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Realizing a ‘Green New Deal”

Nairobi, 16 February 2009—One third of the around $2.5 trillion-worth of planned stimulus packages should be invested on ‘greening’ the world economy.

This would assist in powering the global economy out of recession and onto a Green, 21 st century path a new report released today by the UN Environment Programme (UNEP) says.

The estimated $750 billion of green investment, equal to about one per cent of current global GDP, could trigger significant, multiple and potentially transformational returns.

Allied to innovative market mechanisms and fiscal policies, these include:-

  • Stimulating clean tech innovation, stabilizing and boosting employment in decent jobs and protecting vulnerable groups
  • Cutting carbon dependency and greenhouse gas emissions, reducing degradation of multi-trillion dollar ecosystems and their goods and services and tackling water scarcity
  • Furthering the opportunity to achieve the Millennium Development Goal of ending extreme poverty by 2015

The G20, comprising of the 20 largest developed and developing economies, who next meet in London in April, is the first opportunity to begin shaping a Global Green New Deal.

Such a Deal can also set the stage for a successful outcome to the crucial UN climate change meeting later in the year in Copenhagen, Denmark.

These are among the findings of the Global Green New Deal report, written in consultation with experts from over 25 UN bodies and external organizations including the OECD, the International Monetary Fund and the World Bank.

The report, A Global Green New Deal, commissioned on behalf of UNEP’s Green Economy Initiative was written by Professor Edward B Barbier of the University of Wyoming.

Prof. Barbier is a leading expert on the economics of sustainability, and co-authored with the late Prof. David Pearce, the landmark Blueprint for a Green Economy.

Its findings, alongside those of the UNEP Year Book 2009, are being presented today to over 100 environment ministers attending UNEP’s Governing Council/Global Ministerial Environment Forum.

Achim Steiner, UN Under-Secretary General and UNEP Executive Director, said:” The $2.5 to $3 trillion to be mobilized over the next 24 months to tackle the economic crisis are sums almost unthinkable just 12 months ago”.

“Spent wisely and creatively they offer the chance to deal with the today’s immediate crises and begin focusing and framing a response to those on the horizon from future food shortages, natural resource scarcity, energy security and climate change,” he added.

“The Global Green New Deal report, part of the UNEP Green Economy initiative, is being presented here to ministers from the North and the South as an anti-dote to the current economic woes. It represents an opportunity to accelerate towards innovation-led, low carbon, low waste Green Economy societies with decent employment prospects for many more millions of people,” said Mr Steiner.

“Several economies, such as the United States; China; the Republic of Korea; Japan; Germany, Denmark, France and the United Kingdom are already earmarking parts of their multi-billion dollar stimulus packages for environmental investments. This report is designed to inform a public debate and perhaps assist those who may be unsure how to proceed so they too can turn crisis into opportunity,” he added.

Mr Steiner emphasized: “This agenda-- this locomotive for sustainable development-- is as relevant to developing and emerging economies as it is to industrialized ones.

“Greening the economy is as much about greening overseas development aid development; bilateral and multilateral assistance; south-south cooperation and direct foreign investment as it is about national investment.

Pavan Sukhdev, Project Leader of UNEP’s Green Economy Initiative who is on secondment from Deutsche Bank, said: “Prof Barbier’s report is the third in our ongoing stream of work to rethink economic models and target job growth in a world where leveraging ‘Natural Capital’ is both an increasing constraint and an untapped opportunity, and where failing to pursue sustainable development is no longer an option”.

He said the new report built on two earlier reports-- the Interim Report on The Economics of Ecosystems and Biodiversity (TEEB) published in May 2008 and an initiative of the G8+5 and the Green Jobs Report of September 2008.

“Now ‘A Global Green New Deal’ brings this thinking to bear on the current economic crisis, with a focus and on the reflationary packages being planned to solve it. It shows how “green” components of stimulus packages together with appropriate policy changes may be used to restore job growth and achieve a more sustainable “green economy,” he said.

Mr Sukhdev added that the new report demonstrated that “simultaneously targeting the triple goals of job creation, lower climate and ecological risk, and reduced poverty is not only possible but also desirable and timely”.

“This report addresses both developed and developing world challenges. It recognizes that, in a highly globalized world economy in serious recession, the poor and the vulnerable are hit hardest, and makes useful suggestions to prevent worsening poverty,” he said.

Based on consultations with Governments over the next few days at UNEP’s GC, the Green Economy Initiative will draft specific recommendations towards implementing a “A Global Green New Deal”.

Today’s 154 page Global Green New Deal report outlines a rich array of options and actions available to countries at different points in their economic and developmental paths some of which can be undertaken nationally and others cooperatively at the regional and global level.

The report shows that some countries are at the national level already exceeding, meeting or factoring some proportion of the one per cent suggested target.

The Republic of Korea

It cites the more than $36 billion Green New Deal of the Republic of Korea which under full implementation involves an investment equal to around 3 per cent of GDP and a job creation potential of close to one million jobs.

“The energy conservation and green building investments that form part of the Republic of Korea’s Green New Deal amount to 0.5 per cent of GDP and the full, low carbon strategy accounts for 1.2 per cent of GDP,” says the report.

These strategies alone are expected to create over180, 000 and more than 330,000 jobs respectively.

For example:

  • The $7 billion to be invested in mass transit and railways over the next three likely to generate 138,000
  • The $5.8 billion in energy conservation in villages and schools—170,000 jobs
  • Other parts of the stimulus will also create employment including the more than $10 billion river restoration stimulus; close to 200,000 jobs
  • The more than $1.7 billion forest restoration stimulus—over 130,000 jobs
  • The $690 million water resource management stimulus—over 16,000 jobs

China is expected to spend $586 billion or just over eight per cent of its GDP on a fiscal stimulus package of which an estimated $140 billion or just under two percent is earmarked for green investments.

China ’s green investment package is likely to boost further its $17 billion renewable energy sector which already employs around one million people.

The United States stimulus package, approved by Congress a few days ago, amounts to $787 billion or around 5.7 per cent of GDP of which $100 billion (based on estimates on the new package) or over 0.7 per cent are on directed towards greening the US economy

.

  • $18 billion for clean water, flood control and environmental restoration and $8.4 billion for transit, and $8 billion for high-speed rail
  • $4.5 billion to make federal office buildings more energy-efficient.
  • $30 billion for a smart power grid, advanced battery technology and other energy efficiency measures.
  • $20 billion in tax incentives for renewable energy and energy efficiency over the next 10 years.
  • $6.3 billion for energy efficiency in multifamily housing that gets federal assistance, such as HUD-sponsored low-income housing and $5 billion to weatherize more than 1 million homes owned by “modest-income” families

The report cites a study by the Peterson Institute of International Economics and the World Resources Institute that estimates that green energy investments in the United States could save the economy an average of $450 million a year for every $1 billion invested.

And that every $1 billion of government spending in this area will create around 30,000 job years and reduce annual greenhouse gas emissions by close to 600,000 tons from 2012-2020.

  • The Green New Deal report urges all high-income OECD economies to factor the one per cent green investment goal into their stimulus packages.
  • The report also recommends that the remaining high income economies, alongside middle-income ones of the G-20 to “as far as possible” to invest similar amounts in national action plans to reduce carbon dependency and boost environmental sustainability--the G-20 is next set to meet in London in April
  • The remaining developing economy countries should also consider investments to reduce carbon dependency. Although the amounts need to be determined, the report claim such investments can assist in poverty reduction, employment generation and livelihood improvements.

Cutting Fuel Subsidies—and Cap and Trade Carbon Markets

The report says some of the needed investment income could be raised by developing country governments through reducing or phasing-out energy subsidies.

  • Currently an estimated $300 or more billion is being spent on energy subsidies across developed and developing economies, the lion’s share on fossil fuel subsidies.
  • By far the largest amount is spent by developing economies with subsidies in 20 non-OECD countries totaling $220 billion.

“Cancelling these subsidies would on their own reduce greenhouse gas emissions globally by as much as six per cent and add 0.1 per cent to global GDP,” says the report.

“The financial savings could also be redirected to investments in clean energy R&D, renewable energy development and energy conservation, further boosting economies and employment,” it says.

The report cites energy sector reforms in several low-income economies including Botswana, Ghana, Honduras, India, Indonesia, Nepal and Senegal that have also benefited poor households.

  • Here every dollar invested in boosting the energy efficiency of electricity generation has led to savings of up to $3.

The report counters the idea that renewable energy is the preserve of the well off economies. Small hydropower, biomass and solar photovoltaics are already providing electricity, heat, water pumping and other activities for tens of millions of people in rural, developing country areas.

  • 25 million developing country households now use biogas for cooking and lighting and 2.5 million developing country homes now use solar lighting systems.
  • Indeed contrary to popular belief, developing economies account for 40 per cent of existing global renewable energy resource capacity, 70 per cent of solar water heater capacity and 45 per cent of biofuels production.
  • “Expansion of these existing sectors (in part by redirecting fossil fuel subsidies) will not only increase the availability and affordability of sustainable energy services for the world’s poor but provide much needed (often local) employment opportunities,” says the Global Green New Deal report.

The report also recommends that developing economies spend one per cent of the GDP on improving water clean water and sanitation provisions for the poor in line with recommendations by the UN Development Programme.

  • A dollar invested in clean water and sanitation in developing countries gives returns of between $5 and $11 and in some cases up to $28 for some low-cost measures—benefits including reduced days spent away from work or from school, reduced costs to local health services and reduced costs in medicines as a result of falls in water borne diseases such as diarrhea
  • Indeed the overall economic boost of halving by 2015 the number of people without access to safe drinking water and sanitation would be around $38 billion annually.
  • In sub-Saharan Africa alone, the stimulus would be $15 billion annually equivalent to around 60 per cent of the Continent’s current aid flows.

The report makes the point that the current economic crisis, which is reducing international trade and may lead to declines in aid and private investment flows, demands an even more targeted and focused response in order to maximize returns.

“Addressing the gap in overseas aid for clean water and sanitation in developing economies needs to be a priority of the international community under a Global Green New Deal,” it says.

The report makes a series of additional recommendations in order to achieve a Global Green New Deal and set the stage for Green Economy growth.

  • All economies to consider removing water subsidies and adopting market-based instruments to boost water efficiency, with measures to ensure the protection of vulnerable groups, alongside better governance of shared or transboundary rivers and lakes
  • The adoption of national action plans by developing economies for improving the sustainability of primary production activities

The report cites the case of Malaysia where annual growth rates have exceeded four per cent by investing 25 per cent of the financial gains from sectors like forests and fisheries in diversifying the economy; education and training; social safety nets and other pro-poor measures.

It also calls on groups like the G-20 to underpin Green Economic growth by addressing some of the aid and trade shortfalls emerging as a result of the economic crisis alongside falls in private investment.

Other actions that the report suggests at the international level include:

  1. The most likely global policy forum for promoting urgent international action on the GGND is the G20 forum of the world’s 20 largest rich and emerging economies, although all international fora, and the UN system especially, have a role to play in promoting, developing and enhancing the GGND.
  2. At its April 2009 London meeting, the G20 should consider proposals for a GGND, such as the actions recommended by this report, and help develop framework ideas towards securing a global climate change agreement at Copenhagen in December 2009.
  3. The international community should reach agreement on extending the CDM beyond 2012 as part of a global climate change agreement, and reforming the mechanism to increase the coverage of developing economies, the sectors and technologies and the overall financing of global GHG emission reductions.
  4. The international community should support efforts to improve payment for ecosystem services targeted to the poor and to include more ecosystems, and efforts to improve governance and shared use of transboundary water resources.
  5. The international community should adopt as soon as possible reforms to the governance of the financial system that increase transparency and simplicity, and improve the alignment of incentive structures.
  6. Bilateral and multilateral aid donors should increase their development assistance over the next few years, and target it to the sectors and actions that comprise the key components of the GGND.
  7. The international community should develop and expand innovative financing mechanisms, such as the International Finance Facility, Climate Investment Funds and Global Clean Energy Cooperation, as possible means to fund key components of the GGND.
  8. The international community should develop and expand new trade financing and trade facilitation financing packages, and use them to target support to the GGND.
  9. The international community should review existing trade agreements and shape future agreements to identify and minimize barriers to enhance effective support of the proposed GGND actions.
  10. The international community needs to reach successful conclusion of the Doha Round trade negotiations, especially on fishery subsidies, clean technology and services and reducing agricultural protectionism.

Notes to Editors

The Global Green New Deal report, written for UNEP by professor Ed Barbier, benefited from wide-ranging consultations held at UN headquarters in New York, 2-3 February with experts from amongst others the European Environmental Agency, ICTSD, ILO, IMF, OECD, UNCEB, UNCSD, UNCTAD, UNDESA, UNDP, UNECE, UNEP, UNECLAC, UNESCAP, UNFAO, UNFCCC, UNIDO, UNSD, the World Bank and the UN Secretary General’s Office.

A consultation meeting was also held at the UN Foundation, Washington DC, 4 February 2009 with experts, amongst others, from the Center for American Progress, Pew Center on Global Climate Change, Union of Concerned Scientists, UN Foundation, World Resources Institute and the Worldwatch Institute.

The full report and its Executive Summary can be found at www.unep.org or at http://www.unep.org/greeneconomy/

The 25 th UNEP Governing Council/Global Ministerial Environment Forum http://www.unep.org/gc/gc25/

For More information Please Contact

Nick Nuttall, UNEP Spokesperson, Office of the Executive Director, on Tel: +254 20 762 3084; Mobile: 254 733 632 755 or when traveling +41 795 965 737; E-mail: nick.nuttall@unep.org

Anne-France White at Mobile: +254 (0)728 600 494

or E-mail: anne-france.white@unep.org

Shereen Zorba at Mobile: +254 (0)721 210 571

or E-mail: shereen.zorba@unep.org

Monday 16 Feb 2009
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