Green Economy – Definition and 20 potential impact areas
Why does it matter to think of green economy? What does the next economic revolution look like?
Green Economy is a term that is not clearly defined but already being used by many organizations. What is Green Economy and why whould we start to build a top-down framework for a global economic revolution?
Besides the green-washing trends and “only-on-paper”-commitments we hear every day in the news, there is something else happening as a new movement. Its a demand for a new economy, new rules and global accountability. Many call it the Green Revolution, the next industrial revolution, the next Kondratjew cycle or many other names. But just looking at some facts, we see that something needs to change. When we only calculate that the world economy will grow 3% per year, then we will see an almost 20-fold bigger economy in about 100 years (19.219 times bigger, to be more precise). But already now we used up and destroyed most of the available good soil, more than half of the fresh water and emitting more pollutants and greenhouse gasses than our global ecosystem can handle.
Unlimited growth in a world with limited resources is simply not possible. Economic growth without social exclusion and modern colonialism was not possible and will also not be possible in the future. A lot of factors limit the way our economy works and will work in the future and therefore a new term was minted – “The Green Economy” which is in many parts similar to “Sustainable Economy”.
But what does it mean and why should we care about it? Green Economy will be one of the biggest shifts in our economy for a long time and it will affect everyone – if it comes. The challenges for the green economy and all the dimentions and affected areas are broad and need an international integrated commitment for change.
What is The Green Economy?
The broad definition of The Green Economy is defined by low carbon emission, efficient resource usage and also social inclusion. It was first mentioned in 2011 by UNEP Green Economy Report. Green Economy is related to Ecological Economics, but it is more holistic an also incorporates political advocacy and state interactions with a broader view also on the society perspective.
Different sources mention a bunch of areas that need to be tackled for the new (green and inclusive) economic future. These areas include the needs for new employment and income types, green and sustainable financial market and investments, public-private economic activities, green infrastructure and asset creation, green energy and also the prevention of loss of biodiversity, protecting the global natural ecosystem and the social and economic value of green assets like our nature.
Green Economy might sound logical and might also be easily explained, but translating this idea into action is a very complex task involving a lot of new technologies, technological advancements but also a shift of society and personal interests. Green economy implies new ways of living (e.g. Green City Design), new ways of economy (e.g. Generating Value – Not just money), new ways how to organize businesses (e.g. Stakeholder vs. Shareholder value) and also new globally enforceable standards for environment.
To make Green Economy really work we need to be able to inform and educate on different levels across all continents, sectors and also interest groups. Only then engagement across all sectors, as well as policymakers, businesses and all individuals can make the necessary transformation for a greener economy and a sustainable future.
Green Economy vs. Inclusive Green Economy
As mentioned before, there are also different names and concepts involved. Many frameworks don’t differentiabte between Incluseive Green Economy or just Green Economy.
Here is a quick explanation of the difference:
- Green Economy – Environment and Economy
Many frameworks only mention Green Economy but include also social values. Others differentiate and only see the connection between the environment and the economy as the common ground for a more efficient economy but also a more resilient environmental ecosystem.
- Inclusive Green Economy – Environment, Economy and Social
E.g. the European Union differentiates Green Economy from a inclusive Green Economy. The social elements and effects on overall human well-being are mentioned seperately. It is about inclusion, more equality and also fair sharing of the burden (e.g. environmental impact).
Principles for The Green Economy
When combining the basic principles presented by organizations around the world (ECLAC, EEA, UNEP and OECD) then we see a clear picture on where it should be heading. Important to understand here is that there is no clear “Top-Down” framework that helps to map, prioritize and measure the Green Economy and its implementation. Currently everything is based on “bottom-up” approaches which are unaligned and most projects try to tackle the problems on their own without a global, multinational or regional governance in place.
Some basic Green Economy principles:
- Consistent principles for a sustainable development
- Equity and fairness within and between generations
- Precautionary approach to social and environmental impacts
- Protection of biodiversity and natural ecosystems
- Appreciation of natural and social capital incl. improved governance, life-cycle costing, environmental accounting and internalization of external costs
- Efficient and sustainable resource use, production and consumption
- Macroeconomic goals to enable green jobs, eradication of poverty, increased competitiveness and growth in (sustainable) key sectors.
Green Economy – 20 Impact Areas and Dimensions
As mentioned before, the Green Economy should have impact on almost all topics regarding our life. This will include the ways our economy works, the ways we deal with our natural resources and nature itself, but also keep a fair and social balance in our society.
A critical fact to know is that this is currently a bottom-up approach, with no clear top-down framework that outlines and also coordinates. This is why this article will cover many topics, but the list is not conclusive and not finalized and might be updated in the future. This list was created by the UNECE Steering Group on Environmental Assessments and should highlight the most significant areas. I also included the areas “Innovation” and “Mining” from the EAA.
20 areas a Green Economic Framework might include in the future:
Almost all programs try to also bring more awareness to individuals, companies but also on political level. Depending on program, there are also dedicated intentions for more awareness especially in schools. Awareness and building understanding will be a big part of a successful transformation – see also “Education and Skills”
2. Education and Skills
Especially the future skills needed for a green economy is one of the biggest pillars in most programs around the world. From basic education in schools to special programs in universities, lots of initiatives cover different areas. For most industries experts on green energy, sustainable investment, and also craftsmanship skills (e.g. Electricians) are key for a successful green transformation.
The global shift will be especially hard to manage. Most programs don’t mention these shifts specifically, but it will be a key area of success if we want this global transformation to work. We need to manage the shifts in the economy and, as well in the workforce, from carbon emission jobs to green economy jobs. This area is especially hard to manage as we need to shift big parts of the economy and this usually takes decades to successfully transition. Companies, Education Providers and Governments need to find a close collaboration to tackle an employment collapse of some industries and transition the workforce into greener jobs.
4. Renewable energy
Over 80% of our energy comes from fossil fuels like oil, gas and coal. (source). A global commitment is needed to better use natural energy sources and also provide the necessary infrastructure for this. Without a global framework and also aid for developing countries, there will be a big gap in the energy supply. Next to solar power and wind, this area also includes sustainable hydropower, biofuels and use of sustainable biomass.
5. Energy efficiency
According to the EIA we loose about 66% (source) of our primary energy due to inefficiency, transport, transition and other variables in the process. In some areas, the real energy efficiency is as low as 5% (so 95% of energy is lost). This will be especially a science effort in finding better materials, build better networks and energy grids, but also to lower the cost of energy transitions. But we also need to tackle where we use energy in our daily lives, how cities are designed and increase the efficiency from private households, mobility up until industrial plants and global transportation.
Different initiatives have mobility as a centerpiece of their efforts. Mobility has next to CO2 and energy effieicney also other effects like air quality, emissions and noise that are mentioned and need to be tackled. With around 1/3 of all the energy used today, transportantion makes up a huge part of our CO2 footprint and environmental burden. The goal must also be to have a global solution as currently local regulations usually just shift the problems to other countries (e.g. old cards being exported to developing countries instead of decomissioning). Also a new way of thinking is required. Politics now have the problem that they want to support the automotive industry on one side (because of jobs, economic growth etc.) but on the other side we need to think how to eliminate cars from cities, design cities to be without cars and friendly for pedestrians and cyclists.
Global shift in the industry must also occor. Next to the Mobility its the second biggest energy consumer with another 1/3 of global energy use. But also emissions and waste are a problem that need to be tackled for a greener economy. Many nations already have local plans for green production (e.g. EU Green Deal, Made in China 2025, etc.) but currently we also see that due to a lack of a global framework, most companies are outsourcing their negative global footprint to countries where lower standards are set.
Most mentioned areas involve a lot of different types of innovation. New materials, new processes, new energy sources, new economic business models and we could list hundreds of other topics in this list. More investment and more commitment for new technologies and applications need to be done on a global level. Especially partnerships within the industry but also public-private partnerships are necessary to make this technological leap possible we need.
9. Governance and Partnerships
Global and local governance is a key role that needs to be established. This also includes institutational agreements, multilateral environmental agreemants end especially also performance reviews. Without these governing roles it will be hard to controll and enforce global partnerships and therefore this area is currently demanded by a lot of green economy initiatives but never globally implemented.
10. Environmental reporting
As mentioned before, there also need to be a common understanding and framework on how to measure, analyze and report. Without good reporting there can be a lot of greenwashing and policy evading.
11. Use of natural capital
At the center piece of most current initiatives is always also the natural capital and the right use of natural resources. This includes natural resources like forrests, oceans and land, but is also linked to agriculture and urbanization. Degradation of land, water, soil and biodiversity are also mentioned as they are a direct effect of the exploitation of our natural ressources.
12. Life-cycle analysis
Life cycle sustainability assessment (LCSA) evaluates the environmental, social and economic impacts (negative or positive) of products. This understanding should be used for better decision making as we currently have just a limited overview of the impacts of different products and goods on the three factors of environment, society and economy.
13. Water efficiency in industrial, rural and urban areas
Even it would be directly connected to the “Use of natural capital” category, water and water use is for most frameworks an important area. Currently most of the available drinking water is in danger of being polluted or unusable. Further more we also face a shortage of water for drinking but also agriculture in many countries around the world.
14. Environmental accounting
The enforcement of environmental accounting could also change the picture a lot. Environmental accounting tries to included the negative external effects which are usually only worn by the society. E.g. coal plants destroy the environment, dry out swomps, use lots of water and also pollute the air. The society has more costs for medic care and needs to pay for the pollution clean up in most cases. – With environmental accounting the factors of “Input” and “Output” of the environment need to be included for decision-making.
15. Sustainable consumption and production patterns
Mentioned as one of the big goals of the UN and other initiatives is also about how we use and produce our goods of daily life. Fast-Fashion waste, Foodwaste and many more topics are included in this area. With more efficient production methods and also less consuption/better consuption patterns we can eliminate a lot of CO2 emissions and resource usage.
Wile its only mentioned in one initiative, it is still an imporant part as the mining industry alone accounts for up to 7% of the global CO2 emissions. More efficient processes, better engergy use but also a better resource usage could limit the environmental impact of the mining industry on the global footprint.
Tourism causes a lot of problems around the world. While accounting for almost 5% of man-made CO2 it is also a burden to land usage, oceans and other polutions. Sustainable tourism but also local tourism will be one of the corner stones for many regions. Challenges occur as many regions and even countries around the world heavily rely on tourism and the income from that.
18. Integrated policy and decision-making
Without a global governance and accountability it is hard to enforce rules on a broader level. This would be only possible if governments decide as one party and also act as one global entity. Integrated policy and decicion-making would also mean more interdependence, longer times for decions and more formality but it is the only way to guarantee that the world acts together. Currently there is not even a global cooperation in place.
19. Corporate Social Responsibility (CSR)
The list of areas the most initiatives cover, has often also the economy involved. Corporate Social Responsibility (CSR) must be present and companies need to take more responsibilities. Most CRS programs are still not working as they intended and are often used for greenwashing purposes. There is also not a common framework how to measure and analyze CRS activities and make them comparable, so a common understanding is a high priority.
20. Environmental & Strategic Impact Assessment (SIA & EIA)
Many initiatives mention also the need for a better assessment of actions, projects and programs. Environmental Impact Assessment (EIA) is more focused in the evaluation of proposed projects on basis of social, economic, cultural and (human)-health aspects. Strategic Impact Assessment (SIA), or Strategic Environmental Assessment (SEA) asess the mainly alternative proposals before another project begins.
Problems and Challenges for the Green Economy
As there is only a team for Green Economy, we clearly face some challenges. As mentioned before there is no clear understanding, no clear governance, no common frameworks and many more challenges we still face. The global Green Economy still has …
- No top-down framework
- No global governance
- No clear guidelines
- No measurability
- No accountability
- Weak definition of “Green Economy” – Still no common understanding
The European Green Deal
The European Green Deal is an ambitious legislation institutionalised by the European Commission which paves the way towards a more sustainable and prosperous future. By committing to climate neutrality by 2050, the deal sets out a roadmap going forward that seeks to protect our valuable environment while boosting our economic performance. The main goals of greening Europe rely on clean energy sources such as renewable energy and circular economy, more efficient building regulations, improved transport systems, and sustainable land use methods. These collective efforts are expected to create many new jobs such as those in renewable energy production, wildlife protection initiatives and green industries such as recycling.
Moreover avant-garde research investments in advanced technology encourage both collaboration among likeminded nations for digital transformation for cleaner production techniques. This makes it easier for businesses and citizens alike to achieve healthier lives within better standards of living without compromising productivity or threatening public safety.
The European Green Deal also serves as an example of what a green economy could look like in practial applications even it also has a lot of missing pieces and unknowns.
Conclusion and Recommendation
Currently, there is no clear framework nor definition ready by international organizations. This means that there is a big difference in understanding and no governance for an aligned execution. This leads to a misunerstanding, opens the door for greenwashing and also limits international coordination and integration of porjects.
Different frameworks still emphasize different areas and include e.g. Wealth Distribution (UN Goals) while others see Job Creation or Fair Trade also included in the Green Economy. Therefore, the objectives are not well-defined, most institutions have their own views of a Green Economy and there are clear gaps and regional divides.
As a recommendation, it would be necessary to outline a clear top-down framework and develop an urgently needed global understanding of the same principles, rules and governance of a Green Economic future. This would need an alignment of international institutions, clear assessment and reporting criteria, integrated information exchange and also a global support system for fast and effective implementation.
The time is running and we need to do something … NOW.