I took a summer class at the JFK School of Government at Harvard University a while ago, long before SBY, our beloved president, gave a speech in the main building of the school.
One of the professors complained of the narrow scope of mainstream economics as a purely quantitative expression and assumption of a homo economicus perspective. He was arguing that in the end what matters is the evolution of societies within a long-term time frame.
I did not buy in to that argument until I recently paid attention to global news and read a number of articles on what they call the green economy.
The proponent of a green economy firmly says that yes, the economy has been providing a tool for understanding a short-term business cycle, but what is important is a cycle of evolution of nature, such as global warming and climate change.
While, a short-term cycle corresponds to what we call “economic growth”, the evolution cycle corresponds to the “growth in nature” — a growth that refers not only to the economy, but also to social and environmental justice.
What is a green economy anyway? Is it another fancy word for climate change mitigation or adaptation to global warming?
To many, a green economy is nothing but an economy where costs of environmental protection are included in production, but to a few, it also reflects a new perspective of managing the economy where we are living.
To scholars, a green economy is a domain of economic development addressing a notion that growth has to be hand in hand with social and environmental justice, as they are an inseparable fundamental part of a whole — sustainable development.
A green economy is a new deal. A deal that economist and development planners recognize as a market failure to include environmental and climate protection, as well as social justice.
Reasons for the failure are well known. Externality costs, high future commercial rates associated with high initial costs for R&D are among those that have prevented firms from being voluntarily interested in reducing environmentally unfriendly activities.
Not only has a pending of an environmental crisis occurred, the failure of mainstream economics in our modern world has left one-fifth of humans living in poverty.
Probably it is not too exaggerated to say that a green economy is a deal to overcome such a failure. It addresses simultaneously growth, climate change, biodiversity and poverty within an equitable framework. Yes, it is also not too progressive to say that this is a deal that we cannot let invisible hands alone takes care of.
This is a deal that requires intervention and incentives to motivate firms to invest and produce what we call green products and services. If we agree to that notion, what incentives do they actually need? How do we best design these? And what sectors in a green economy must we focus on?
Incentives for using renewable energy and low-carbon power generation probably is one of a fundamental element to trigger a green economy. State-of-the-art of current technologies to generate large-scale power from solar, wind, geothermal, marine including wave, biogas, fuel cell, and nuclear must definitely be acquired.
Incentives for green buildings are the next, with green retrofits for energy and water efficiency, for residential and commercial, green products and materials, and LEED (Leadership in Energy and Environmental Design) construction.
Clean transportation is another. This will include incentives for using alternative fuels, enhanced public transit utilization, the development of hybrid and electric vehicles, car-sharing and carpooling programs in urban areas.
Green production is also a must. Incentives must be designed to allow a production processes that only uses material to the extent that they are sustainable.
We may only utilize as much copper as can be recycled, significantly reducing the need for minerals as a finite resource.
Incentives are also needed to improve our way to undertake water reclamation, to maintain ground water and rainwater systems, to manage low-water landscaping and water purification, and to manage storm-water as well as municipal solid waste.
The objective is to prolong the service-life of natural resources, while reducing the potential detrimental effects to nature.
Of course, incentives are required to do our land management. This includes spatial management for organic agriculture, as well as habitat conservation and restoration.
On the one hand, we need to revitalize urban forestry and parks, and on the other hand we are challenged to carry out a large scale reforestation and soil stabilization in rural areas.
In order to attain fair and long-lasting growth, principles must be understood and be treated as a basis for developing green policy initiatives.
First, our economy has to be designed following a belief that our biosphere is a closed system with finite resources and a limited capacity for self-renewal. This belief underwrites that we are inevitably very much depending on natural resources, today and tomorrow.
Therefore, we must create a system that respects the integrity of ecosystems — ensuring the resilience of life supporting systems.
We may call it a principle of “Environmentally Sustainable”.
Second, our economy has to be developed based upon the belief that culture and human dignity are precious resources. Like our natural resources, culture and dignity require responsible stewardship to avoid their depletion.
Therefore, we must create a vibrant economic system that ensures all people have access to a decent standard of living and full opportunities for personal and social development.
We may call it a principle of “social justice”.
Third, we have to run our economy derived from the belief that an authentic connection to place is the essential pre-condition to sustainability and justice.
Therefore, we must see that our economy has a global aggregate of individual communities meeting the needs of its citizens through the responsible, local production and exchange of goods and services.
We may call it the principle of “local ownership”.
With these three principles, carefully designed and executed, a green economy would create both green jobs and ensure real and sustainable economic growth. It can prevent environmental pollution, global warming and resource depletion.
It is time to end the tunneled vision of our regulators. The traditionally accepted concept of “economic growth” is no longer good enough for the people of today and tomorrow.
The writer is director for Energy and Mineral Resources and Mining at the National Development Planning Agency, (BAPPENAS). This is a personal opinion.