Green Growth

A path to sustainable development

Date: October 7, 2016

To: Nadine Ibrahim, CME 368
TA: Kirti Sehgal
From: Dalton Veintimilla, 1000988078
Subject: Green Growth Assignment

“I hereby certify that I am thoroughly familiar with the contents of this report. It is substantially
my own work, I have referenced all my sources of information, and I am the sole author.”

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 INTRODUCTION

Green Growth is a development strategy to seek concrete and measurable progress

throughout environmental and economic pillars by investing in human and natural capital,
whereas, Sustainable Development is a paradigm that focusses on meeting the needs of the
present without compromising the future generation own needs. Green Growth serves as a
complement to Sustainable Development. This strategy is of significant importance to
engineering economic analysis due to the nature of Green Growth that presents many
challenges, ranging from technical to social. It requires professionals with an interdisciplinary
background, which makes engineers the suitable persons to tackle the implementation of Green
Growth in the global economy. The following report looks into the reasons and the methods to
implement the Green Growth approach into the economic analysis made by engineers. It will go
in deep into what Green Growth means to the global economy and the ways to measure it. It also
will describe the role that engineers take into the incorporation of this strategy. Finally, at the
end of the report, some suggestions will be made on how to incorporate natural capital into
economic analysis.

GREEN GROWTH

The United Nation Conference on Sustainable Development took place on June 2012 in
Rio de Janeiro, Brazil. The conference was held 20 years after the first Rio summit, which, had
the purpose of looking for alternative strategies to tackle the adverse impacts of global economic
growth. The current paradigm of economic growth focuses on maximizing short term profit by
abusing natural and human capital. Rising income inequality, high unemployment rates and
environmental disasters are just a few examples of how the conventional global system has failed
to deliver economic growth together with sustainable development.

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 Green growth rises as an alternative to the conventional model of economic
development. It is a strategy that goes beyond trading off between the 3 sustainable
development dimensions (social, economic and environmental). Green growth synergically seeks
to invest in natural and human capital to drive the so called “Green” economic growth [1]. For
example, the Bengali social organization Waste Concern converts roadside organic waste into
fertilizer, this enterprise which, was founded in 1995 has created 986 direct jobs and saved over
USD1.24 million by avoiding agricultural composts’ imports [2]. Initiates like Waste Concern will
not only lead to a growth of GDP, but also ecological sustainability.

GREEN GROWTH INDICATORS

Every decision-making process relies heavily on data and indicators. The analysis of the
state of a particular scenario, and how the policies were undertaken could affect it, need an
objective framework. Indicators close the gaps between theory and implementation by giving a
method to monitor progress.

The Work Bank, United Nations Environment Programme, Organization for Economic
Co-operation and Development and Global Green Growth Institute used to have their own
measurement for Green Growth. However, in April 2013 these four major international
organizations coordinated efforts and launched a knowledge platform by publishing a scoping
paper. This conversion led to a unified set of indicators. In their report, they started by
acknowledging that there is no single model for green growth. Every country has its own
conditions and capabilities. Therefore, every green growth strategy must be designed to meet
them. In a broad sense, these are the key areas to measure advancement towards green growth:

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 Table 1. Green Growth Indicators
Indicator Description
Natural Asset Base Evaluation of natural asset stocks, which
comprises ecosystems, water, soil,
biodiversity and mineral resources.
Environmental and Resource Productivity This indicator measures how efficient
natural and human resources are being
used.
The Environmental Quality of Life A multi-dimensional indicator that
measures the quality of life of people (life
expectancy, access to clean water and air,
etc.).
Policies and Economic Opportunities Measures the level of innovation and
technological development as the result of
applying green policies
The Socio-Economic Context The economic and social welfare of
population (employment, poverty and
inequality rates) [3].

CHILE
GDP is an incomplete indicator of development, it was designed to measure only a small
portion of a society activity. It measures only financial transactions related to services and good’s
production. As a result, GDP measures only economic quantity and not the wellbeing of citizens.
As a result, it gives an incomplete picture of the world humans depend on [4].

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 Several indicators have tackled the incompleteness of GDP by taking into account the
multi-dimensionality of development. The OECD designed Better Life Index evaluates countries
performance in a broader sense. This index comprises areas such as income, jobs, safety,
environment, education, health. In December 2013, Chile published its National Green
Growth Strategy, in which the index is being used as a tool to monitor and measure Green
Growth. Better Life Index recognizes that natural asset base (geology, soil, air and living beings)
is a factor of production, by doing so future economic analyses will take into account depletion
of natural resources and how that affects society as a whole [5]. This metric could be of major
relevance when calculating the cost of potential externalities, such as oil spills or deforestation
because it includes elements necessary human wellbeings such as water and air pollution.

Figure 1: OECD’s Better Life Index

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CZECH REPUBLIC
Other members of OECD have also made significant progress to measure Green Growth.
In 2011, Czech Republic Statistical Office came out with the Green Growth in the Czech Republic
Selected Indicators report. In this report, the Czechs selected 27 of the 30 indicators
recommended by OECD based on their own situation. What they did is to evaluate their
performance by looking at the trend their policies create. An approximation to their goals will
result in a positive trend and going away from goals will be a negative one.

Figure 2: Green Growth Indicators in the Czech Republic

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Environmental and Resource is a fundamental element of Green Growth. The Czech measure
progress in this area by looking into the relationship between the amount of environmental
services used in production and the output generated. For example, greenhouse gas productivity,
which is calculated by dividing GDP by the total emission of greenhouse gasses (tons of CO2)
stands out in their report. It can tell us about the economy’s eco-efficiency and how it behaves
throughout the years. We can see that the chart has a positive trend, this is due to the
dramatically drop in greenhouse emissions in the 1990s and a thrive in the economy activity in
the past years [6].

Figure 2: Production-based greenhouse emission productivity

(thousands CXK per metric ton of CO2)

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THE ROLE OF ENGINEERS IN GREEN GROWTH

It is obvious that engineers can contribute to Green Growth with their technical skills.
However, they can also work in areas like research and development. For example, today
agriculture is more sustainable than ever thanks to innovation in plants breathing, plant
biotechnology is helping farmers grown more in existing land while minimizing their impact. In
fact, without the use of pesticides products and biotechnology farmers in Canada will need to
cultivate 15 million more hectares of farmland to generate the same production they see today
[7]. Modern agriculture is an example of natural asset base protection because improving
production in existing farmland leaves wildlife habitat intact and at the same time creates
economic growth. It is estimated that in 2012 alone, there was and net economic benefit of $18.8
billion which means an income of $117 per every hectare cultivated with bioengineered plants
[8]. Engineers are a fundamental part of the human capital that will research decoupling
technologies and strategies necessary to meet Green Growth.

Green Growth policies can be generators of new economic opportunities and expand
the role of engineers in society. One of these new roles of engineers is to minimize the
environmental footprint. For example, the multinational manufacturing company 3M was using
40% of the energy that was consuming at its height production day when nothing was being
produced. Andrew Hejnar, who is an electrical engineer by trade and the energy manager at 3M’s
facilities in Brockville, Ontario created a team to tackle this problem. Hejnar’s team ran an
inspection of the existing equipment and maximize the production cycle by achieving an efficient
process flow. 3M’s energy team succeed in reduce consumption from 40% to 6% and saved the
company $350000 per year with no extra capital (human and natural). Increasingly, companies
and organizations are making efforts to reduce their environmental footprint, these initiatives
are creating new jobs for engineers. Moreover, the number of engineers with the Leadership in
Energy and Environmental Design (LEED) certification has increased significantly according to
leading human resources organization Central and Eastern Region for Randstad Canada [9].
Furthermore, legislation in Ontario requires that buildings increase their energy efficiency by at
least 30% over the previous standard. This means that in the more capital investment is needed,

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especially in workforce education. To conclude, the Green Growth approach is creating a trend
into a more sustainable development. The role of engineers is fundamental for this purpose
because they have the technical skills, their job has deep social consequences and creates
economic opportunities.

MONETARY VALUE ON NATURAL CAPITAL

Should the access to natural capital be a right? Should air, land and water be a human
right? Assigning a monetary value to natural capital is highly controversial, due to moral
implication of doing so. On July 2010 the United Nations General Assembly recognized explicitly
that water and sanitation are essential and inalienable human right. UN’s decision makes sense
because modem human life is inconceivable without clean drinking water and sewers. In my
opinion, this is not a question only morality, it’s about the global economic model because
Capitalism works that way. We live in a global economy where trade is at the core of every
countries activity. The trade won’t take place without monetary value on natural capital. Trade
is the global economy engine, if countries stop doing it they will collapse. As a result, millions of
jobs will be lost, poverty will increase and development will stop or even go backward. There is
no doubt that the environment should be taken into account in every economic analysis, but
without neglecting the fact that human being’s welfare is the most important goal.

NATURAL CAPITAL INTO ECONOMIC ANALYSIS

The Yasuni-ITT project was an incentive by the Ecuadorian government to protect Yasuni
National Park. The park is located in the Ecuador’s Amazon region it comprises an area of 9820
km2. The park is considered by some scientist the most biologically diverse spot on the planet
[10]. Yasuni park was designated a Biospehere Reserve in 1989 by the UNESCO, there are more
amphibian species in the national parts than in Canada and United Stated put together. However,
Yasuni National Park is one of the most impoverish areas in the country and also contains around
800 million barrels of oil which accounts for 20% of Ecuador’s oil reserves. The reasoning behind
the Yasuni-ITT initiative is that the Ecuadorian government will leave the park intact and no oil
will be extracted, so future greenhouse emissions can be avoided. As part of the deal, develop

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countries will contribute with US$3.6 billion, which represents 50% of the oil’s reserve at current
market price. This project is an excellent way to take into account the importance of natural
capital, because it does not only recognize the direct impacts of oil exploration in a very fragile
area such as the Amazon rain forest but also the positives externalities or opportunity cost of
leaving the oil in the earth. It is estimated that the project could avoid the emission of more that
400 million metric tons of CO2, which is equivalent to the greenhouse emissions of more than 42
million house per year [11]. Economic compensation to developing countries could be a
legitimate way to incorporate natural capital into an economic analysis, because of the
environmental services (plants transformation of CO2 into Oxygen, water reservoir and
biodiversity) that the Amazon rainforest gives to the planet improve the life of everyone in
developing and developed countries.

CONCLUSION

Green Growth could be an alternative for the contemporary GDP-based development

paradigm. It contemplates a more holistic approach as it recognizes the importance of natural
capital into the economic analysis and that a complete depletion of the natural based asset will
be disastrous not only for the global economy but to every aspect of human life. There is no
doubt that every country has its own circumstances and more investments in human capital
needs to be done. However, some steps have been taken in that direction, like the consolidation
of indicators that measure progress and the creation of new economic opportunities to improve
the existing human capital.

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REFERENCE:

[1] United Nations Economic and Social Comission for Asian and the Pacific. (n.a). Green Growth
and Green Economy [Online]. Available: http://www.unescap.org/our-work/environment-
development/green-growth-green-economy/about
[2] Organization for Economic Co-operation and Development. (June 2012). Green Growth and
Developing Countries [Online]. Available: https://www.oecd.org/dac/50526354.pdf
[3] Green Growth Knowledge. (April 2013). Green Growth Knowledge Platform Scoping Paper
[Online]. Available:
http://www.greengrowthknowledge.org/sites/default/files/downloads/resource/GGKP%20Mo
ving%20towards%20a%20Common%20Approach%20on%20Green%20Growth%20Indicators.pd
f
[4] Boston University. (January 2009). Beyond GDP: The Need for New Measures of Progress
[Online]. Available: https://www.bu.edu/pardee/files/documents/PP-004-GDP.pdf
[5] Chilean Ministry of Enviorment. (December 2013). National Green Growth Strategy [Online].
Available: https://www.oecd.org/greengrowth/Green%20Growth%20Strategy%20Chile.pdf
[6] Czech Statistical Office. (2011). Green Growth in the Czech Republic Selected Indicators
[Online]. Available: https://www.czp.cuni.cz/knihovna/GreenGrowthweb.pdf
[7] CropLife Canada (n.a). What are the benefits of plant biotechnology? [Online]. Available:
http://www.croplife.ca/plant-biotechnology/what-are-the-benefits
[8] PG Economics (May 6, 2014). GM crop use continues to benefit the environment and farmers
[Online]. Available: http://www.pgeconomics.co.uk/page/36/-gm-crop-use-continues-to-
benefit-the-environment-and-farmers
[9] Financial Post (March 25, 2013). Engineering Month: Green initiatives expand role of
engineers [Online]. Available: http://business.financialpost.com/executive/careers/engineering-
month-green-initiatives-expand-role-of-engineers
[10]Margot S. Bass (January 19, 2010). Global Conservation Significance of Ecuador’s Yasuni
National Park [Online]. Available:
http://journals.plos.org/plosone/article?id=10.1371/journal.pone.0008767
[11] Our World (October 10, 2010). Debate: Paying Ecuador to leave oil underground? [Online]
Available: https://ourworld.unu.edu/en/debate-2-0-paying-ecuador-to-leave-oil-in-the-ground

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