policy background paper: a viable framework for a green economy in caribbean member states

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Policy Background Paper: A Viable Framework for a Green Economy

in Caribbean Member States

Document Prepared by Ms. Leisa Perch, Team Leader of the Rural and Sustainable Development Team of the UNDP -International Policy Centre for Inclusive Growth (UNDP-IPC-IG)

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1.Background and Context

The paper considers the context in which the green economy and a greening economy process will take place in the Caribbean with specific reference to key social and fiscal requirements and realities which drive and influence the green economy process.

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1.Background and Context

Rio +20 represents a significant watershed moment for an expanded policy context in which equity, inclusion and sustainability are priority focus areas;

Build on MDG Summit in 2010 – with a view to the catalytic actions which must be put in place to achieve the MDGs by 2015 and lay a foundation for a post-MDG development agenda. The environment is cross-cutting for all of the other MDGs with access to water being one of the most vital;

Undertake a critical review of why we still have been unable to consistently reconcile the economy, society and the environment and to identify the appropriate institutional frameworks and approaches which can best enable such efforts;

Bring inclusion and inclusiveness more centrally into the discussions and policies for sustainable development. Until now, inclusion has been more on the periphery of sustainable development.

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1.Background and Context.

The paper elaborates a number of key regional strategy papers and underscore why strong economic growth is a pre-requisite to stay on a pathway for sustainable development and to reduce poverty;

For Caribbean SIDS, the struggle has largely been to adequately sustain a level of growth which is pro-poor and equitable based primarily on direct and indirect uses of natural resources while coping with natural hazards. High unemployment and underemployment, rising crime and persistent inequalities across all income groups;

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2.Growth, Poverty and the Environment Contradictions and Structural Realities

Normatively, the link between poverty, the environment and growth have not always been clearly defined;

The idea of a green economy was first clearly defined in the work of Pearce and Barbier (1989) in the context of a blue-green economy, building on the concepts of sustainable development first discussed in 1972’s Stockholm Conference and Our Common Future and leading up to the 1992 UN Convention on Environment and Development;

The current iteration of the “green economy” concept as mapped out in UNEP’s flagship report brings policy and political attention squarely back to the need to accelerate efforts towards a sustainable pathway for growth

and development;

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2.Growth, Poverty and the Environment Contradictions and Structural Realities

“A Green Economy is one that results in improved human well-being and social equity, while significantly reducing environmental and ecological scarcities" (UNEP, 2011). UNDESA (2011), in the World Economic and Social Survey, builds from this and suggests that enhancing economic growth, social progress and environmental stewardship can be complementary strategic objectives and that the need for possible trade-offs among them en route to their realization can be overcome;

This is well defined in an economic sense and largely illustrated d through key drivers of growth based significantly on reformed industrial processes;

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The Common and Unique Challenges of Caribbean SIDS

Amongst these is the need for development and growth to be resilient as a high priority;

Resilience theory is one area that has received attention in social, economic and environmental vulnerabilities as in the work of Cascio, 2009; Thomas, 2004; Witter and Briguglio (2002) but often to counteract economic and environmental vulnerability, less so to the social vulnerabilities;

Now it should be noted that a virtuous cycle between growth, income and equity has often been assumed but rarely realized;

Estimates of the global ecological footprint currently exceeds 1.5 times the Earth’s capacity ;

The average ecological footprint – consumption per capita/per resident in Latin America and the Caribbean is slightly below the global average while is Europe it is nearly double and in North America, nearly four times the global average.

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In the Caribbean region, the contradictions between growth and the environment manifest largely in the environmental externalities from tourism-led growth, agricultural production and other forms of resource-intensive development;

Unregulated tourism growth of the 1970/80s has been identified as a significant contributor to the pollution and degradation of near-shore reefs as well as "beach mining" resulting from rapid/unregulated construction of tourist destinations along the coast;

This contributed to significant net losses and also to the physical vulnerability of shorelines, properties and investments in low-lying coastal areas. Recent estimates by Burke et al (2011) highlight immediate and long-term costs for reef-based drivers of growth worth billions of dollars;

According to figure 3 most Caribbean countries comprise a significant number of countries with the highest exposure of risks to reef threats of destruction;

Study indicate that significant steps have been taken since this period to address these challenges.

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Figure 3. Drivers of reef vulnerability in 27 very highly vulnerable countries and territories

Source: Reefs at Risk – Revisited, WRI, 2011

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For mineral-rich and dependent economies, Suriname, Trinidad and Tobago, Guyana and Jamaica – other challenges have emerged, largely in the context of revenue management;

The effective management of income streams for mineral-driven development and the use of such revenue as a development multiplier remains a matter of intense policy debate;

Of great concern has been the pace of consumption or use of resources which have often outpaced the natural regenerative capacity of eco-systems;

Thus the paper advocates that key challenge for green growth under these circumstances is to de-couple growth from environmental degradation.

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The paper also cite a number of studies which underscore , that often the benefits of such consumption are not equally or automatically shared across society, with poverty reduction being facilitated indirectly through re-distributive policies and not necessarily through increased opportunities i.e. jobs;

The paper also highlights climate change as one of many manifestations of the unsustainable patterns of growth and presents an additional pressure to re-define growth and development;

The paper highlights the context in which unequal access to resources has consequences for the system as a whole, in which countries which have contributed less are on the frontlines of the shifts being created by a changing climate system with implications for livelihoods, health, economic growth and development;

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The key point here is that there is an overlap between poverty, vulnerability to climate change and environmental stress that has often been underestimated or been given limited recognation;

The graph (next) maps the increasing reality of environmental risk largely shaped by the food-water-energy nexus, unequal access and allocation of resources and the implications for the scope and scale of growth including increasing conflict.

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Figure 1. System Diagram for Risk Associated with the water-food-energy nexus

Source: World Economic Forum, 2011

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Now the Caribbean vision for poverty reduction, environmental sustainability and growth in the Caribbean is effectively captured in the following statement: “The single vision is for sustainable development and it encompasses economic, social, environmental and governance dimensions; grouped into six broad elements:

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– Self-sustaining economic growth based on strong international competitiveness, innovation, productivity, and flexibility of resource use;

– A full-employment economy that provides a decent standard of living and quality of life for all citizens; elimination of poverty; and provision of adequate opportunities for young people, constituting an alternative to emigration;

– Spatially equitable economic growth within the Community, having regard to the high growth potential of member states with relatively low per capita incomes and large resources of under-utilised land and labour;

– Social equity, social justice, social cohesion and personal security;– Environmental protection and ecological sustainability;– Democratic, transparent and participatory governance.” (Girvan, 2007:12)

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At this juncture, it is also important to underscore that given that export-led growth alone, in the case of small states, will likely not be adequate to sustain growth and that for export-growth and economy-wide growth to be in sync for development to occur and the green economy discussion presents CARICOM member states with an opportunity to revisit growth, development and equity;

Additionally, the frequency of adverse weather-related shocks compounds the

development challenge facing a largely mono-cultural growth system in the Caribbean Development in SIDS presents a policy paradox and the Caribbean is no exception

to this; Human development in the Caribbean has been steady and measured as high,

compared with SIDS as a whole and non- SIDS developing countries.

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3.Current Development Context in the English-speaking Caribbean

Source: Perch and Roy, 2010

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Table 1. Socio-economic data for Caribbean countries –Economic Growth

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Table 2. Socio-economic data for Caribbean countries- Poverty

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Table 3. Socio-economic data for Caribbean countries- Employment/Unemployment

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Figure 4: Global Comparative Growth Performance

Source: Hurley and Perch, forthcoming

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Global Comparative Growth Performance

Growth in the region has generally often less consistent and much lower than other developing countries or even the world average – with disasters potentially contributing to this pattern.

Some of the most significant disasters in the region have exceed 100% of GDP – Ivan (2004 for both Grenada and Cayman Islands) Georges (1998 in St. Kitts and Nevis);

In the case of Grenada, prior to Hurricane Ivan, the economy was on track for a growth rate of approximately 5.7% per annum; after the event negative growth of

around −1.4% per annum - was forecast – loss of markets/ comparative advantage in nutmeg;

These pattern of growth overtime cannot be fully attributed to disasters alone, but other factors based on country experiences even through the information suggests the impacts of disasters are significant in the short to the medium term;

In addition, the Caribbean trade policy over the years have made countries

increasingly dependent on international markets to meet food supply needs.

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Global Comparative Growth Performance

These conditions are further compounded in most countries by the high import energy bill given the region dependence on fossil fuel;

These factors along with others act as compound pressures on fiscal space and fiscal flexibility further limiting long-term investment in poverty reduction and the capacity for high-risk but catalytic policy experimentation.

High debt in the Caribbean - this raise questions on who will pay for the transition to a green economy and green growth;

These cascade effects compound the poverty challenge in CARICOM member states;

According to UNECLAC 2010, between 2006 and 2008, while the GDP growth rate declined 7.8 to 4.4 and to 2.6, the unemployment rate averaged around 9 %;

Generally, the employment growth rate has often been far below that of the GDP growth rate in Caribbean SIDS – sometimes seeming to suggest that growth has been largely jobless or is constrained by underemployment.

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Other Related Development Challenges

Water supply inadequacies; Land-based pollution is a significant

environmental concern of the Caribbean;

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Green Growth in the Caribbean context – what needs to be considered?

A CARICOM Green Economy should have a “social face”;– A green economy implies shifting to more environmentally

friendly production and supply-chain models and the weaning of growth away from significantly “brown” sources of growth;

– A green economy for poverty eradication requires also a focus on security, particularly in transitioning from more informal-driven micro level development to more formal mechanisms and structures;

– At the macro-level, strategies must be oriented to meet three key complementary conditions for development and growth

to be sustainable in the context of a green economy:

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what needs to be considered?

– Complementary measures undertaken to mitigate trade-offs and negative consequences. This includes putting measures in place to mitigate the worst impacts of environmental change, in whatever form it takes, including climate change;

– Strategies are put into place to safeguard the social and economic progress achieved, including greater risk-sharing and less “free riding” and “overburdening of the poor”. Greening efforts should not further imperil or weaken the poor;

– Frameworks and principles are employed which ensure the compatibility of development actions at various levels;

– An enabling trade environment is critical to the capacity for Caribbean SIDS to green their economy in several ways: i) to transition from carbon-dependent energy sources to low-carbon options, (ii) to access new technologies for cleaner production, greener operations and to support green business services and (iii) to access the inputs for local innovations particularly for small-scale energy solutions.

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SCP could play an instrumental role in this process in the context of the process of the convergence of needs with wants and domestic production

Source: Akenji, 2010

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Research shows that agriculture continues to have significant poverty reduction potential;

According to research undertaken by ODI agriculture re labor productivity has a potential of 0.55 compared to 0.32 for trade and 0.47 for tax revenue;

Other research findings highlighted the capacity for climate-resilient and compatible forms of agricultural production to provide multiple benefits, particularly environmental ones in water-saving, energy use, carbon sequestration in soils, etc;

Other issues of significance are: employment particularly youth employment; education;

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Labour market participation should be equitable; The structure of the labour market is still defined by gender and this

matter should be addressed; Need to strengthen development programmes on Micro-enterprises and a

greater focus on the household sector; Adaptive financing and optimizing the potential of micro-scale

finance: More adaptive and clearly defined policy by the financial sector in relation to micro and small business affected by crisis including disasters and other hazards is needed ;

Frameworks for Incentivizing Innovation. There are a number of significant opportunities to enhance economic security, business continuity and reduce costs through a focus on energy and related infrastructural transformation.

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Green infrastructure and by extension green construction

Adapting Policy-making to make a Green Economy effective in delivery sustainable development and poverty reduction;

Two key areas are important for Caribbean SIDS in making a co-benefits strategy work. The first: maximizing public investment and the second, minimizing social risk. Both are critical given the structure of Caribbean economies which are largely public-sector led and linked closely with social capital transfers and systems;

Adaptive Public Finance – Innovative Finance and Budget Reform;

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The paper highlights some of the existing user fees and the annual estimated revenue as well as findings from assessment of “willingness to pay” by users of the environment and potential estimated income which could be derived if implemented.

See Table 4 on the Existing revenue sources and potential additional gains for public and private investment in green growth page 62 of the report;

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Blue Carbon – An Opportunity for Significant Mitigation Funding?

The carbon sequestration capacity of wetlands may be a space which SIDS needs to watch more closely;

Potentially, wetlands conservation and maintenance could be a source of carbon credits if accepted within the mechanisms of the UNFCCC;

Though medium-term in scope, this could be a source for further and long-term investment in the broader social and economic policies needed to support and sustain employment.

More generally, linked to public works investments, blue carbon-generating natural infrastructure presents a potentially significant triple-win for SIDS. This needs to be further investigated, researched and advocated for at the global and regional level.

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Concluding Remarks

With increasing variability and uncertainty, Caribbean SIDS must look beyond finance, to capacity, access and the affordability of technology and other inputs for their green economy;

Finally, beyond achieving a green economy, Caribbean SIDS face specific and long-term challenges in sustaining one.

policy background paper: a viable framework for a green economy in caribbean member states

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