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Lush landscapes, idyllic green fields like New Zealand, wind turbines lazily spinning in the breeze, giving you a vibe of the Netherlands and solar panels basking in the sun. Whoa, did I just define 'Green Economy?' When we talk about the 'Green Economy,' we are we are NOT referring to a glittering Snapchat filter. This is not just a trendy catchphrase used by hipster policymakers or eco-warriors sipping soy lattes in biodegradable cups and speaking in a Valley accent. It is not just about aesthetics or a fleeting environmental trend. The Green Economy is serious business – NO CAP.
In 2023, the world is finally waking up to the fact that our current economic model is unsustainable.
The concept of a Green Economy, championed by the United Nations Environment Programme (UNEP), offers a way out of this ecological and economic predicament. It is about creating an economic system that does not just aim for growth but does so in a way that improves human well-being, reduces inequality, and protects the environment.
In not-so-nerdy terms, it is an economic model where 'green' does not just refer to the colour of money but the health of the planet, and if executed well, it could be our best shot at a sustainable future.
To understand why the Green Economy matters today, let us take a brief historical detour. No, not to the time of foragers and hunters, but the 1970s and 80s. This period saw the birth of environmental consciousness in the global north, where issues like deforestation, pollution, and resource depletion began to gain traction, with the 1987 Brundtland Report, which coined the term 'sustainable development', introducing the notion that economic growth should not come at the expense of future generations. However, it was the global financial crisis of 2008 that really pushed the Green Economy into the spotlight.
As economies around the world crumbled, the idea of rebuilding in a way that also addressed environmental concerns started to gain traction. In 2012, the concept was further solidified at the United Nations Conference on Sustainable Development (Rio+20), where the Green Economy was recognized as a critical strategy for achieving sustainable development. By 2023, the urgency to transition to a Green Economy is no longer just a policy preference – it is it is a survival strategy.
With the Intergovernmental Panel on Climate Change (IPCC) warning that global temperatures could exceed the 1.5°C threshold by 2035, and with one million species at risk of extinction, the stakes could not be higher.
In addition, biodiversity is declining at an unprecedented rate, with one million species at risk of extinction (UN, 2022). These are not just numbers; they are harbingers of the hunger games, a future where food, water, and clean air could become scarce commodities. Sounds voodoo? Mumbo jumbo?
The Global Footprint Network of 2023 reports that we now consume the equivalent of 1.8 piles of earth annually to maintain our lifestyles, and this is more than just a statistic – it is a clear indicator that we are writing cheques our planet can cash.
The world is grappling with climate change, biodiversity loss, and resource depletion – issues that make the plot of 'Mad Max: Fury Road' look like a comfy Sunday picnic.
Fear not, men. You have a messiah. The Green Economy offers a pathway to mitigate these crises by transforming how we produce, consume, and live.
By prioritizing renewable energy, sustainable agriculture, and circular economy practices, the Green Economy aims to create a system where economic activity enhances, rather than depletes, the planet's natural capital.
Moreover, the Green Economy is increasingly seen as a critical driver of social equity. The current economic model has exacerbated inequalities, both within and between countries. The Green Economy, by focusing on inclusivity and equitable resource distribution, offers a more just and sustainable alternative.
For instance, the International Labour Organization (ILO) estimates that the Green Economy could create 24 million new jobs by 2030, primarily in sectors like renewable energy, energy efficiency, and sustainable agriculture, while also reducing poverty and improving health outcomes (ILO, 2019)
However, what exactly does a Green Economy look like? Is it about slapping solar panels on every rooftop and calling it a day? Not quite. It is built on principles that go beyond just environmental sustainability. It is about inclusivity, ensuring that economic benefits are shared across society, particularly among the marginalized. It is about efficiency – using resources in a way that minimizes waste and maximizes value. It is about resilience, creating systems that can withstand environmental and economic shocks. It is about interconnectedness, recognizing that the economy, society, and the environment are interconnected.
This is not just a theoretical exercise in a seminar. It is about tweaking the rules of the game so that everyone – including the planet – can win. It is less about radical change and more about intelligent evolution.
The transition to a 'Green Economy' is already underway in many parts of the world, driven by both necessity and innovation. Change is inevitable, and resistance is futile.
In reality, transitioning to a 'Green Economy' is horrendous! It requires overcoming significant challenges, from entrenched fossil fuel interests to the need for massive infrastructure investments.
It is like turning a cruise ship – slow, cumbersome, and requiring a lot of coordinated effort. However, if the global community can pull it off, the rewards – both economic and environmental – could be immense.
The European Union (EU) has been at the forefront of the global push towards a Green Economy. The European Green Deal, launched in 2019, is perhaps the most ambitious plan to date. The EU aims to become the first carbon-neutral continent by 2050, with intermediate targets to reduce greenhouse gas emissions by 55% by 2030 compared to 1990 levels (European Commission, 2022).
This plan includes a mix of regulatory measures, investments, and policy reforms aimed at transforming sectors such as energy, agriculture, and transportation.
The EU is also implementing the Carbon Border Adjustment Mechanism (CBAM), which is set to be fully implemented by 2026. It is one of the most innovative trade policies aimed at promoting green economic growth. It is designed to prevent 'carbon leakage' by imposing tariffs on imports from countries with lower environmental standards. This policy not only incentivizes green production within the EU but also pressures trading partners to adopt more sustainable practices (European Commission, 2023).
This could create a ripple effect, leading to higher environmental standards globally. However, the CBAM has also sparked concerns about protectionism and the potential for trade disputes, particularly with developing countries that may struggle to meet the EU's stringent environmental standards.
The United States, under the Biden administration, has rejoined the Paris Agreement and set ambitious climate goals, including achieving net-zero emissions by 2050 (The White House, 2021).
The administration's Inflation Reduction Act passed in 2022, allocates $369 billion to clean energy and climate initiatives, making it the most significant investment in green technology in U.S. history (Congressional Budget Office, 2022).
The U.S. is also promoting green trade through the U.S.-Mexico-Canada Agreement (USMCA), which includes provisions for environmental protection and sustainable trade practices. However, the country faces significant challenges, including political polarization (hello fracking) and the continued influence of fossil fuel industries.
China, often criticized for its environmental record, is also making significant strides towards a Green Economy. As the world's largest emitter of greenhouse gases, China's actions are critical to global climate goals.
The country has pledged to peak its carbon emissions before 2030 and achieve carbon neutrality by 2060 (Xinhua, 2023). To meet these targets, China is investing heavily in renewable energy, electric vehicles, and green infrastructure.
In 2022 alone, China added more than 100 gigawatts of solar power capacity, accounting for nearly 40% of the global total (BloombergNEF, 2023) and over 45% of global wind turbine production (International Renewable Energy Agency, 2023).
The country is also leading the world in the production and export of electric vehicles, with EV sales surpassing 6 million units in 2022 (International Energy Agency, 2023).
China's reliance on coal remains a significant challenge, and its transition to a Green Economy will require substantial efforts to phase out fossil fuels. By investing heavily in renewable energy and exporting these technologies to other countries, China is not only greening its economy but also driving the global transition to renewable energy (IEA, 2020). However, China's dominance in the renewable energy market has also led to trade tensions, particularly with the United States.
In 2022, the U.S. imposed tariffs on Chinese solar panels, citing concerns about unfair trade practices and the need to protect domestic industries (Office of the United States Trade Representative, 2022).
These trade tensions highlight the complexities of promoting a Green Economy in a globalized world, where economic interests and environmental goals can sometimes conflict.
As for developing countries, the transition to a Green Economy presents both opportunities and challenges. On the one hand, these countries have the chance to leapfrog traditional, carbon-intensive development pathways and adopt more sustainable practices. They face significant barriers, including limited financial resources, lack of access to green technologies, and vulnerability to climate change. International cooperation and financial support will be crucial in helping developing countries transition to a Green Economy.
The Green Climate Fund, established under the UNFCCC, aims to mobilize $100 billion annually by 2025 to support climate action in developing countries (UNFCCC, 2023). However, as of 2023, only $80 billion has been pledged, highlighting the need for more robust financial commitments from developed countries.
Clearly, the Green Economy is not just a fad – it is its future since now you realize trading is lurking at the corner!
……………………………(to be continued)
(The writer is an engineer turned finance and ESG enthusiast, trying to drink gulps from the immensely stimulating ocean of finance/economics/ESG and move to greener pastures to shift from his tedious job in the capital market. Tell him how he can do that at galibnakibrahman@gmail.com)