Pathways to Sustainable Development and Poverty Eradication

Nairobi/World — Investing two per cent of global GDP into ten key sectors can kick-start a transition towards a low carbon, resource efficient "green economy" a new report launched today says.

The sum, currently amounting to an average of around $1.3 trillion a year and backed by forward-looking national and international policies, would grow the global economy at around the same rate if not higher than those forecast, under current economic models.

But, without rising risks, shocks, scarcities and crises increasingly inherent in the existing, resource-depleting, high carbon ‘brown’ economy, says the study.

As such, it comprehensively challenges the myth of a trade-off between environmental investments and economic growth and instead points to a current "gross misallocation of capital."

The report sees a green economy as not only relevant to more developed economies but as a key catalyst for growth and poverty eradication in developing ones too, where in some cases close to 90 per cent of the GDP of the poor is linked to nature or natural capital such as forests and freshwaters.

It cites India, where over 80 per cent of the $8 billion National Rural Employment Guarantee Act, which underwrites at least 100 days of paid work for rural households, is invested in water conservation, irrigation and land development.
This has generated three billion working days-worth of employment benefiting close to 60 million households. Two per cent of the combined GDP of Cambodia, Indonesia, the Philippines and Vietnam is currently lost as a result of water-borne diseases due to inadequate sanitation.

Policies that re-direct over a tenth of a per cent of global GDP per year can assist in not only addressing the sanitation challenge but conserve freshwater by reducing water demand by a fifth by 2050 compared to projected trends.
The report has modeled the outcomes of policies that redirect around $1.3 trillion a year into green investments and across ten key sectors—roughly equivalent to two per cent of global GDP. To place this amount in perspective, it is less than one-tenth of the total annual investment in physical capital.

Currently, the world spends between one and two per cent of global GDP on a range of subsidies that often perpetuate unsustainable resources use in areas such as fossil fuels, agriculture, including pesticide subsidies, water and fisheries.
Many of these are contributing to environmental damage and inefficiencies in the global economy, and phasing them down or phasing them out would generate multiple benefits while freeing up resources to finance a green economic transition.

Key Findings

• Investing just 2% of global GDP into ten key sectors can kick-start a transition towards a low-carbon, resource-efficient economy.
• Greening the economy not only generates growth, and in particular gains in natural capital, but it also produces a higher growth in GDP and GDP per capita.
• A green economy values and invests in natural capital.
• A green economy can contribute to poverty alleviation.
• In a transition to a green economy, new jobs will be created, which over time exceed the losses in “brown economy” jobs.
• Prioritizing government investment and spending in areas that stimulate the greening of economic sectors is on the critical path.
• The scale of financing required for a green economy transition is substantial, but an order of magnitude smaller than annual global investment.
• The move towards a green economy is happening on a scale and at a speed never seen before.
• It is expected to generate as much growth and employment – or more – compared to the current business as usual scenario, and it outperforms economic projections in the medium and long term, while yielding significantly more environmental and social benefits.