What is green growth and why do we need it?

Global momentum toward sustainable development has been renewed by the adoption of the 2030 Sustainable Development Agenda, the Glasgow Climate Pact, the Kunming-Montréal Global Biodiversity Framework, and the UN mandate to negotiate a legally binding global instrument to end plastic pollution. At the same time, the effects of Russia’s large-scale unprovoked aggression against Ukraine have been severe and came on top of an already fragile and heterogeneous recovery from the COVID-19 pandemic. Across the world, people are concerned about energy and food security and affordability, restarting and “building back” domestic economies, and inequality. With the 2030 deadline for the SDGs on the horizon and the window to meet the 1.5 degree target of the Paris closing quickly, it has never been more important to align policies for environmental protection, economic prosperity and social equity.

Russia’s invasion of Ukraine has resulted in a number of immediate and longer-term policy challenges. The increase in energy prices and food prices is taking a heavy toll on the world economy. Growth has slowed down in several OECD and non-OECD countries. Monetary policy is being tightened with the aim containing the inflationary impulse of higher energy and food prices. The risks of debt distress in low-income countries is increasing while the impacts of higher costs of living are disproportionately affecting people on low incomes.

Global material use projections

Source: OECD (2019) Global Material Resources Outlook to 2060. https://doi.org/10.1787/9789264307452-en

At the same time, the urgency to act to address environmental degradation has not subdue. Environmental challenges such as climate change, biodiversity loss, worsening resource bottlenecks, and life-shortening air pollution continue to pose great systemic risks to the wellbeing of current and future generations. Without stronger action to improve the environmental performance of our economies, the impacts of environmental degradation will undermine development prospects and the progress in well-being achieved in the past 50 years for at least three reasons:

• Human well-being is inherently liked to the environment. For example, air pollution is projected to cause 6-9 million premature deaths globally by 2060 and there is increasing evidence that it reduces labour productivity. Land-use change and wildlife exploitation increase the risk of emergence of new infectious diseases.

• Change does not necessarily follow a smooth, foreseeable trajectory. For example, overshooting the Paris Agreement target of keeping increase in temperature to 1.5°C may push the earth over several tipping points, leading to irreversible and severe changes in the climate system.

• It is becoming increasingly costly to substitute physical capital for natural capital. For instance, if water becomes more polluted, it is more costly to ensure water access because more transport and purification infrastructure is needed.

Consistency of actions across all policy domains (e.g. trade, labor, fiscal policies) is necessary to ensure that longer-term environmental, social and economic goals can be met. Building on its Green Growth Strategy and the OECD Secretary General’ Strategic Orientations presented at the OECD Ministerial Council in 2022, the OECD leverages its multidisciplinary reach to provide policy advice and identify best practise for an inclusive green transition. For instance, the OECD’s horizontal project Net Zero+: Climate and economic resilience in a changing world draws on expertise from across the OECD to deliver impactful policy advice to members on how policies that address near-term challenges can also be aligned with building longer-term resilience.

Productivity growth, green growth and inclusive growth are three key aspects of the OECD efforts to help countries sustain economic growth and improve wellbeing in the context of sustainable development.

Wellbeing

Productivity Growth Green Growth Inclusive Growth

The Green Growth Strategy

Following the 2008-2009 crisis, OECD countries have adopted the Green Growth Strategy, which aims at “fostering economic growth and development, while ensuring that natural assets continue to provide the resources and environmental services on which our well-being relies”. To do this, it must catalyse investment and innovation that will underpin sustained growth and give rise to new economic opportunities for all in inclusive ways. Since then, the OECD Green Growth strategy has provided a green lens for more than 20 OECD Committees’ and bodies’ activities.

The world is currently experiencing a situation very similar to that of 2009. The Russian aggression against Ukraine and the COVID-19 pandemic have brought about an unprecedented global crisis. At the same time, there is an increasing global consensus that responses to these crises must also accelerate action to address environmental degradation. Many countries, including developing ones, have introduced measures to cushion impacts of these crises while also supporting the transition towards a green and resilient economy. Green growth policies can help to achieve these intertwined objectives.

Mainstreaming the Green Growth Strategy

Since the launch of the Green Growth Strategy in 2011, the OECD continues to support strategies for greener growth through its core advice in country-specific and multilateral surveillance. The main outcomes include a more systematic account of green growth issues in its Going for Growth flagship reports, Economic Surveys, Environmental Performance Reviews, Investment Policy Reviews, Innovation Policy Reviews and Multi-dimensional Country Reviews of OECD countries and emerging economies. Green growth is also integrated in the OECD’s sector and issue-specific work in key areas such as taxation, innovation, investment, trade, industry, energy (with IEA), transport (with ITF), food and agriculture, tourism, skills and jobs, climate, biodiversity and water management, rural and urban development.

The framework of the OECD Green Growth Strategy provides a ‘green lens’ for looking at growth, development, and human wellbeing. It aims to identify mutually reinforcing aspects of economic and environmental policy as well as synergies with the inclusiveness agenda. It recognises the full value of natural capital as a production factor along with other commodities and services. It focuses on cost-effective ways of reducing environmental pressures, to achieve a transition towards new patterns of growth that will avoid crossing critical local, regional and global environmental thresholds. Mainstreaming green growth in social policies needs to aim to enhance equity and inclusiveness.

While there is no “one-size-fits-all” prescription for implementing green growth, the OECD’s analytical work over the past years resulted in the ability to provide concrete targeted advice to member and partner countries in mainstreaming green growth into national and multilateral policies.

Green growth and the Sustainable Development Goals (SDGs)

Green growth is a subset of sustainable development. It entails an operational policy agenda that can help achieve concrete, measurable progress at the interface of the economy and the environment. It fosters the necessary conditions for innovation, investment and competition that can give rise to new sources of economic growth that are consistent with resilient ecosystems.

Green growth strategies need to pay specific attention to the social issues and equity concerns that can arise as a direct result of greening the economy. This means that strategies should be implemented in parallel with initiatives focusing on the broader economic, social and environmental pillars of sustainable development. At the same time, it should be recognised that lack of action to green economies creates equity concerns as disadvantaged households are often more exposed and vulnerable to pollution and climate change.

The Agenda 2030 for Sustainable Development and the SDGs are today the norm for all countries, developed and developing alike. The OECD supports the United Nations in ensuring the success of the 2030 Agenda by bringing knowledge and expertise to inform policies through; data and evidence-based analysis, best practices identified through developing and developed countries’ own approaches, and guidance and lessons on innovative ways to implement green growth strategies.

Key Publications and website

• The inequalities-environment nexus: Towards a people-centred green transition (2021)

• Towards Green Growth? Tracking Progress: Four years of the Green Growth Strategy (2015)

• Towards Green Growth? Tracking Progress: Key Findings and Recommendations (2015)

• What we have learned from attempts to induce green growth policies? (2013)

• Towards Green Growth (2011)

• Tools for Delivering Green Growth (2011)

• www.oecd.org/greengrowth

Contact for more information

Enrico Botta

Environment Directorate

Email: Enrico.Botta@oecd.org