focus of sd strategies in ap region - oecd.org · focus of sd strategies in ap region: ......

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ENVIRONMENTALLY SUSTAINABLE ECONOMIC GROWTH FOR THE WELLENVIRONMENTALLY SUSTAINABLE ECONOMIC GROWTH FOR THE WELLBEING OF ALLBEING OF ALL

Focus of SD Strategies in AP Region:How to move away from “Economic Efficiency”towards “Ecological Efficiency” Paradigm ?

Rae Kwon Chung

UNESCAP


The Asia-Pacific: a profile

Population: 3.9 billion people or 2/3 of the global population

(2002)Density: 1.5 times the global

averageLand surface: 40% of global

land area2/3 of world poor

Diversity and Disparity: LDCs (14), LLDCS (12), SIDS (16), Economies in transition (8), and developed economies (5) Highest income country and lowest income (Japan and

Tajikistan)

ESCAP

53 Member countries

9 Associate Members

49 within the region

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Can the Asia-Pacific region continue with its current growth pattern ?

Is there an alternative path for economic growth without compromising ecological carrying capacity ?


Dynamic growthDynamic growth

ESCAP countries - 4.4 %; World - 3.5 % (1999-2003)

Industrial output: developing countries - 47 %; Global - 25%

(1995-2003)

Manufacturing output: developing countries - 51%

Global production centre –exports grew by 94%

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Population density 1 ½ times the global average

Freshwater available: 3,920m3/cap/yr vs. South America

38,300m3.cap/yr.

Productive area available per capita: 60 % of the global

average

Arable land per capita: 80 % of the global average

Limited carrying capacityLimited carrying capacity


Carrying capacity vs.Carrying capacity vs.environmentalenvironmental pressurepressure

• “Ecological deficits –already living beyond our “environmental means”

3.43.1-0.3Non-Asia Pacific

2.21.8-0.4WORLD

1.51-0.5Asia-

Pacific

Ecological footprint

BiocapacityEco-logical deficit

Global hectares per capita (2002)

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Unmet basic needsUnmet basic needs…… need for further need for further economic growtheconomic growth

1 billion poor living under 1 dollar a day, 2/3 of world poor live in Asia & Pacific

The region has to continue economic growth necessary to meet basic needs of the poor,


AsiaAsia--Pacific situationPacific situation

Limited carrying capacity

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TIMETIME: : ASIA'S ENVIRONMENT: Visions of GreenASIA'S ENVIRONMENT: Visions of Green October 9, 2006 October 9, 2006

•A 2005 United Nations report (SOE2005 of UNESCAP)warned that although one-fifth of Asians still exist on less than $1 a day, "the region is already living beyond its environmental carrying capacity."

•But Asia can't wait for the invisible hand to grow a green thumb; its problems are too intractable for that Asia's future has to become one of sustainable "green growth,"


Ecological Efficiency to Ecological Efficiency to continue economic growthcontinue economic growth

• To continue economic growth necessary to alleviate the poverty, without compromising limited ecological carrying capacity,

•Then we have to improve Ecological Efficiency of our economic growth Green Growth

•Green Growth aims to achieve MDG 1 & 7 at the same time.

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What is Ecological What is Ecological efficiency?efficiency?

•Minimizing Ecological Costs =Resource Depletion + Pollution

Impact

•Current paradigm: Economic Efficiency =Minimizing Market Costs + Maximizing

Profit

•But Market Price < Ecological Price •Economic Efficiency ≠ Ecological Efficiency


Why Ecological Efficiency ?Why Ecological Efficiency ?

1. Increasing demand for Quality of LifeEconomic Efficiency GDP growth but not improving quality of life, well-being

Early stage of dev: GDP growth could be priority

But GDP growth alone enough ?

2. To continue economic growth

Rising natural resource price China: already focusing on Resource Efficiency to continue growth

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EE new paradigm for

•Continuing Economic Growth•Necessary to Improve Quality of Life•without compromising limited ecological carrying capacity

Ultimately to make our economic growth pattern to be compatible with limited ecological carrying capacity


EE as new paradigm: Is it EE as new paradigm: Is it feasible?feasible?

Skeptic View:

• Internalizing ecological costs rising market price burden on economy negative impact on competitiveness and growth

• EE: just environmental idea can not be used as a new paradigm

• Can we operationalize EE without damaging

Economy? Any Examples ? Yes.

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Examples of EE & Non EEExamples of EE & Non EE

• EE: Railroad of Japan, licensing of private car in Singapore, congestion charge London

• No EE: express way to Incheon airport,

why not express train ???

• End Result of Economic Efficiency: Highway of Korea, length of rail network reduced, huge congestion costs 4.4% of GDP > Defense budget(2.6%)


Green GrowthGreen Growth as new as new paradigmparadigm

•Current Growth Pattern based only on “Economic Efficiency” has to be changed to •“Green Growth” pattern based on

“Ecological Efficiency” paradigm

•by improving EE of Economic Growth pattern

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Green Growth (GG) Green Growth (GG) as new paradigm for APas new paradigm for AP

MCED5, March, 2005, Seoul, Korea

Ministerial Declaration on GG

Korean Government: Seoul Initiative on GG

UNESCAP: GG Policy Dialogue focusing on

1. Green Tax

2. Sustainable Infra

3. Sustainable Consumption Pattern

4. Greening the Business

5. Ecological Efficiency Indicator (EEI)


How to maximize Ecological How to maximize Ecological Efficiency?Efficiency?

•“Economic Efficiency” driver: Market & Price

•“Ecological Efficiency” driver: ???

not Market / Price

•Government: should be the main driver to improve EEof Growth Pattern

•Fiscal Policy (Green Tax): direct tool to close Gap between Market Price & Ecological Price

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Countries exhibit different Countries exhibit different ecoeco--efficiency patterns; efficiency patterns;

US < Japan, EU

Korea < Singapore:

China: what kind of growth pattern?

Big question ?May 2006; announced 6 measures for GG

Resource Efficient & Env Friendly Society


Different Patterns of Different Patterns of Growth Growth

(global hectares per capita, 2002)(global hectares per capita, 2002)

ecological deficit, Bio-capacity, eco-footprint

Rep. of Korea - 3.8 (0.6 / 4.4)

Japan - 3.5 (0.8 / 4.3)

China - 0.8 (0.8 / 1.6)

DPR Korea - 0.8 (0.7 / 1.5)

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Transport: Example of Transport: Example of Economic Economic EffEff ≠≠ Ecological Ecological

EffEff

Rail/Public Transport: low economic eff, high ecological eff

EU & Japan: invest for Rail, Public Trans

Korea: mainly highway, private car

traffic congestion cost (4.4% of GDP)

Japan: 0.79%,

US: 0.65%,

UK: 1.25%

Bangkok: 6%


EcoEco--efficiency Pattern of efficiency Pattern of Growth (EPG)Growth (EPG)

•As countries show different EPG/lifestyle:- Japanese(4.3) vs American(9.7)

- Small Car: Korea(4.4) 4%, Japan/EU 24%

- large car:US 60%, Korea 30%, Japan/EU 20%

•Need to measure EPGIdentify the factors affecting EPG

Explore policy options to improve EPG

•ESCAP: developing EEI (differ from ESI, EPI)

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ESI/EPI ESI/EPI vsvs EcoEco--efficiency efficiency IndicatorIndicator (EEI)(EEI)

•Yale and Columbia (Davos): ESI, EPI•ESI: Argentine(9), Brazil(11), Gabon(12), Congo(39), Indonesia(75) > Korea(122)

measuring env challenge a country is facing country with large carrying capacity tends to end up with high ESI

•EPI: high income(Korea42) >low income countries measuring env performance towards international goals country with high income tends to have high EPI

•So far no indicator measuring EE pattern of economic growth

•That’s why we Need to develop EEI


How can we change theHow can we change thegrowth pattern?growth pattern?

• As Growth Pattern = Prod + Cons pattern

• EE of Prod/Cons Pattern has to be changed

• Prod: PC easy to target, some progress

RE rising resource price pushing

• Cons: difficult to change lifestyle

PC some progress in waste/recycle

RE deterioration as income goes up

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Consumption

Pollution

Res-efficiency Res-efficiency

Production

Pollution

+

Res-efficiency Dimension

EnvKuznetCurve

Sustainable Consumption and ProductionSustainable Consumption and Production

Pollution Dimension

Conventional Approach

Green Growth

Approach REEFChina

EEI


Consumption need more focus Consumption need more focus for the future of APfor the future of AP

•Production Pattern: improve as income goes up •Consumption pattern: expected to deteriorate.

- no empirical evidence of EKC for EE of Cons.

•Consumption pattern will be more criticalin the future as resource price goes up

•New Message: pollution control alone is not enough, Demand Side Management to control consumption will be more critical

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Green Tax ReformGreen Tax Reform

•Could be the Most Powerful Tool to improve EE pattern of economic growth,

production & consumption pattern, Pollution control, resource efficiency, demand side management,

•Changing tax base from INCOME to POLLUTION

•Revenue Neutrality/Double Dividend


Prospect for Green Tax in Prospect for Green Tax in APAP

•Lack of Clear Understanding: •Confusing with earmarked Environment Tax •Mistaken as New & Additional Tax •Revenue Neutrality (Reduction of Income Tax) not publicized at all

•Deep Concern for Competitiveness/Income Regressiveness

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Points to be clarified: Points to be clarified: Green Tax isGreen Tax is

•Changing tax base from income to pollution•Not new & additional tax and not increasing tax burden (Revenue Neutrality)

•Linked with income tax reduction•Can be designed not to damage industrial competitiveness or income regressiveness.

•Can have Double Dividend.


Challenges to overcomeChallenges to overcome

•Inter-ministerial Coordination: tax, politically sensitive, domain of finance ministry, green tax = fundamental change of taxation system tax is for revenue, using tax for env is new,

•No incentive for Env ministry to push, prefer

earmarked env tax as they prefer to get

the revenue from env tax

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AP Need examples to followAP Need examples to follow

•Green Tax Reform : unbelievably little known and publicized in Asia, even in a developed country like Japan.

•Urgently need good examples from Europe to be widely publicized to policy makers & media as well.


Investing in Ecological Investing in Ecological EffEffof Infraof Infra

•EE concept to any infra development & investment

•Ecological Costs of long term use of Infra should be given higher weight in current EIA or SEA: Rail vs Highway, new airports & amusement parks with maximum public transport accessibility

•Transport, Energy, Water,•Building Insulation, Water Recycling, etc.

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Demand side management: Demand side management: Sustainable Consumption Sustainable Consumption

PatternPattern

•Purchasing power of Asian consumers increasing and their EE is rapidly deteriorating; conspicuous consumption,

•Demand side management to make consumers pay for their ecological costs of consumption: Consumer Right vs Consumer Responsibility

•Road & water pricing, energy tax, CO2 tax,congestion charge (London)


However, focusing not only on individual However, focusing not only on individual

consumers choice of productsconsumers choice of products

• Rather focusing on issues at macro-level consumption pattern; public transportation & infra which provide services and choices to the public

• Focusing on government investment for sustainable infrastructure such as public transport & railroad

• For individual consumer choice (conspicuous consumption i.e., large car) needs to be linked with tradition & culture

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Climate Change classical case Climate Change classical case wherewhere

•economic efficiency ≠ Ecological Efficiency

•Climate Action (CA): critical for EE of growth

•As oil price goes up : CA compatible with economic efficiency

•Energy conservation = Good for Economy, •Climate change action = Bad for Economy ?•Energy Cons = Climate Action


Climate Action = Ecological Climate Action = Ecological EffEff

• GHG emission reduction: most effective way of improving Ecological Efficiency of our Growth & Quality of Life

• Climate Action : critical component of EE

• Simply by improving traffic congestion: we can improve EE as well as reduce CO2 emission

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Climate regime after 2012Climate regime after 2012

»Non-Annex 1 commitment issue: deadlock

•Non-Annex 1 already actively initiating CDM projects: more than 60% uni/CDM

•Annex 1: prefer buying CER to investing in CDM •Volume of CDM rapidly increasing: program CDM•CDM: can be redesigned as incentive mechanism for non-annex 1 action, through unilateral CDM approach

•U/CDM: proposed at COP 6 by Korea, approved in April 2005, took 5 years,


CER discountingCER discounting

•CDM can be redesigned as global reduction mechanism if linked with CER discounting scheme

•As volume of CDM increases, it could replace national target/commitment

•Stabilize CER price, differentiation of discounting ratio

•Target: hot air risk, CER discounting: no hot air risk

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CDM Projects linked with CDM Projects linked with CERsCERsDiscounting SchemeDiscounting Scheme

Non-Annex I Non-Annex IAnnex I Annex I

All CERstraded

no global reducti

on

CERsdiscounting rate at 50%

Discount CERs

Retained as net global

reduction

No CER Discount

With CER Discount

No Global Reduction

Net Global Reduction


Exploring New ParadigmExploring New Paradigm

• Happiness, Well-being, Quality of Life,

- Richard Layard, LSE, “Happiness”• Thailand: “Sufficiency Economy”• China: Harmonious Society, China Development Forum: New Model of Economic Growth, Beijing17-19 March 2007.

• OECD: How to measure Social Progress? Future of Indicators (beyond GDP, MDG)

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Spiritual dimension: 4Spiritual dimension: 4thth

pillarpillar• Sus Dev: eco, env, soc 3 pillars still mainly materialistic dimension

• SD + spiritual value (happiness, well-being etc.)

• Searching for new paradigm: GDP not enough

• OECD leading international discussion: WorldForum on “Statistics, Knowledge and Policy”27-30 June 2007, Istanbul, “Is Happiness measurable?” conference, Rome, 2-3 April

2007,


ConventionalWestern Culture

ConventionalAsian Culture

EE = the EAST meets the EE = the EAST meets the WESTWEST

Happiness =

Material Possession/

Consumption

Desire

New AsianConsumerism

New WesternConsumerism

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Is it only a matter of Is it only a matter of ““MoneyMoney”” ??

• Many argue: if we have enough money, we can clean up and invest for env., so money is the answer. Or internalize env. costs.

• Money critical when income is low (EKC)

• But for Korea, not money,

• It is policy concept & paradigm

• Huge Traffic congestion costs: Korea >Japan,

not money, but system & growth pattern


Matter of Vision and Matter of Vision and LeadershipLeadership

• Political Vision & Leadershipcritical to adopt EE as new paradigm for transport, climate change, infra,consumption pattern, tax reform (Ex. Singapore)

EE: critical condition for economically competitive, ecologically efficient growth

Quality of Life & Well-being, Happiness,

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ESCAP isESCAP is

•Promoting Ecological Efficiency as a new paradigm of economic growth as a critical component of sustainable development national strategy

•Through Green Tax Reform, Sustainable Infrastructure, Sustainable Consumption Pattern & EEI,

•Promoting climate action as EE pattern of growth & CER discounting scheme.

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Vision for AsiaVision for Asia--PacificPacific

Green Growth:Green Growth:

Environmentally sustainable economic growth for the improved well being of allFor more on Green Growth see

SOE 2005, GG at a Glance or Urban Environmental Governance

Or visit our website www.unescap.org/esd


Thank you!

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