The sections below outline the main categories of policy tools that governments may use to promote a transition to a green economy. As an introductory remark, it is worth noting that green economy strategies and related timeframes will vary based on a country’s circumstances. The mix of policy tools, and the timeframes for their implementation, will consequently vary from one country to another. Moreover, a country’s particular transition strategy may arise as a result of government decisions at the most senior level or may instead emerge gradually from initiatives being taken at a sectoral or sub-sectoral level by ministries and local government authorities, as well as in response to innovation from the private sector and civil society. Given these factors, it is not possible or advisable to prescribe a single green economy policy mix that is relevant and applicable to all countries. Rather, in supporting a green economy, transition countries will likely prioritise their choice of policy based on a number of factors, including:
■ Existing development plans and commitments. These include state economic and development plans, national sustainable development strategies, poverty reduction strategies, and strategies for meeting the Millennium Development Goals (MDGs). To avoid duplication, policy tools for a green economy should complement and contribute to these existing strategies;
■ National circumstances. These include the cost and abundance of labour and capital, environmental and natural resource endowments, the extent of locked-in capital stock, availability of renewable energy resources, institutional capacity and governance strengths and weaknesses, political stability, demographic profile, and the strength of the private sector and social actors;
■ Sub-national differences. In many cases, the greening of key sectors will have differential impacts on rural and urban areas, or different sub-national regions. Regions with pressing environmental or social problems might be targeted as a focus for green development;
■ Culture and traditions. These factors can influence a community’s material aspirations and consumer behaviour, thereby affecting a country’s path to a green economy. More broadly, culture and traditions will in many cases require long-term attention to ensure a just transition; and
■ Costs and timescales of different policies. In some sectors, there are quick wins that can be targeted and achieved on a relatively short time scale. Elsewhere, medium- to long-
term preparation might be needed to overcome technical and political economy challenges. In some circumstances, such as the design of cities or investments in renewable energy, there might also be pressing reasons to act now to prevent significant future losses despite high financial and political costs in the short term.
A careful analysis of the above factors will also assist countries in assessing the feasibility of implementing a given policy reform or tool. No matter which policies are prioritised, the existence of robust institutions – at a national and an international level – is vital. Strong institutional capacity provides the basic functions for the effective design, implementation and operation of any policy intended to enable a green economy: consistent, science-based measurement, analysis and decision-making; inclusive consultation and strategic planning;
monitoring the performance of policies
and economic actors; adaptation of policies where necessary; enforcement of laws; transparency and accessibility regarding information of interest to citizens; and existence of systems that ensure the accountability of decision-makers. The need for strong institutional capacity reinforces the importance that should be placed on the international community to provide technical and financial assistance for building such capacities in developing countries.
2.1 Promoting investment and spending in areas that stimulate a green economy
While the bulk of green economy investment will ultimately have to come from the private sector, in some situations the careful use of public expenditure and investment incentives can play an important role in enabling markets to incentivise green economic activity. Such situations might include the need to overcome market barriers or the need to act quickly, due to fear of locking in unsustainable assets and systems, or of losing valuable natural capital that people depend on for their livelihoods. Three important focuses for public spending are: (a) the promotion of innovation in new technologies and behaviours that are vital to green markets; (b) investment in common infrastructure that is required for certain green innovations to flourish; and (c) fostering infant green industries, as part of a strategy to build comparative advantage and drive long-term employment and growth.
Public expenditure can be harnessed in a number of ways to alter the operation of markets. Many of these