Transcript ppt

Inclusive Growth and Green Growth
as
Market-Friendly Growth Strategies
for Sustainable Development
Hyun-Hoon Lee
Professor
Kangwon National University
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References
1. Jeffrey Sachs, The Age of Sustainable Development, World Bank Talk
(March 9, 2015)
http://jeffsachs.org/category/topics/sustainable-development/
2. Jeffrey Sachs, The Age of Sustainable Development, Coursera
http://live.worldbank.org/age-of-sustainable-development
3. OECD, Key OECD Documents on Green Growth
http://www.oecd.org/greengrowth/keydocuments.htm
4. International Policy Center for Inclusive Growth, “What is Inclusive
Growth?”
http://www.oecd.org/greengrowth/keydocuments.htm
Contents
1. What is sustainable development?
2. What have been done by the international community?
3. Current status of sustainable development in the world?
4. Key Concepts of Inclusive Growth and Green Growth?
5. Strategies for Inclusive Growth
6. Strategies for Green Growth
7. Framework for Sustainable Development
8. Epilogue
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1. What is Sustainable Development?

As an individual, what is the ultimate goal?
 More money?
 Answer: Happiness of individual (personal well-being)

As a nation, what is the ultimate goal?
 Large GDP? high income per capita?
 Answer: Happiness of the people (national welfare or sustainable
development)
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1. What is Sustainable Development?
Nation’s Welfare (Happiness)
 A nation's welfare can increase when the following
conditions are met.
(1) Economic growth (Y): Increase in paid consumption
of goods and services:
(2) Environmental protection (E): Increase in unpaid
consumption of environmental services:
(3) Social equity (S): Decrease in desire (Increase in
income equity)
 i.e. W is a function of YES (W = Y*E*S),
where Y = income, E= environmental sustainability, and S =
social equity.
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1. What is Sustainable Development?

Sustainable Development meets the needs of the present without
comprising the ability of future generations to meet their own
needs.

The concept of UN’s Sustainable Development has the three
components
“The achievement of sustainable development requires the integration
of its economic, environmental and social components at all levels.” 6
(United Nations Division for Sustainable Development)
2. What have been done by
the international community?

Brundtland Report, 1987
 Also known as "Our Common Future", submitted by World
Commission on Environment and Development (WCED), which
was founded in 1983
 Alerted the world to the urgency of making progress toward
"sustainable development”.
 The report also highlighted three fundamental components to
sustainable development: environmental protection, economic
growth and social equity.
 Following the recommendation of the report, the UN General
Assembly decided to establish the United Nations Conference
on Environment and Development (UNCED).
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2. What have been done by
the international community?

Earth Summit, 3-14 June 1992, Rio De Janeiro
 The first UNCED, also known as the Rio Summit.
 An important achievement was an agreement on the Climate
Change Convention which in turn led to the Kyoto Protocol.
 Produced the Rio Declaration consisted 27 principles intended
to guide future sustainable development around the world.
 Also produced Agenda 21, which is a comprehensive blueprint of
action to be taken in every area in which humans impact on the
environment.
 Established Commission on Sustainable Development (CSD).
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2. What have been done by
the international community?

Millennium Summit, 6-8 September 2000, New
York
 55th Session of the UN General Assembly
 Adopted the Millennium Declaration and Millennium
Development Goals (MDGs) – Target year: 2015
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2. What have been done by
the international community?

World Summit on Sustainable Development
(WSSD), 2-4 September 2002, Johannesburg, South
Africa (Rio+10)
 Also called Earth Summit II and nicknamed "Rio+10".
 Adopted the Johannesburg Declaration; but U.S. president
George W. Bush boycotted the summit and did not attend.
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2. What have been done by
the international community?

Earth Summit 2012: UN Conference on Sustainable
Development (UNCSD), 20-22 June 2012, Rio De
Janeiro, Brazil (RIO+20)
 Two themes:
(1) a green economy in the context of sustainable development
poverty eradication;
(2) institutional framework for sustainable development
 Adopted the outcome document entitled “The Future We Want”
 Sustainable Development Goals (SDGs) are to be adopted and
will serve as the successor framework to the MDGs after they
expire in 2015.
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2. What have been done by
the international community?

United Nations Sustainable Development Summit
2015, 25-27 September 2015, New York
 Adopted Sustainable Development Goals (SDGs) as the 2030
Agenda
 Unlike the MDGs, which were drawn up by a small group of
experts, SDGs have been drafted by and Open Working Group.
 SDGs will be new development agenda for the period 2016-2030
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SDGs
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https://sustainabledevelopment.un.org/sdgsproposal
SDGs
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SDGs
 Action-oriented?
 Concise?
 Easy to communicate?
 Limited in number
 Aspirational?
 Global in nature?
 Universally applicable to all countries
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https://sustainabledevelopment.un.org/topics/sustainabledevelopmentgoals
3. Current status of
sustainable development?

There are no internationally agreed sustainable
development indicator, but
 Happiness Index (Sustainable Development Solutions Network,
Happiness Foundation)
 Better Life Index (OECD), Happy Planet Index (New Economics
Foundation), Gross National National Happiness Index (Bhutan)
 Human Development Index (UNDP)
Need for a development of SD index
Also need for a development of measurements of SDGs
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 Ranking of Happiness Index 2012-2014
Helliwell, J. R. Layard and J. Sachs eds., World Happiness report 2015
3. Current status of
sustainable development?

Economic Growth
 GDP
 GDP per capita
 GDP, ppp
 GDP per capita, PPP
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 World GDP per capita - Trend
Angus Maddison, "World Population, GDP and Per Capita GDP”
http://www.ggdc.net/maddison/maddison-project/data.htm
 World GDP per capita
http://en.wikipedia.org/wiki/Geography_and_wealth
 Korea GDP per capita - Trend
3. Current status of
sustainable development?

Environmental Sustainability (Biocapicity vs. Ecological
Footprint)
 Biocapacity of a country: the total usable biological production
capacity in a given year of a biologically productive area of a country.
 Similar to environmental carrying capacity
 Footprint of a country: the total area required to produce the food
and fiber that it consumes, absorb the waste from its energy
consumption, and provide space for its infrastructure.
 Similar to environmental pressure
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■ World’s Biocapacity vs. Footprint
Source: Global Footprint Network
■ World’s Biocapacity vs. Footprint
24
■ Korea’s Biocapacity vs. Footprint
3. Current status of
sustainable development?

Social Inequality
 Income inequality
- Gini Coefficient, Theil Index, General Enthropy Index, etc.
- Rate of return on capital vs. rate of economic growth (Thomas Piketty Right,
2013, Capital in the Twenty-First Century)
 Gender inequality
- Gender Gap Index (World Economic Forum)
- Gender Inequality Index (UNDP’s Human Development Reports)
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 Global Income Inequality – Trend
The Economist, 2012, “For richer, for poorer”, October 13.
 Gini Coefficient – Comparison of individual countries
 Korea’s Gini Coefficient - Trend
OECD, Economics Surveys: Korea 2012
 Gender Gap Index - World
World Economic Forum, World Gender Gap Index 2014
 Gender Gap Index - Korea
World Economic Forum, World Gender Gap Index 2014
3. Current status of
sustainable development?

The UN has pursued sustainable development (SD), but with not
much success.
 World’s ecological footprint has been rapidly increasing, thus
degrading environmental sustainability.
 In many countries, economic growth has contributed to a
decline in the poverty, it has also been accompanied by rising
income inequalities.
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4. Key Concepts of Inclusive Growth
and Green Growth?

Traditionally,
 The three pillars of SD have been thought separately and policies have not been
designed and implemented synthetically.
 Also, the three pillars of SD have been often viewed as contradictory, or
environmental sustainability and social equity have been viewed as residual
outcomes of economic growth,
 Accordingly, in many countries, economic growth was taken up as the first goal
and environmental protection and social development were dealt with as
secondary goals.

But,
 Three pillars can be enhanced via synergy creating policies.
 i.e., while pursuing economic growth, social equity and environmental
sustainability can be enhanced.
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4. Key Concepts of Inclusive Growth
and Green Growth?

Inclusive Growth
 Socially equitable growth
 i.e., Economic growth that allows people to contribute to and benefit from
economic growth .
 Socially equitable growth has been termed as “shared growth”, “pro-poor
growth”, “broad-based growth” and more recently “inclusive growth”.

Green Growth
 Environmentally sustainable growth
 i.e., Economic growth which is consistent with environmental
sustainability.
 Environmentally sustainable growth has been termed as “sustainable
growth”, “clean growth”, and more recently “green growth.”
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4. Key Concepts of Inclusive Growth
and Green Growth?

The Green Growth Initiative and Inclusive Growth Initiative
should constitute two important “strategies” to achieve the ultimate,
long-term goal of Sustainable Development.
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4. Key Concepts of Inclusive Growth
and Green Growth?

Evolvement of Inclusive Growth
 India adopted the theme of 'towards faster and more inclusive
growth,' in it’s Eleventh Five-Year Plan, which runs from 2007 to
2012
 ADB’s framework for inclusive growth in Strategy 2020 (April 2008).
 OECD’s initiative for inclusive growth.

Evolvement of Green Growth
 UNESCAP adopted as a new growth paradigm at Asia-Pacific
Ministerial Conference on Environment and Development (MCED
V), (March 2005).
 Korea adopted “Low Carbon Green Growth” as a long-term growth
vision (August 2008).
 OECD adopted Green Growth as a new work agenda (July 2009) 36
5. Strategies for Inclusive Growth
1. Creation of synergy between growth and social
equity has to be created
2. Management of both supply side and demand side
3. Support for the long-term perspective
4. International Cooperation
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IG 1. Creation of synergy between
growth and social equity

Providing equal opportunities for high-quality
education and training
 Strengthen human capabilities of all members of the economy,
including the disadvantaged and the bypassed.

Providing equal opportunities for employment
 Create more employment opportunities and make them
accessible to all, including the disadvantaged and the bypassed.

Strengthening “productive” social safety nets
 Provide and strengthen social safety nets that can increase (not
decrease!) capabilities and incentives of the disadvantaged and
the bypassed to take part more actively in productive
employment.
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IG 2. Management of both supply side
and demand side
 Conventional social equity policy has focused
primarily on the consumption side (i.e., income
distribution).
 Pro-poor growth has been promoted: providing monetary
subsidy to the poor, unemployed, the aged, etc., thus
reducing work incentives
 However, supply side management is more crucial
for the creation of synergy between growth and
social equity.
 Equal opportunities for high-quality education
 Equal opportunities for high-quality employment
Productive social safety nets
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IG 3. Support for the long-term
perspective
 Conventional social equity policy has been
conducted on the short-term basis.
 eg.
 However, the long-term perspective is required.
 The public sector needs to bridge the gap between long-term
social benefit and short-term social cost to provide extensive
training and education opportunities, etc.
 The public sector also needs to bridge the gap between long-term
social benefit and short-term commercial benefit to promote the
active participation of the private sector in “socially inclusive”
production activities.
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IG 4. International Cooperation
 International cooperation to support structural
reform in developing economies.
 eg.
 International cooperation for education, training,
migration labor, etc.
 eg.
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6. Strategies for Green Growth
1. Creation of synergy between growth and social
equity has to be created
2. Management of both supply side and demand side
3. Support for the long-term perspective
4. International Cooperation
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GG 1. Creation of synergy between
growth and environment

Internalization of environmental costs in price
mechanism
 Eg. 1: Green tax reform: Increase environment-related tax, while
reducing income tax
 Eg. 2: Subsidy reform:

Investment in environment-related industry
 Strengthen the future industry by investing in environment.
 Eg.: Subsidy for green R&D

Public investment in environment structure
 Increase employment by public investment in environment
structure, especially when the economy is down.
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GG 2. Management of both supply side
and demand side
 Conventional environmental management has
focused primarily on pollution control.
 Eg.,
 However, management of both supply side and
demand side management is also required so as to
increase eco-efficiency in both production and
consumption process.
 Eg.,
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GG 2. Management of both supply side
and demand side

Environmental sustainability can be achieved not just with pollution
reduction, but rather with improving eco-efficiency in both production
and consumption sides.
 Determinants of environmental
sustainability
 Flows of Production and Consumption
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GG 3. Support for the long-term
perspective
 Conventional environmental has been conducted on
the short-term basis.
 eg.
 However, the long-term perspective is required.
 The public sector needs to bridge the gap between long-term
social benefit and short-term commercial benefit to promote the
active participation of the private sector in environmental R&D.
 Creation of new growth engines for the future.
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IG 4. International Cooperation
 International cooperation to reduce barriers to trade
and investment in environmental goods and services
(EGS).
 To ensure environmental sustainability to be consistent
with keeping global trade and investment open and free,
without raising new barriers to trade and investment.
 eg.
 International cooperation to expedite green
technology transfer to developing economies
 eg.
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8. Epilogue I –Framework for SD
Sustainable Development
Green growth
Inclusive growth
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7. Epilogue I – Principles of Economics by Mankiw
Mankiw, N. Gregory, 2014, Principles of Economics, 7th ed., Cengage Learning.
7. Epilogue I – Principles of Economics by H.-H. Lee
Part I. Introduction
Part II. Happiness, Welfare, and Sustainable
Development
Part III. Microeconomics
Part IV. Externalities and Market Failure
Part V. Macroeconomics
Part VI. Sustainable Development in the Longrun
 Market and social inclusiveness
 Market and environmental sustainability
 Inclusive growth and green growth for Sustainable Development
7. Epilogue II – Questions for Review
1. Critically explain Green Growth and Inclusive
Growth strategies for Sustainable Development.
2. Explain some market-friendly Green Growth
strategies that were not identified in class.
3. Explain some market-friendly Inclusive Growth
strategies that were not identified in class.
Hyun-Hoon Lee
[email protected]