MODULE

INTRODUCTION & THE WORLD

DEVELOPMENT SCENARIO
OVERVIEW

MODULE OUTLINE
Introduction
Development and the environment
Hidden costs
Resource decoupling
Resource Efficiency And Resource Consumption Increased
Need for raising resource productivity
A vicious cycle of growth
Why not grow now and clean up later
Virtuous cycle
A virtuous cycle of green growth systemic reforms
Conclusion: The idea of green growth
References

INTRODUCTION
Analysis of the world development scenario reveals that
the world economy has been transformed over the last
25 years. Computing, communications, biotechnology,
materials science and other fields are in the midst of
technological revolutions, greatly expanding humanitys
productive capacity.
World output has more than doubled since 1990,
accompanied by rising international flows of knowledge,
trade and capital, as well as by enormous structural
changes (GCECC 2014).

Likewise, developing economies have grown in

importance with their share of global GDP rising from
just over a quarter to more than two-fifth over this
period.
The number of people living in urban areas surged by
two- third, to more than half the worlds population.
Besides, developing countries the poorest and most
populous region of the world have been at the heart of
many of these changes. Middle-income countries output
has more than tripled since 1990, and low-income
countries has more than doubled. Growth accelerated
not only in large emerging economies such (as China and
India), but also in many smaller and poorer countries in
Asia, Africa and Latin America.

Considering the case of Asia and Pacific economies, for

the last two decades, the growth rates of Asian and
Pacific economies have been among the highest in the
world, and the positive impacts of this economic
expansion have been significant.
Between 1990 and 2005, the regions population living
in extreme povertyon less than $1.25 per dayfell
from 1.5 billion to 979 million (UN and ADB 2012).
While during this period, economic growth has lifted
more than 660 million people out of poverty and has
raised the income levels of millions more, but growth has
too often come at the expense of the environment.

A variety of market, policy, and institutional failures mean that the

earths natural capital tends to be used in ways that are
economically inefficient and wasteful, without sufcient reckoning
of the true social costs of resource depletion and without adequate
reinvestment in other forms of wealth.
The problem with natural resource depletion and degradation
arises due to its inefficient use. This inefciency stems partly from
the fact that many natural resources are common property, so
consumption by one person precludes consumption by another, and
it is hard to exclude potential users. Open access regimes for
common property create incentives to use up such resources as
quickly as possible.

Open access sheries are a classic example in which catch per

sher and per vessel has been declining steadily because of
overshing, and continued depletion threatens the livelihood of
more than 100 million people and the food security of many more.
Policy failures (for instance, perverse subsidies) exacerbate
common property problems, yet substantial resources are allocated
to environmentally harmful price support schemes. Global subsidies
to fisheries are estimated at $10 billion to $30 billion and are partly
to blame for the six fold increase in the fleet capacity index between
1970 and 2005 (World Bank and FAO 2009).

 In

Mexico, subsidies for energy used in irrigation,

amounting to around 1 percent of GDP, are exacerbating
excessive groundwater withdrawals and the depletion of
key aquifers. India suffers from the same problem in
addition to spending some 2 per- cent of GDP on a
fertilizer subsidy overly weighted in favour of nitrogen;
the resulting use of fertilizer is causing serious pollution
problems.

Not only this, production and consumption processes are often

wasteful, too. This is particularly obvious in the energy sector.
Existing energy efficiency technologies can cost-effectively reduce
energy use in new buildings by at least 30 percent. In fact, making
new buildings in China more energy efficient would reduce energy
costs by more than 50 percent, while increasing construction costs
by only 10 percent. Waste also plagues food production.
Some 15 to 30 percent of food produced in developing countries is
lost before it reaches the market due to poor storage and transport
facilities. In high-income countries, meanwhile, one third of food is
wasted through losses in supermarkets and homes and plate
waste.

Income and population growth have also stretched water supplies.

Water withdrawals have tripled in the past 50 years, leading to
water scarcity and groundwater depletion.
Withdrawals are projected to increase in developing countries by
another 50 percent by 2025, by which time roughly 5.5 billion
peopletwo thirds of the projected global populationwill live in
areas facing moderate-to-severe water stress.
Growth has similarly strained ecosystems, with roughly 60 percent
of ecosystem services now of lower quality than 50 years ago.
Additionally, the current rate of species extinction, stemming mainly
from habitat loss and degradation, is 100 to 1,000 times higher than
before humans walked the planet. In 2008, 875 species became
extinct, and more than 17,000 others are at high risk (IUCN 2009).

Lastly, energy prices are likely to be high in the future,

(GCECC 2014) because oil resources that are easy and
cheap to extract and use have already been extracted,
and the world is now turning toward fossil fuels that are
more expensive and more damaging to the
environmentsuch as shale gas, tar sands, oil from deep
offshore wells, or even liqueed coal.
Without signicant changes in energy policy, the
amount of resources the world economy will have to
dedicate to fossil fuel extraction and energy production is
likely to increase substantially, making higher energy
efficiency even more desirable in the future than it is
today.

DEVELOPMENT AND THE

ENVIRONMENT
All these failures threaten the long-term sustainability
of growth and progress made on social welfare.
Moreover, despite the gains from growth, 1.3 billion
people still do not have access to electricity, 2.6 billion
still have no access to sanitation, and 900 million lack
safe, clean drinking water.
Environmental consequences of them has serious
implications in terms of quality of life discussed in the
following slides.

Carbon dioxide emissions are accumulating in the atmosphere,

approaching a level that will make it impossible to maintain global
mean temperature below 2C in excess of the preindustrial level,
even though the probability of irreversible environmental changes is
increasing with temperature (for example, rapid ice loss in
Greenland and forest die- back in the Amazon).
Carbon dioxide is also affecting the worlds oceans. Because of
global warming, we have already committed to high probabilities of
coral bleaching and mortality by the late twenty-rst century, which
will significantly harm reef ecosystems

The health damages caused by local air pollution are

often very large (UN and ADB 2012). For example, in
China, PM2.5 pollution has been linked to 1.23 million
premature deaths in 2010 (median estimate) or, put in
monetary terms, damages equivalent to 9.713.2% of
Chinas GDP. The problem is so severe that curbing local
air pollution has become one of the major items on the
governments policy agenda, driving plans to curb Chinas
coal consumption.
In India, PM2.5 pollution is associated with more than
627,000 premature deaths in 2010 (median estimate),
equivalent to 5.57.5% of GDP.

The concurrent acidication of oceans, which absorb

about one quarter of the excess carbon dioxide in the
atmosphere, is threatening marine food webs and could
undermine the global fishing industry and food security.
The pollution emission by the high income, middle
income and low income countries has never been equal.
The high income countries have the highest per capita
emission of CO2 followed by the middle income
countries and then by the low income countries. The
following figure makes the picture clear.

In addition to the environmental degradation, the

developing countries also face particular challenges.
First, in the absence of strong governance, natural
resource abundance tends to foster problems such as
corruption, social strife over rents and other effects
collectively labelled the natural resource curse that
lead to worse development outcomes. In practice, faster
growth associated with mineral booms has often had
only weak links to job creation and poverty reduction.
Second, many of these countries are not saving enough
to replace the depletion of their natural assets with
human capital, through skills development, health
improvements and new infrastructure, for example. In
such cases, the total stock of wealth is falling, and
present prosperity masks the likelihood of a poorer
future.

Third, if the rest of the world credibly commits to

curbing fossil fuel use, these resource-rich countries face
the prospect of reduced demand and lower prices for
fossil fuels in the future.
It is therefore crucial that they make the most of the
boom they are enjoying today to build up their human
and other capital and prepare for the transition that they
will surely have to undertake in the coming decades.

The IPCC (IPCC 2015) in its assessment report have

identified risks faced by the developing countries in
various continents at various levels of temperature rise
(table 1).
The risks range from (please see the table in the
previous slide) water stress, risks of malaria, reduction in
crop and inundation of infrastructure in the small islands
in the event of the sea level rise.

Thus, the links between the economic and social pillars of

sustainable development are generally self-reinforcing. But the story
is not so simple when it comes to the economic and environmental
pillars (Fig. 2).
Economic growth causes environmental degradationor has for
much of the past 250 yearsdriven by market failures and
inefficient policies. As with inequality, overall environmental
performance does not rst get worse and then improve with
income. Of course, some local and visible environmental public
goods do worsen at rst and eventually improve with income
typically local air quality.
But this is not true of local pollutants with invisible or long-term
impacts (such as the accumulation of pesticides and toxic chemicals
in land and water) or global pollutants (such as greenhouse gases in
the atmosphere). These often get worse with higher income.

FIGURE 2: THREE PILLARS OF

SUSTAINABLE DEVELOPMENT

It is becoming increasingly clear that our current

growth-fixated economies, built on the exploitation of
finite resources and emission-intensive energy, are no
longer sustainable. Not only that, but in recent years this
economic model has not discernibly increased prosperity
or wellbeing for most people nor found a way to
decouple economic growth from resource consumption.
Despite remarkable economic performance in recent
decades at least, measured in terms of GDP growth in
many countries it has not led to greater prosperity for
all.

Most economic development and growth strategies

encouraged rapid accumulation of physical, financial and
human capital, but at the expense of excessive depletion
and degradation of natural capital, which includes the
endowment of natural resources and ecosystems.
By depleting the worlds stock of natural wealth often
irreversibly this pattern of development and growth
has had detrimental impacts on the well- being of
current generations and presents tremendous risks and
challenges for the future. The recent multiple crises are
symptomatic of this pattern.

HIDDEN COSTS
As a target for policymakers focusing on short-term
economic gains, GDP, a measure of economic activity, is
often misused as an indicator of countrys overall
development status leading to rising hidden costs.
Firstly, the hidden costs of economic growth such as
environmental degradation and resource depletion are
excluded from GDP figures are economically significant.
For example, air, water pollution and soil degradation has
cost China nearly 10 percent of its GDP over the past
decade, while the total cost of climate change is
estimated to represent five percent of world GDP
annually for the foreseeable future, unless action is
taken.

Second, the policy focus on short-term GDP gains has

undervalued or ignored many socially-desirable, and
economically-important activities, especially those
activities that take place outside markets. These
economic activities include unpaid or underpaid work in
the workforce or at home, or the services provided to the
economy by nature (ecosystem services), such as
purifying water or absorbing pollutants.
Rising GDP, while highly correlated to some
improvements in quality of life, also provides a
misleading picture. The net growth of the sociallydesirable services produced in an economy is often much
lower than statistical GDP growth.

RESOURCE DECOUPLING
As GDP figures include defensive expenditures such
as the costs of dealing with crime, environmental
cleanups, pollution control, and medical treatment, they
mask key trends that impact directly on quality of life and
long-term prospects for growth. While quality of life may
be improving for some sectors of the population, GDP
figures can also mask differences in quality of life.
In the context of resource productivity, decoupling
refers to the amount of materials used in relation to
economic output. According to UNEP (UNEP 2011),
resource decoupling means reducing the rate of use of
(primary) resources per unit of economic activity.

This dematerialisation is based on using less material, energy,

water and land resources for the same economic output. Resource
decoupling leads to an increase in the efficiency with which
resources are used.
Two types of resource decoupling need to be distinguished:
relative and absolute decoupling. Relative decoupling means that
material consumption is increasing at a pace slower than the
economic output.

This is a good start towards sustainable development

but not sufficient in the long run, as environmental
pressures continue to increase. Given that environmental
pressures are already above sustainable levels on the
global scale, absolute decoupling must be the objective.
Absolute decoupling can be achieved when GDP grows
while material use and associated environmental
pressure decrease in absolute terms.

RESOURCE EFFICIENCY AND

RESOURCE CONSUMPTION
INCREASED
The worlds economy achieved a relative decoupling on
the global level; today, we extract around 40% more
economic value from each tonne of raw material.
However, these efficiency gains have been undermined
due to economic growth of 150% in the same period,
which lead to an actual increase in material
consumption.
Therefore, the required absolute reduction of resource
use on the global level is still far from being achieved.

NEED FOR INCREASING

RESOURCE PRODUCTIVITY
As a consequence, increased resource productivity has
to become the main feature of technological progress,
with incentives for those who are more productive with
scarce resources. This will stimulate our economies in
many ways, e.g. in terms of higher economic multiplier
effects as well as the creation of green jobs.
By turning innovations toward higher resource and
energy productivity, ecological restraints can be reduced
without touching the economic and social sustainability.
Although this is a longer term process, it can be
accelerated by a switch of economic policy from fostering
labour productivity to fostering capital and resource
productivity.

A VICIOUS CYCLE OF
GROWTH
An excessive focus on maximizing short-term GDP
growth is shaping an economic expansion that has lifted
many out of poverty. At the same time, persistent
poverty and inequality and resource constraints are signs
of sustainable development.
Greening of Economic Growth Series: Shifting from
quantity to quality: Growth with equality, efficiency,
sustainability and dynamism of a vicious cycle that is
driven by the exploitation of human and natural capital
(the following slide).

FIGURE 3: VICIOUS CYCLE

OF GROWTH

WHY NOT GROW NOW

AND CLEAN LATER
A grow now, clean up later strategy relies on the
belief that the environment being a superior commodity
will improve with the rise in incomes. However, there are
serious limitations in the approach.
First, that the pollution has serious impact on the health
of the people especially the poor who are not able to
protect themselves.
Second, it is more economical to reduce or prevent
pollution at an early stage than to incur higher cleaner
cost at the later stage.

VIRTUOUS CYCLE
Quality of growth: Transforming a vicious cycle of
exploitation into a virtuous cycle of investment with
people at the centre.
Improving the quality of growth seeks to align growth
outcomes with the objectives of sustainable
development placing the goal of improving human
well-being within planetary boundaries at the heart of
economic growth strategies.
Well-being depends on meeting basic needs. These
basic needs can be objectively defined including for
example, access to water, energy and food.

FIGURE 4: VIRTUOUS CYCLE

OF GROWTH

A VIRTUOUS CYCLE FOR

GREEN GROWTH
SYSTEMIC REFORM
Sustainable development will remain elusive while the
environmental and social costs of economic growth are externalized
and disproportionately borne by those who have least benefited.
Price signals, which are reflective of policies, institutions,
technologies, infrastructure and social preferences, must be more
closely aligned to sustainable development objectives.
Economic growth must be driven by investment flows that promote
inclusive and sustainable development outcomes.

Even though there is upward pressure on the prices of

energy and several kinds of commodities, green growth
will not take place automatically without making
fundamental economic transformations.
In particular, there is a need to close two gaps: (a) the
time gap between short-term costs and long-term
benefits of investments that reduce environmental
pressures; and (b) the price gap between market prices
and the economic value of ecosystem goods and
services, which reduces the incentives for resource
savings or investment in natural capital.

CONCLUSION :THE IDEA

OF GREEN GROWTH
Green growth is a matter of both economic policy and sustainable
development policy. It tackles two key imperatives together: the
continued inclusive economic growth needed by developing
countries to reduce poverty and improve wellbeing; and improved
environmental management needed to tackle resource scarcities
and climate change.
When green growth began to be promoted through the 2008-9
economic stimulus packages, some governments approached it from
a short-term growth perspective the potential to boost jobs and
incomes through increased investment in some green (notably lowcarbon) technologies.

Others approach green growth from an environmental

perspective the potential to internalise environmental
externalities by mainstreaming sustainable development
requirements into economic decision-making, notably
through resource pricing and land use/infrastructure
choices.

Another imperative, of equity and inclusion, has more

recently been expressed, especially by developing
countries the notion that green growth should serve
those excluded by the current economic system.
The informal economy is very large in many developing
countries and its potentials and hazards need to inform
any transition to green growth in order to deliver more
and better jobs and resilient livelihoods for poor people
Thus there is growing convergence around the notion
that the current economic system is not only
unsustainable and inefficient in its resource use, but
moreover is inequitable in its distribution of costs and
benefits. Hence, pursuing green growth is an imperative
rather than a choice.

Developing countries are the key to achieving global green growth

in two major ways. Firstly, the potential economic and social impacts
of environmental degradation are particularly important for
developing countries.
They are the most vulnerable to climate change and tend to be
more dependent than advanced economies on the exploitation of
natural resources for economic growth.

In addition many developing countries face severe economic, social

and ecological threats from energy, food and water insecurity to
climate change and extreme weather risks. They also face risks from
premature deaths due to pollution, poor water quality and diseases
associated with a changing climate.
All of these factors undermine their development. Secondly,
although today most developing countries contribute only minor
shares to global greenhouse gas (GHG) emissions compared to the
OECD and major emerging economies, they will increase their
emissions if they follow conventional economic growth patterns.
Increasingly, developing countries are becoming the sources of
global economic growth, emissions and, with these, more intensive
use of natural resources.

REFERENCES

1.

GCECC (2014) Better Growth Better Climate: the New Climate

Economy Report. Washington D.C. : New Climate Economy.

2.

IPCC (2015) Climate change 2014: Synthesis Report. Geneva: Inter governmental Panel on Climate Change.

3.

IUCN (International Union for Conservation of Nature). 2009.

Extinction
Crisis
Continues
Apace.
Gland:
IUCN.
http://www.iucn.org/knowledge/news/?4143/Extinctioncrisiscontinues-apace.

4.

UNEP (United Nations Environnent Programme). 2011. Towards a

Green Economy: Pathways to Sustainable Development and Poverty
Eradication. Geneva: UNEP. http://www.unep.org/greeneconomy.

5.

UN and ADB (2012) Green Growth and Resilience:

Environmental Sustainability in Asia and Pacific. Bangkok:
United Nations and Asian Development Bank.

6.

World Bank (2012) Inclusive Green Growth: Pathways to Sustainable

Development. Washington D.C: The World Bank.

7.

World Bank and FAO (Food and Agriculture Organization).

2009. The Sunken Billions: The Economic Justification for
Fisheries Reform. World Bank, Washington, DC; Food and
Agricultural Organization, Rome.