The Green Economy: A Fairer Future?

People’s mindset with regard to the Green Economy has to be changed from the view that we must ‘do our bit’ to save the planet to thinking that you want to live differently.

The idea of a Green Economy is gaining more and more attention as an alternative to today’s economic model. The UNEP defines a Green Economy as: “A system of economic activities related to the production, distribution and consumption of goods and services that result in improved human well- being over the long term, while not exposing future generations to significant environmental risks and ecological scarcities”. According to the International Chamber of Commerce, “although the Green Economy concept is global in scope, it seeks to ‘green’ all elements of the economy, from global to local, in different ways”. There is one main implication in the concept of Green Economy – it suggests incorporating the concept of fairness. This article will try to relate these two concepts together and see if they are compatible.

The United Nations environment programme  has said “Fairness implies recognizing global and country level equity dimensions, particularly in assuring a just transition to an economy that is low carbon, resource efficient, and socially inclusive”. Similarly, Michael Sandel, the moral philosopher from Harvard University, wrote in his newest book ‘What money can’t buy: the moral limits of markets’, that the virtues of free market have become increasingly defined by financial incentives alone and therefore raised the question of fairness in today’s economy.

So what does it actually mean moving towards a fairer economic model? Since it has been suggested that the future lies in the Green Economy, as opposed to free market virtues, it is worth looking deeper at the differences between the classic economy and current economy. Classic economy is signified with the ‘invisible hand’ or self-regulating capacity. Today’s economy believes ‘people respond to incentives’ (as described by Greg Mankiw in ‘Principles of Economics’). Incentives according to Sandel ‘are interventions that the economist (or policy maker) designs, engineers, and imposes on the world’. So the free market today is no longer an invisible hand but a ‘heavy hand’.

The Green Economy is closely related with biodiversity. In 2010, the global study ‘The Economics of Ecosystems & Biodiversity’ aimed to measure ‘the costs of the loss of biodiversity and the failure to take protective measures versus the costs of effective conservation’. It suggests the provision of monetary incentives in order to accelerate the path towards the Green Economy. For example, payments for ecosystem services (PES) provide land users with incentives to protect natural environments. The EU spends €2 billion a year on supporting this scheme. Is such an amount of money worth spending just to encourage people to care about their land in a more sustainable way?

The author of this report, Jairam Ramesh, stated: ‘The time for ignoring biodiversity and persisting with conventional thinking regarding wealth creation and development is over. We must get on to the path towards a green economy.’ His study demonstrated how degrading biodiversity would cost the global economy trillions of dollars. Jairam Ramesh often endorsed ‘incentives’ to encourage countries to implement green policies, to look more at long term gains and in doing so, build the foundations of a Green Economy. So in this case, using incentives to change behavior seems justifiable; after all if you want to attract attention of ‘the baddies’ you need to speak their language, the ‘language of economics’.

However monetary incentives may raise some moral questions. The Financial Times special report on Sustainable Business wrote about trading ecosystems for credits and paying for ecosystem services, and that everyone has to be involved in the creation of the Green Economy – the government, the NGOs, the big businesses and the public. Michael Sandel argued that the financial incentives have crowded out non-market norms and environmental policies are one of them. Sandel rightly observes that most economists often ignore the question ‘Why maximize social utility?’ For example, tradable pollution permits proposed by Kyoto protocol are more like fees rather than fines. Buying the right to pollute from others ‘does damage to two norms: it entrenches an instrumental attitude toward nature, and it undermines the spirit of shared sacrifice that may be necessary to create a global environmental policy’.

The Telegraph also ran a story this week of how these schemes can be abused. ‘Figures obtained from the Financial Services Authority (FSA) revealed an explosion in companies fraudulently offering to deal in carbon credits – transferable certificates that allow companies to pollute. More than 100 companies have been reported to the watchdog over the past 12 months… The companies, including Green Carbon Solutions, Global Climate Agency and Carbon Credit International, have names designed to suggest probity. In fact many of them are run by individuals who used to operate boiler room scams selling shares to unsuspecting investors.’

Sandel wrote that ‘Global action on climate change may require that we find our way to a new environmental ethic, a new set of attitudes toward the natural world we share’. George Marshall’s handbook for individual reduction in carbon emissions says people’s mindset has to be changed from the view that we must ‘do our bit’ to save the planet to thinking that you want to live differently. This point could be applied not just to reducing emissions, but also to taking steps towards realizing a Green Economy: using energy more efficiently, caring about biodiversity not because you have to produce a report for the government or society, but because you care.

Tagged EU, George Marshall, Green Economy, Jairam Ramesh, Kyoto Protocol, Michael Sandel, UN, UNEP