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Monitoring the Transition Towards a Green Economy

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1 Monitoring the Transition Towards a Green Economy
Seminar on Green Economy and Official Statistics, Seoul, 6 July 2011 Fulai Sheng Head, Research and Partnerships Unit Economics & Trade Branch Division of Technology, Industry and Economics UNEP This presentation will do two things: It will briefly summarize UNEP’s recent work in the Green Economy Initiative, in particular the report, Towards a Green Economy. It will outline what UNEP sees as priority areas for UNEP’s flagship publication, Towards A Green Economy: Pathways to Sustainable Development and Poverty Alleviation, is the result of two year’s work, involving about 500 people from several UN agencies and numerous institutions from around the globe. This includes about 150 contributing authors, who are experts in their field, and a robust scientific peer review process. Advance draft versions of Towards A Green Economy were released in February of this year. A wide range of further comments have been received and the report is now being finalized for publication later this year.

2 What is a Green Economy? A Green Economy is one that results in increased human well-being & social equity, while significantly reducing environmental risks & ecological scarcities. There is no one approach to a green economy. A green economy does not favour one political perspective over another; it is relevant to all economies. However, for UNEP’s purposes, it defines a green economy as one that results in human well-being and social equity, while significantly reducing environmental risks and ecological scarcities.

3 In Other Words… A Green Economy is one whose growth of income and jobs is driven by investments that reduce carbon emissions and pollution, enhance efficiency and sustain biodiversity and ecosystem services. In a green economy, growth in income and employment are driven by public and private investments that reduce carbon emissions and pollution, enhance resource and energy efficiency, and prevent the loss of biodiversity and ecosystem services. Moreover, these investments need to be catalyzed and supported by targeted public expenditure and policy reforms. And, a green economy recognizes natural capital as a critical economic asset. This focus on investments driving growth in income and jobs highlights the need for statistics and information that capture these fundamental components of a green economy.

4 Why a Green Economy? It was born out of multiple crises and accelerating resource scarcity. A Green Economy is the economic vehicle for sustainable development. A Green Economy has strategies to end the persistence of poverty. It is a new economic paradigm that can drive growth of income and jobs, without creating environmental risk. The concept of a green economy does not replace sustainable development, but nearly 20 years after the first Earth Summit in Rio, there is a growing recognition that in order to achieve sustainable development, we must get the economy right. Several concurrent crises have sprung up or accelerated during the last decade: crises in climate, biodiversity, food, fuel and water, and more recently, the financial crisis. Although these crises vary, they all share a common feature, the gross misallocation of capital. Existing policies and market incentives have contributed to the problem. Therefore, we know in order to achieve sustainable development, we are going to need a new economic paradigm.

5 Green Economy in Action
China - investing US$ 468 billion in greening key sectors by 2015; >double past five years. Barbados - National Strategic Plan includes green economy as one of its six goals by 2025. South Africa - launched a process to develop a national Green Economy Plan. Indonesia - national development plan has a goal of a “green and everlasting Indonesia” by 2025. Brazil – State of Sao Paulo developed a green economy plan with targets and indicators. Countries throughout the world are actively promoting a transition to a green economy. See examples of strategies and initiatives underway. UNEP’s Green Economy Initiative is also working with about 20 countries to develop such plans.

6 UNEP’s Green Economy Report
Investing or reallocating just 2% of global GDP in 10 key sectors can kick-start a transition to a low-carbon, resource-efficient economy. UNEP’s report found investing – or reallocating – 2% of global GDP to green 10 key sectors is enough to kick-start a transition to a low-carbon, resource-efficient economy. What are the 10 key sectors? To put 2% in context do you have a breakdown of %of GDP comes from other sectors.

7 BAU vs. a Green Scenario Green Scenario Business as Usual
2 % of GDP or 1.3 trillion USD per year invested in greening 10 key sectors from Policies adopted to help reduce harmful CO2 emissions and subsidies, and incentives created to increase investments, i.e., in natural capital and energy efficiency. Business as Usual Current trends assumed to continue with 2% of GDP per year allocated in a BAU across 10 key sectors from Policies continue to support investment in non-green infrastructure, harmful fossil fuel and fishing subsidies, etc. The report uses a macroeconomic model to compare a 2% of global GDP investment under a BAU scenario to 2% of global GDP under a GE scenario, applying it to “green” 10 key sectors. The report measures the results not only in terms of GDP, but also the impacts on employment, resource intensity, emissions and ecological impact. We estimated that the annual financing demand to green the global economy was in the range of US 1.05-$2.59 trillion (Annex 1), and took an annual level of $1.3 trillion (i.e., 2% of GDP) as a target for reallocation from “brown” investments to green investments. Under a BAU scenario, it is assumed that policies would continue to support carbon-intensive infrastructure and harmful subsidies. For example, production and price subsidies for fossil fuels exceeded US $650 billion in 2008, which adversely affects a transition to renewable energies. Under a green scenario, policies would be adopted to reduce harmful subsidies and incentives would be created to increase investments in natural capital and energy efficiency, for example.

8 Key Findings Investing in natural capital, resource and energy efficiency can lead to: Higher rates of GDP growth over time and enhanced wealth Natural capital stocks Reduced poverty Decent employment

9 Results by 2050 NATURAL CAPITAL … While preserving
Moving Towards a Green Economy argues that a reallocation of public and private investments – spurred through appropriate policy reforms and enabling conditions – can generate as much growth and employment as our current brown economy, and outperforms the latter in the medium and long-run, while yielding significant environmetnal and social benefits.

10 UNEP’s Role in Monitoring Progress
Facilitating and catalytic: what are important issues Work in partnership: UNSD, OECD, WB, EUROSTAT, ILO, etc  EMG Emphasize user perspective  policy Collaborate with developing countries and promote capacity building Measuring progress towards a green economy is an integral part of the Green Economy Initiative (GEI). Indicators are the means by which the concept of green economy can be made more concrete and defined more specifically. Quantitative indicators are the basis for setting targets and assessing achievement. In general, UNEP seeks to play a facilitating and catalytic role on measuring progress towards a green economy, working with key partner organizations to develop consensus and promote implementation, particularly with the needs and circumstances of developing countries in mind. These partner organizations include, but are not limited to, the United Nations Statistical Division (UNSD), the Organization for Economic Co-operation and Development (OECD), the World Bank, EUROSTAT, the European Environment Agency (EEA), the International Labor Organization (ILO), as well as various other UN organizations. An important vehicle is the Issue Management Group on Green Economy, under the auspices of the Environment Management Group (EMG), which is preparing an inter-agency report on green economy with the aim of promoting common perspectives. In this regard, considerable efforts have been devoted to developing the system of Integrated Environmental and Economic Accounting (SEEA), as well as frameworks for sustainable development indicators by various national and international organizations. This work provides a substantial basis on which a framework of indicators for a green economy can draw. UNEP also plans to work with governments in the elaboration of this framework. Requests for assistance on Green Economy Advisory Services have been received from more than 30 countries and a number of projects are now in the pipeline. The framework for measuring progress will form part of these efforts, offering governments advice and choices on indicators that can meet their needs. There is considerable scope for providing such guidance and advice in partnership with other organizations. UNEP is preparing a booklet on measuring progress towards a green economy that will place this measurement challenge in the context of existing frameworks and initiatives (e.g. indicators of sustainable development, accounting frameworks including the environmental-economic accounting, OECD green growth indicators). The paper will also outline a number of relevant issues that may help governments and other stakeholders in developing approaches and initiatives to monitor progress towards a green economy. This booklet should be complete by October 2011.

11 National tailoring vs International comparisons
Some Important Issues National tailoring vs International comparisons Relevance vs Data availability Measured vs Modelled indicators

12 Basic framework for monitoring the transition
Key Sectors Agriculture Buildings Cities Energy Forests Fisheries Manufacturing Tourism Transport Waste Water 1. Green Investments, Jobs and Sectors Investment (monetary) Employment (jobs) Output (monetary) 2. Decoupling Impacts & Resource Productivity GDP per unit… GHG emissions Energy use Water use Material use Waste generation Economy- wide Selected key sectors The basic framework for indicators to monitor the transition towards a green economy recognizes three principal groups: “Green Investments, Jobs & Sectors”: This group has an economic focus and represents efforts to achieve a green transformation of the economy and various key sectors, in terms of investment, and the associated share in output and employment. These can be considered as similar to leading indicators. “Decoupling Impacts and Resource Efficiency”: This group assess the environmental impacts of economic activity, identifying indicators of resource efficiency and productivity, and the decoupling of economic activity from these impacts. Principle issues including materials and waste, energy, water, land use and ecosystem change, and emissions of hazardous substances. Work of the International Panel on Sustainable Resource Management has suggested a number of priority areas for further indicator development. “Aggregate indicators of progress and well-being”: This group refers to overall measures of economic progress and well-being, including poverty alleviation and natural capital depreciation (such as in the “Beyond GDP” initiative). This includes thus a wide range of proposed indicators and composite indicators (indices), mostly to complement GDP with social, environmental and more detailed economic criteria. UNEP supports efforts by various actors to expand the range of core indicators by which the performance of an economy is summarized. More details Key sectors: energy, buildings, transport, manufacturing, tourism, waste management, agriculture, forests, fisheries and water// Indicators reflect policy actions, such as the share of renewables in the energy mix Measures of the intensity of energy, resource and material use and waste generation for specific sectors// Indicators capture the outcomes/impacts of policies and investments to green key sectors 3. Aggregate indicators of progress and well-being e.g. Adjusted net savings, expanded wealth estimates, indices of well-being, poverty reduction, Genuine Progress Indicator, etc. 12

13 Green Sectors, Jobs … Economic variables Economic sectors
Turnover Value added Employment Exports Economic variables Corporations General Government NACE 2-digits levels Administrative levels Economic sectors Environmental protection Resource management Environmental domains The green transformation of key economic and natural resource based sectors is the principal focus of UNEP’s Green Economy Report, to be published in The various chapters, prepared by a team of international experts and covering 12 sectors or spheres of the economy, offers some suggestions for indicators for greening specific sectors, but this process has not been undertaken in a comprehensive manner. . Some of these are presented below in Table 1 in the first column. EUROSTAT has developed a classification of the environmental goods and services sector (EGSS) within the context of the system of national accounts. With the benefit of having been considered and even tested by member states, this classification system, for which a handbook has already been formulated, offers an approach for defining new green sectors, including associated investments and employment. Complementary elaboration may also be useful to also capture investments and employment in activities that concern “greening brown sectors” that may not be adequately captured in this classification. Such issues are under ongoing discussion within and among national statistical offices of EU member states (e.g. Livesay, 2010 for the UK Office of National Statistics). This figure shows different levels of detail for presenting data on the EGSS. UNSD has led the preparation of revised Handbook on Integrated Environmental and Economic Accounting (SEEA), guided by the Committee of Experts on Environmental and Economic Accounting (CEEA), which UNEP contributed to establishing. The UN Statistical Commission aims to have this adopted as an international statistical standard by It is envisioned that the revision will also incorporate the EGSS. There have been similar initiatives by some other countries, in particular the United States (US Department of Commerce, 2010), which can contribute further to the elaboration of internationally agreed definitions and classifications. Further information on the SEEA In order to assess a country or region’s path towards a green economy, data on economic production and consumption should be integrated with information on the environmental impacts of these activities. In terms of the conceptual framework above, the impacts in terms of decoupling and efficiency in the second group of indicators should be related to production and consumption data, as maintained in the system of national accounts. In addition, changes in the amount and sectoral disaggregation of production and consumption, as well as associated employment, can be characterized as part of a green transition, resulting from specific investments or changes in the structure of the economy. The UN System of Environmental-Economic Accounting (SEEA) is the internationally agreed statistical framework for the environment focusing on measuring the relationship between the economy and the environment. The SEEA sets the statistical standards for collecting and integrating economic and environmental data for analysis of the green economy and sustainability. It does not propose any single headline indicator. Rather it is a multi-purpose system with many different analytical applications that generates a range of indicators. Env. specific & connected services Connected goods Adapted goods End of pipe technologies Integrated technologies Type of output Different levels of detail for presenting data in EGSS (EUROSTAT)

14 UK market value and employment, LCEGS sector, 2008/09
Market value (£ billion) Total employed (thousands) Environmental 22 192 Renewable energy 31 257 Emerging low carbon 53 432 Total 107 881 This table is an example from a feasibility study in the UK undertaken by Innovas and commissioned by the Department for Business, Enterprise and Regulatory Reform (now Business, Innovation and Skills) titled Low Carbon and Environmental Goods and Services, an industry analysis. (Innovas, 2009). Source: Innovas 2010

15 … & Green Investments Collecting data systematically on investments presents many challenges, but investments, both public and private, form a key component of a transition to a green economy. Every year UNEP collaborates with Bloomberg New Energy Finance on the publication of their latest estimates of investments in renewable energy, as part of the REN21 Global Status Report. This information receives substantial attention from policy makers and other stakeholders. Perhaps there are ways for national statistical offices to explore new partnerships with emerging data gatherers and providers, in the private or non-profit sector – possibilities for innovative approaches at NSOs.

16 Concluding Remarks Coordinated efforts, but flexibility
Importance of economic statistics on the green economy Recognize value of SEEA  accounting framework for statistics and indicators at national level To respond to policy makers urgent needs, explore new approaches

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