oil.


Road to Rio(7)+20.indd 94 2/10/11 1:55:11 AM


Ain Beni Mathar (East Morocco):
Morocco has considered the installation
of its first solar thermal plant, a 470 MW
natural gas unit, including a 20 MW solar
unit. The project comprises a unit based
on solar energy (a solar field of cylindro-
parabolic mirrors covering a land surface
of approximately 20 ha.) and a natural
gas combined cycle unit. The site is lo-
cated in Ain Beni Mathar, 86 km south
of the city of Oujda. Solar production is
estimated at up to 55 GWh/year.




85


Photovoltaic systems: decentralized
photovoltaic solar electrification


Currently, photovoltaic solar energy in
Morocco is used mainly in rural and off-
grid areas. Distribution is estimated as
follows:


• rural electrification: sub-programme
of decentralized rural electrification
(150,000 households to be electrified
by Photovoltaic Systems, SHS) and
community applications, 6 MWp;
• water pumping: 1.12 MWp;
• commercial sector (telecommunica-
tions, TV relays, radio, etc.): 5.85 MWp;
• other applications: 1.1 MWp.


Wind power parks
a large potential


In recent years, wind has become an in-
creasingly attractive source of renewable
energy. Wind energy is the world’s fastest-
growing energy technology and Moroccan
capacity has more than doubled in the
past three years. Wind power currently
supplies about 1.86 per cent of national
electricity needs but capacity is expanding
rapidly. Wind power amounts to an in-
stalled production capacity of 280 MW and
720 MW are under construction. About 5
sites have been identified for the next 1,000
MW programme, all of which have consid-
erable development potential. Numerous
private foreign operators are interested in
using wind power in Morocco to produce
green electricity. A Wind Atlas produced
by ADEREE is available for those who wish
to consult it.


The 2,000 MW Wind Parks Initiative


Since the first wind power plant installed
in Koudia El Baida in 2000, several further
wind parks have been built. The largest
one, the 140 MW in Tangier, was set up in
2009. The national programme aims to
install a number of new wind farms, rais-
ing installed electrical wind power from


the current 280 MW to 2,000 MW by 2020.
Five parks have already been installed:
The Koudia Al Baida Wind farm (50 MW
capacity), The Abdelkhaled Torres wind
farm (3.5 MW), The Essaouira Wind farm
(60 MW), a private wind park (Lafarge - 30
MW) and the 140 MW wind farm at Tangier.
720 MW are underway. Other regions have
been identified, mostly located in the
north and south of Morocco, to imple-
ment the second 1,000 MW parks: Tanger
2 (150 MW), Koudia El Baida à Tétouan (300
MW), Taza (150 MW), Tiskrad à Laayoune
(300 MW) and Boujdour (100 MW). The
project investment cost, estimated at USD
3.15 billion, will be covered by national and
international public and private funds or
other financing mechanisms.


Hydroelectricity in progress


Hydroelectricity is currently the largest
producer of renewable power in Morocco,
generating around 14.1 per cent of the
nation’s total electricity production in
2009. Total hydro capacity amounted to
1,265 MW in 2009 and a further 472 MW are
planned. Morocco is also interested in de-
veloping decentralised small hydropower
projects for isolated areas. The amount of
hydroelectric power generated is strongly
affected by changes in precipitation and
surface runoff. Hydroelectric power does
not necessarily require a large dam –
some power plants use just a small canal
to channel river water through a turbine
and a number of these projects is currently
under development by ADEREE. A small
or micro-hydroelectric power system can
produce enough electricity for a home or
remote village.


Biomass preservation


Biomass can be utilized for all three major
energy needs: electricity, heating/cooling
and transportation fuel. However, each
usage is distinctly different from the oth-
ers, especially with regard to efficiency/
the percentage of energy utilized from the
biomass source.


Rational use of wood fuel in rural areas


Biomass accounts for an important share
of Moroccan energy consumption (34 per
cent), representing a major deforestation
problem (30,000 hectares annually). It is
estimated that about 50 per cent of the


population using fuel wood collects it from
neighbouring forests (in the neighbour-
hood of 10 km) while the other 50 per cent
buys the wood, with an average monthly
consumption of about 50 kg/household.
In order to improve the use of fuel wood,
programmes carried out by ADEREE and
other national and international partners
have focused on fuel switching and energy
efficiency. These include:


• Dissemination of small agricultural Bio-
Digesters for producing Biogaz. Since
1983, more than 350 units have been in-
stalled in different regions of country.
For example, an ADEREE/GTZ coopera-
tion programme introduced more than
100 Biogaz digesters in the pilot region of
Souss Massa to encourage this technique
and reduce thermal deforestation.
• Dissemination of fuel wood-saving
stoves for cooking and heating in rural
zones and encouragement to consume
gas.
• Promoting the use of wood energy-
saving technologies for urban and rural
hammams through training, supervi-
sion, awareness-raising, informative and
incentive measures to save neighbouring
forests. The new technologies can attain
a 78 per cent efficiency rate.


ADEREE is also working on an algae fuel
pilot project near TanTan in the south of
the country.


National energy efficiency
programmes


National energy efficiency programmes
aim to achieve a 15 per cent energy saving
by 2020 in the following main sectors: in-
dustry, transport, residential and tertiary.
Energy efficiency programmes are to be
implemented through the Energy Effi-
ciency Codes in Residential Buildings and
Energy Efficiency


The Programme for the Improvement in
Commercial and Hospital Buildings in
Morocco (carried out by ADEREE and in-
stitutional partners) includes the following
components:


1. Setting up a Building/Construction
Energy Efficiency Code Authority;
2. Designing, implementing and evalu-
ating Building/Construction Energy
Efficiency Regulations through thermal
building codes for hospitals, hotels and
housing;


Tangier Wind Park


Road to Rio(7)+20.indd 95 2/10/11 1:55:12 AM




3. Developing guidelines for technical
professionals (hospitals, hotels/services,
housing);
4. Comprehensive Barrier Review/Pro-
motion of knowledge-sharing;
5. Developing the local market for solar
water heating systems. The goal is to
implement 440,000 m² to be installed in
2012 and 1.7 million m² by 2020.


Policy, regulatory framework,
RE/EE funds and institutional
reforms


Morocco has set up a several incentive
measures to promote renewable energy,
with new enacted renewable energy laws
and institutions in the last twelve months.
Its strategic geographic location and its
liberalization policy enable it to export to-
ward an extensive market where demand
is strong (Europe, Africa and the Middle
East). A law on projects for Renewable
Energy (Law 13-09) has been promul-
gated in the parliament as well as a new
law to transform the national renewable
energy development centre (CDER) into
a renewable energy and energy efficiency
agency (ADEREE), and the creation of the
Moroccan Agency for Solar Energy (MA-
SEN), which will be in charge of carrying
out all technical, economic and financial
studies necessary for the implementa-
tion of the 2,000 MW solar programme.
Another energy investment company
(Société d’investissement énergetique-SIE)
has also been created to invest in projects
to increase the production capacity of re-
newable energy and intensify energy effi-
ciency. In fact, the Renewable Energy law
set up the legal framework for promoting
investment for export, assistance in site
selections, permits and authorization, ac-
cess to the national grid and electrical in-
terconnections, export of RE, and so on.


Energy development funds


Morocco has, in its efforts to increase en-
ergy security and reduce its vulnerability to
oil price shocks, set up a fund, called “Fond
de Développement de l’Energie (FDE)”, cur-
rently with USD 1 billion in deposits. Its le-
gal status and operational priorities are set
out in the Finance Act of 2009. The FDE’s
present priority areas lie in developing
generation capacity and security of supply,
developing renewable energy and energy


efficiency. This fund will be instrumental
in achieving financial closure for projects
with the greatest potential for GHG emis-
sions savings and that face viability gaps
due to additional costs or risk premiums.
The focus will be on: (a) increased penetra-
tion of renewable energy into Morocco’s
electricity generating portfolio, with an
emphasis on wind power, and (b) energy
conservation measures, particularly indus-
trial energy efficiency and urban transport.
The majority of FDE funds are to be in-
vested with the aim of generating returns
for the State. Such projects will include,
but will not be limited to, power genera-
tion from renewables.


All the renewable energy and the energy
efficiency projects will be implemented
using carbon funds (Clean Development
Mechanism with 5 projects already regis-
tered, the clean technology fund, etc.).


New industrial parks dedicated to the pro-
duction of industrial components for the
renewable energy and energy efficiency
sectors are being implemented with the
objective of developing the renewable en-
ergy industry. The first one is located near
Oujda. Furthermore, a new policy calls for
the inclusion of specific courses and re-
search and development in these sectors
in the curricula of a number of universities
and engineering schools.


The regional approach


Morocco has a leading role in Euro-Med-
iterranean energy cooperation through
its electricity interconnections with neigh-
bouring countries. The country also adapt-
ed its new legislation to facilitate green
energy export. It has joined the Mediterra-
nean Solar Plan and Moroccan companies
are involved in the MedRing and Desertec
projects.


In conclusion, Morocco is, with its highly
proactive renewable energy policy, demon-
strating that, at national and international
level, the technological progress made in
the last few years, the increasing cost of
fossil fuel and the high level commitment
to renewable energy, energy efficiency and
environment protection, are the main driv-
ers in the ongoing growth of its national
renewable energy market.


86


Saïd Mouline
Director of the Moroccan Agency for
Development of Renewable Energy and
Energy Efficiency (ADEREE)


AuthorTHE


Road to Rio(7)+20.indd 96 2/10/11 1:55:15 AM




Ismail Akaley, General Manager at MANAGEM describes how his company
specializing in the production and valorisation of base metals, precious
metals and cobalt, has been able to creatively transform environmental
protection constraints into business opportunities. Through its own research


and development of recycling techniques and recuperation of waste matter,
it has been able to improve the lives of citizens living around its industrial
installations, contribute towards the career opportunities of young people
and help create small enterprises and jobs.


MANAGEM
80 y E a r s o F d E v E lo p m E n t a n d va lo r i s at i o n o F n at u r a l r E s o u r c E s 87


key actor in Morocco,
MANAGEM Private Group,
specializes in the production
and valorisation of base
metals, precious metals
and cobalt.


In each branch of its activities, MANA-
GEM deploys its highly specialized com-
petences, its advanced technology equip-
ment and its strong capacity in research
and development, allowing the group to
constantly meet its clients’ needs from
different sectors such as the steel indus-
try, aeronautics, energy, industrial tools,
the chemical industry and electronics.


A historical engagement for local
and regional development
The mining activity historically has always
been a strong tool for local development
and is still nowadays an important linchpin
in the development of and a driving force


behind the provision of medical services,
schools and socio-cultural infrastructure
in the regions where it is implemented.


For more than 80 years, MANAGEM has
accelerated and facilitated access to vital
needs, in particular to drinking water,
electric sources and new technologies.


In addition, MANAGEM contributes to
the development of communities sur-
rounding its production plants, mainly by
promoting and encouraging children’s ed-
ucation, supporting various programmes
for rural women and democratizing access
to water through various partnerships.


Ethics at the centre of
MANAGEM’s social policy
MANAGEM’s social policy is carried out
according to principles and today the
group is proud to have a human resources
policy based on shared values, corporate
culture, clear and open communication
and a motivating system of incentives.


One of MANAGEM’s subsidiaries, Com-
pagnie de Tifnoute Tiranimine (CTT), has
received the General Confederation of
Moroccan Enterprises (CGEM) Corporate
Social Responsibility Label.


In addition, thanks to the health and safe-
ty system, the hydrometallurgical units
and the Research Centre received the
Occupational Health and Safety Assess-
ment Series (OHSAS) 18001 in 2010.


A


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Act for the environment, one of
MANAGEM’s key values


MANAGEM considers the protection
of the environment one of its priorities
by pushing hard to minimize the envi-
ronmental impact of its activities. The
Group has mobilized efforts in the field
of recycling industrial effluents, waste
water minimization and treatment,
dust control and plantation and man-
agement of open spaces.


The know-how acquired over the years
and the important efforts in research and
development deployed by MANAGEM’s
Research Centre have allowed the group
to view environmental restrictions as real
development opportunities.


The group has already implemented
several projects on mining waste re-
covery and industrial effluents:


Bou Azzer’s mining waste
valorisation
Since 1929, the cobalt mine of Bou Azzer
has accumulated millions of tons of sol-
id waste from gravimetric treatment for
the production of a cobalt concentrate.
Thanks to a hydrometallurgical process
developed by MANAGEM’s Research


Centre REMINEX, the environmental
restriction has become an opportunity,
with 500 tons of cobalt metal produced
every year from this solid waste.


Sodium sulphate project
MANAGEM’s different hydrometallurgi-
cal units produce liquid effluent rich in
salt (sodium sulphate). These effluents are
stored in evaporation tanks. The devel-
opment of hydrometallurgical activities,
which generate more than 700 m3 of liquid
effluents per day, encouraged the group to
develop an environmental and sustainable
solution involving salt crystallization of so-
dium sulphate, a marketable product, and
a water recycling unit. This unit, which
started up in 2009, produces 25,000 tons of
sodium sulphate and recycles 200,000 m3 of
water per year.


E-waste recycling project
MANAGEM, with its expertise and com-
mand of treatment processes, has created,
through its Cobalt and Specialties Branch,
a recycling field for the valorisation of non-
ferrous and precious metals waste. This
e-waste recycling project was born within
the MANAGEM Research Centre in 2006.


In December 2009, a partnership agree-
ment was signed between CTT and Al Jisr,


a Moroccan NGO working in education.
This partnership allowed the project to be
upscaled to include a social component.


Under the project, the Al Jisr Associa-
tion, through the Green Chip project, is
in charge of collecting, dismantling and
sorting e-waste in workshops equipped
by MANAGEM. These dismantling work-
shops are located in some schools and
involve young people in academic failure.
The goal is to show them the way to create
their own dismantling workshops in order
to become CTT suppliers.


CTT is in charge of the valorisation of dis-
mantled products, nonferrous and precious
metals, and the sale of the other dismantled
products such as steel and plastic.


The partnership with Al Jisr contributed to:
• Supplying e-waste;
• Facilitating the integration of young
people in academic failure
• Reducing the digital bill in Morocco


The valorisation process of electronic
cards and nonferrous metals has allowed
the group to treat 1,500 tons/year and fa-
cilitated the creation of 80 dismantling
workshop and more than 200 jobs.


88


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The group plans to increase progres-
sively its treatment capacity to 100,000
to 120,000 tons per year, with the poten-
tial of 1,500 to 2,000 kg of gold, 15 to 20
tons of silver, and an annual turnover
of USD 100 to 120 million.


Pyrrhotite project
The solid waste from the Guemassa poly-
metallic mine (an unusual iron sulphide
mineral with a variable iron content) is
stocked on more than 100 hectares. At
present, the potential is more than 20 mil-
lion tons, with an annual increase of 1 mil-
lion tons.


With this in mind, the MANAGEM group
has launched a project of pyrrhotite valo-
risation to produce sulphuric acid, iron
oxide and electrical energy with zero
waste. In this way, it has transformed a
constraint, solid waste, into a real asset to
promote sustainable development.


Through the treatment process devel-
oped by the MANAGEM research centre,


involving a baking furnace, mining waste
is transformed into a number of different
value added products:


• Sulphuric acid, a strategic reagent for
MANAGEM plants;
• Iron oxide, a raw material for the steel
industry;
• Electricity, to be used for plant’s needs.


This industrial unit will, according to the
economic feasibility study, allow the treat-
ment of 100,000 tons of waste (pyrrhotite)
to produce:


• 100,000 tons of sulphuric acid, covering
MANAGEM’s own needs;
• 140,000 tons of iron oxide, a marketable
product for the steel industry;
• 4.5 MWh (megawatt hour) of electricity,
covering 50 per cent of the Guemassa
plant needs.


The project has been presented with the
Cleaner development Mechanism (CDM)
due to the fact that it is capable of produc-
es energy at the same time as avoiding the
emission of 7,000 tons of CO2 per year.


Partnership with the Moroccan
Cleaner Production Centre (CMPP)


In June 2009, MANAGEM Group signed a
partnership agreement with the Moroccan
Cleaner Production Centre or Centre Ma-
rocain de Production Propre (CMPP) with
the aim of promoting cleaner production,
efficient use of resources and sustainable
development.


CMPP is member of an international
cleaner production network set up by
the United Nations Industrial Develop-
ment Organization (UNIDO) and the
United Nations Environment Programme
(UNEP)


The centre has access to national as well as
international expertise in different fields
related to cleaner production, resources
efficiency, sound environmental technolo-
gies and sustainable development.


89


Dismantling workshop of electronic waste.
Green Chip, Casablanca


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Development that meets the needs
of the present without compromising


the ability of future generations
to meet their own needs


Sustainable Development as defined in
Our Common Future


also known as the Brundtland Report,
from the United Nations World Commission


on Environment and Development
1 9 8 7


Printed in Geneva


2011


This publication was printed by the
Publishing Service of the United Nations Office in Geneva (UNOG)


which obtained in November 2010 the ISO 14001
environmental certification


ISO 14001
certified


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