By Anna Brennan
In June 2012, representatives of 192 governments from across the globe gathered in Rio intending to guide political commitment towards a sustainable future1. With the world’s economies re-emerging from the financial crisis of 2007-2008 and the climate crisis gaining traction on the international stage, the ‘Green Economy’ was proposed as a tool to bridge the divide and minimise trade-offs between economic growth and environmental protection2. The Green Economy’s primary aim is to provide “prosperity for all within the ecological limits of the planet”, which incorporates the triple bottom line concept where the three pillars of sustainable development – economy, environment, and society – can be achieved in tandem3.
A Green Economy is primarily made up of natural capital and manufactured and financial capital. It also includes input from social and human capital. This type of economy emits minimal greenhouse gases and is inclusive in both consumption and outcomes; it should be able to achieve this by having strong foundations in “sharing, circularity, collaboration, solidarity, resilience, opportunity, and interdependence.”
It may seem daunting for governments who are tasked with transforming capitalist economies built upon burning fossil fuels into circular and inclusive green economies, as this requires a myriad of policies to be implemented and, most importantly, a colossal shift in the way society functions. However daunting achieving a Green Economy may be, it should not be impossible. Denmark’s policy-driven approach has paved the way forward and, most importantly, it has yielded results. Emissions have plummeted over the past 20 years and will continue on this downward trajectory as the country aims for a 70% reduction in emissions and complete renewable electrical energy consumption by 2030. With Denmark leading the way in lowering emissions and maximising investment in renewables, other states will follow suit.
Transitioning to a Green Economy is a high priority for the UK government, especially with the fairly recent introduction of a 10-point plan to rebuild the country post-pandemic, which intends to reap long-term economic growth. Within this plan, government funds amounting to £12 billion have been set aside to create investment opportunities in green technology and sustainable finance, which will boost the UK’s economy and generate 250,000 jobs. Prior to this scheme, promising growth has been recorded in much of the UK’s renewable energy sector indicating the potential for further expansion in the future. Hydroelectric, wind and solar power have seen significant growth over the last decade and are predicted to continue growing post-pandemic after a short period of decline. Increased investment in the renewable energy sector is, therefore, a defining factor for the UK’s sustainable future.
To further the transition towards a Green Economy, the UK has addressed some of its economy-environment trade-offs by implementing various policy tools. Fiscal policy can influence where money is invested as incentives and subsidies will encourage investment in the clean energy sector while higher tax on fossil fuels can divert investment from this sector. This is exemplified by the North Sea oil industry. Oil is important to the UK’s economy – in 2019 alone the offshore oil industry supported over 200,000 jobs, directly and indirectly, and generated £650 million of profit for the industry. Yet, the associated environmental and climatic impacts create a trade-off between lucrative economic gain and severe ecological degradation. Therefore, a solution must be sought. Renewable/low carbon energy sources are an alternative to oil. By using fiscal policy to influence sectoral investment, the UK’s reliance on fossil fuels should reduce. This is exemplified with the creation of the Energy Innovation Programme where £505 million was available to fund low carbon/renewable community and commercial projects from 2015-2021. There is a further £1 billion allocated for the next four years under the Net Zero Innovation Portfolio. These incentives should help stimulate the UK’s economy and aid the government in meeting its pledge to reach net-zero emissions by 2050.
Furthermore, regulatory frameworks can aid the greening of sectors that have a reliance on depleting natural resources like agriculture and forestry4. They act as a tool for accountability as they ensure that states continue to progress towards achieving a Green Economy. This process involves not only implementing frameworks but also monitoring and evaluating their effectiveness. Research suggests that the effectiveness of regulatory frameworks is of paramount importance in both transitioning towards a Green Economy and reaping the benefits of a Green Economy once it is in place5. For example, in the UK agricultural industry, farmers sometimes require permits before growing different types of crops. To secure this permit, evidence is submitted pertaining to the quality of soil and the type of pesticides in use. This ensures that crops produced in the UK are of high standard and can be exported. This occurs under the Environmental Land Management scheme, which aims to protect the environment, livestock and crop health whilst boosting economic productivity in this sector.
The environmental benefits of implementing fiscal policy and regulatory frameworks may be lucrative but, economically speaking, significant questions concerning feasibility are raised. The UK’s devolved nations, in particular Scotland, already have high tax rates in comparison to Australia, New Zealand, and the USA. Increasing tax on fossil fuels would have knock-on effects on the UK’s economy that could increase inflation, which is already on the rise. High inflation rates spell disaster for the government who would be put under pressure to raise wages and pension costs alongside the rising cost of living. In terms of implementing regulatory frameworks, the UK’s fresh produce is already of a high standard. Yet having extra steps in the growing process increases farming costs, which, in turn, adds to the purchase price of the product. Rising food prices has its own complex set of socio-economic impacts including hindering food accessibility and security which puts more people in danger of living below the poverty line. In short, if the government becomes too ambitious with its green policy the cost of living may become unreasonably high across the UK.
By implementing a variety of appropriate fiscal policies and regulatory frameworks, the UK should be able to continue along its pathway to a Green Economy, much like Denmark. The government must continue to address some of the UK’s most pressing economy-environment trade-offs while increasing productivity and economic growth. The government must also align its policy along local, national and global scales in a coordinated effort to ensure the transition towards a Green Economy is meaningful and effective6. While doing so, the cost of living within the UK must be kept at an appropriate level. This requires creative thinking from the UK government to strike the balance between environmental protection and economic feasibility within its green policy.
The views expressed in this article are the author’s own, and may not reflect the opinions of The St Andrews Economist.
References
Image: Unsplash
[1] Loiseau, E., Saikku, L., Antikainen, R., Droste, N., Hansjürgens, B., Pitkänen, K., Leskinen, P., Kuikman, P. and Thomsen, M., 2016. Green economy and related concepts: An overview. Journal of cleaner production, 139, pp.361-371.
[2] Barbier, E.B. and Markandya, A., 2013. A new blueprint for a green economy. Routledge.
[3] Borel-Saladin, J.M. and Turok, I.N., 2013. The green economy: incremental change or transformation?. Environmental Policy and Governance, 23(4), pp.209-220.
[4] Akhmetshina, L., Sergeev, A. and Mottaeva, A., 2019. Influence of organic agriculture on the development of green economy. In E3S Web of Conferences (Vol. 91, p. 06008). EDP Sciences.
[5] Cigu, E., Petrișor, M.B., Nuță, A.C., Nuță, F.M. and Bostan, I., 2020. The nexus between financial regulation and green sustainable economy. Sustainability, 12(21), p.8778.
[6] Barbier, E., 2011, August. The policy challenges for green economy and sustainable economic development. In Natural resources forum (Vol. 35, No. 3, pp. 233-245). Oxford, UK: Blackwell Publishing Ltd
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