It's the Green Economy, Stupid

cross posted from Huffinton Post Canada

How do we pursue a green economy?

It's an interesting question, I think. And it's a question we should be asking ourselves right now.

When the economy is going through a rough patch, it tends to become the focus of our attention, often at the expense of other issues. In large degree, this is understandable. And it's not surprising that respondents to a recent poll cited the economy as the most pressing concern facing Canada.

To be sure, we haven't entirely forgotten about other issues, but I suspect that for many people, when asked what they believe is the most important issue, the prevailing sentiment could well be summed up as: It's the economy, stupid, and we want it to grow.

However, as we work on fixing the economy, on getting it back up to speed, I believe we should give equal if not even greater attention to the shape and direction of our economy. Rather than being entirely consumed with getting things back on track, we should also ask ourselves where that track was taking us and whether we were headed in the right direction.

For me, the answer is no.

My chief concern is that our current economic system has failed to protect the environment, which we are entirely dependent upon. In fact, when it comes to environmental protection, the shortcomings of the current economic system are so great that we've come to believe that the economy and the environment are opposing forces: If we want to save the environment, it will hurt the economy, and conversely, if we wish to generate new jobs and wealth, we must accept some environmental consequences. As I've argued before, this is preposterous. We cannot choose between the environment and the economy. We need both. And with smart public policy, we can create the conditions such that both can thrive.

And there are other issues, too, including that our current economic system has led to the concentration of wealth and to an unacceptable gap between rich and poor. The trend line is unmistakable.

To me, these and other shortcomings of our current economic system suggest that our challenge is not simply to restart things. To me, it's obvious that we need to make some substantial changes. And I also believe that now, with the economy receiving such great attention, is the time to do so.

I'm obviously not the first one to make this argument, and in fact the type of economy that I would advocate for already has a name: it's called a green economy, and it has been defined as an economy that results in "improved human well-being and social equity, while significantly reducing environmental risks and ecological scarcities." Simply put, a green economy is low-carbon, resource efficient, and socially inclusive.

And not only would a green economy address the shortcomings mentioned above, but there is mounting evidence that a green economy would deliver greater economic growth and more jobs compared with continuing with business as usual. The point is, a green economy isn't just more equitable and better for the environment; it's a better economy.

Allow me to provide some examples. Sir Nicholas Stern, an esteemed economist, was tasked with calculating the costs of climate change for the U.K. back in 2006. His key finding: if one per cent of GDP were spent to combat climate change, it would be sufficient to stem the worst impacts, but failing to invest that much would result in a five to 20 per cent reduction in GDP.

A similar finding was recently reported by the International Energy Agency in their World Energy Outlook. In their words, "Delaying action is a false economy: for every $1 of investment avoided in the power sector before 2020 an additional $4.3 would need to be spent after 2020 to compensate for the increased emissions." And a report commissioned by our federal government found the same: the costs of ignoring climate change exceed the costs of dealing with it.

An ounce of prevention, after all, is worth a pound of cure.

Another, related issue, is that our current system doesn't value nature's services, or natural capital. Yet the natural environment serves a number of crucial functions such as climate regulation, carbon sequestration, pollination, and flood protection. Indeed, by one estimate Canada's boreal forest provides about $700 billion worth of these services every year. And Ontario's greenbelt is similar, estimated to contribute $2.6 billion in non-market services annually.

But when we don't appreciate the value of these services, we degrade the ecosystems which supply them, and ultimately we're forced to go out of pocket to build waste-water treatment plants, or flood mitigation, or other expensive infrastructure, which is almost always less effective than the wetland, forest, or green space which it is meant to replace.

But aside from these and other shortcomings, other market failures, there is also the flipside: the fact that the shift to a green economy is opening up entirely new opportunities and new markets. And these markets are proving to be very robust. The authors of a report out of the U.S. described the rate of growth in the green economy as "torrid." And even during these tough economic times, investment in renewable energy has continued to climb, reaching $260 billion in 2011, with analysts projecting it will double again by 2020. And renewable energy is just one piece of the green economy.

I could go on and add more to the case for the green economy, but in truth it's pretty well established, which is why I asked the question: How do we pursue a green economy? Why is easy, and why is largely answered. How is more difficult. But now is the time to ask.

As we continue to struggle through these tough economic times, we should resist the temptation to resuscitate our economy as is, and take this opportunity to make it better. As has often been said, a crisis is a terrible thing to waste.