Natural capital, made up of several elements that nature provides us with as the sustenance and basis of our society (soil, raw materials, water, clean air, …) has an economic value: today any growth model that ignores this by now shared knowledge can no longer work.
Green growth: an operational tool (and GDP has had its day…)
Carlo Carraro, Director | International Center for Climate Governance
Let’s imagine a geography map. Let’s imagine a brown marker placed at one point on the map (the starting point) and a green marker (the arrival point) placed at a different point. The brown marker is brown economy, today’s economy, largely based on the use of fossil fuels and no longer sustainable for the planet and ourselves. The green marker is the point we need to get to, green economy, an economic system where well-being and social equity progress while environmental risks are reduced and the limits to natural resources are managed more sensibly: a low-carbon economy, whose key factors are social inclusivity and high efficiency in the use of resources.
How can we move toward the green marker? There is no single path but many combinations dictated by the choice of different paths, different cruising speeds and different means of transportation. This makes the path toward green economy a creative trek full of possibilities, opportunities and feasible adjustments. The economic and social conditions of different national realities and priorities necessitate adaptation of the transition to the context in which it takes place: while in one place the priority may be to develop green sectors (such as renewable energy), in another it may be to green the brown sectors, or to act on the equity front.
Similarly, the measurement of well-being and growth cannot follow the single index of Gross Domestic Product (GDP), which measures the well-being of a nation solely on the basis of increased production of goods and services, when we know that sustainable development must also consider other parameters better suited to take into account environmental sustainability and social development. How then can green growth be measured?
“Moving Beyond GDP – Measuring inclusive green growth” was the theme of the Policy Session organized by the Green Growth Knowledge Platform (GGKP) as part of the 5th World Congress of Environmental and Resource Economists (WCERE), the most important forum of economists of the environment and natural resources, held in Istanbul (Turkey) from June 28 to July 2, 2014. 1,100 economists from around the world gathered to exchange the results of their research, aware of the fact that a good economy does not ignore natural capital but includes it to all effects in their development models. Natural capital, made up of several elements that nature provides us with as the sustenance and basis of our society (soil, raw materials, water, clean air, …) has an economic value: today any growth model that ignores this by now shared knowledge can no longer work, not only in environmental terms but also in economic ones: growth cannot ignore the limits imposed by the environment and by exhaustible natural resources. And in order to take account of these limits it is necessary to set a price on natural capital, correcting negative externalities that distort market behavior, fooling us into believing that we can make unlimited use of nature’s “free” commodities.
Marianne Fay (World Bank) chaired the session, which involved, besides myself, Edward Barbier (University of Wyoming), Geoffrey Heal (Columbia Business School) and Sheng Fulai(UNEP), in addressing the issue of green growth and discussing the role of sustainability indicators both to increase the effectiveness of communication, and to help policy-makers implement concrete, verifiable actions. Sustainable growth is the main activity of GGKP, which started up two years ago as a global network of 30 international organizations and experts, and on whose Advisory Committee I serve. GGKP’s aim is twofold: on the one hand to address the main weaknesses of the theory (and practice) of green growth by promoting coordinated research, and on the other to provide policy-makers, through the right channels, with the information they need to support a transition to a green economy. The third annual GGKP conference, “Fiscal Policies and the Green Economy Transition: Generating Knowledge – Creating Impact”, to be held on January 29-30, 2015 at the Ca ‘Foscari University of Venice, will focus on tax policies: environmental taxes, subsidies for adopting clean technologies and innovation incentives, along with other fiscal instruments, can play a crucial role in promoting a green economy and limiting environmental externalities.
But in order to get the world of politics to use these and other tools, and to get the public to appreciate their usefulness, they must be presented in a proper way. “Numbers not only help us measure, but they also help communicate the challenges we face and the successes we’ve had,” writes Amanda McKee (GGKP) in her web article Measuring green growth at the WCERE. And in this sense GGKP is promoting a new critical study precisely in order to outline a statistical system that goes “beyond GDP” to aid decision-makers in taking account of a far more complex reality, in which GDP is not even the most important variable. Along this direction, the Fondazione Eni Enrico Mattei, by means of a model of the world economy, has constructed the FEEM SI (Sustainability Index), an aggregate forward-looking index, which includes 23 indicators related to social, environmental and economic dimensions. Using this index, it becomes possible to provide projections on future sustainability performances at national and supranational levels. A useful tool to help policy-makers analyse scenarios for predicting the effects that different policies might have on sustainability.
Professor Carlo Carraro is President of the Università Ca’ Foscari Venezia, where he is also Professor of Environmental Economics and Econometrics and President of the Ca’ Foscari University Foundation.
He holds a Ph.D. from PrincetonUniversity. In 2008, he has been elected Vice-Chair of the Working Group III and Member of the Bureau of the Nobel Laureate Intergovernmental Panel on Climate Change (IPCC). He has been working as IPCC Lead Author since 1995.
Professor Carraro is Director of the Climate Change and Sustainable Development Programme of the Fondazione Eni Enrico Mattei, and Director of the International Centre for Climate Governance (ICCG).
He is member of the Green Growth Knowledge Platform (GGKP) Advisory Committee and of the International Advisory Board of the Harvard Environmental Economics Program (HEEP).
He is also member of the Scientific Committee of the International Human Dimensions Programme (IHDP); of the Ifo Institute for Economic Research, Munich; of the Centre for Applied Macroeconomic Analysis, AustralianNationalUniversity; and of the Fondazione Generali, Trieste.
He belongs to the Mitigation Board of the Global Network for Solutions Network (GNCS) at Columbia University’s Earth Institute and to CEPS Carbon Market Forum Advisory Board.
In 2007, he has been elected Resident Member of the Academy “Istituto Veneto di Scienze, Lettere e Arti” and in 2010 of the Academy “Ateneo Veneto” in Venice. He is also President of the Ca’ Foscari International College, San Servolo Island, Venice.
He is research fellow of the CEPR (Center for Economic Policy Research), London, CESifo (Center of Economic Studies ), Munich, and Associate Research Fellow, CEPS (Center of Economic Policy Studies ), Bruxelles.
Professor Carraro is also member of the Steering Committee of the Ca’ Foscari – Harvard Summer School (CFHSS), the International Energy Workshop (IEW), and of the Coalition Theory Network (CTN).
He belongs to the Board of Directors of the Euro Mediterranean Centre on Climate Change (CMCC) and of the Fondazione Coin. He also belongs to the Consiglio Generale of the Fondazione Giorgio Cini and of the Fondazione di Venezia, and he is President of the InternationalCenter for Tourism Economics (CISET).
He worked as a consultant to the World Bank and to the Economic and Social Research Institute (ESRI), Cabinet Office, Government of Japan. In 2009, he has been awarded the Sustainable Energy Prize by the Italian Association of Energy Economists.
Past academic positions include teaching at the University of Paris I, LUISS in Rome, University of Udine, University of Aix-en-Provence, University of Paris X. He has been Vice Provost for Research Management and Policy of Università Ca’ Foscari (2003-2006) and Chairman of the Department of Economics (2005-2008).
Professor Carraro has a proven track record and international recognition in many relevant fields. He has written more than 200 papers and 30 books on the international coordination of monetary policy, the coordination between monetary and fiscal policy, coalitions and group formation in economic systems, international negotiations and the formation of international environmental agreements, monetary and fiscal problems in open economies, monetary policy coordination in Europe, the econometric modelling of integrated economies, dynamic modelling of climate-economy interactions, sustainable development.
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