1 Rebalancing Asia: Implications for inclusive green growth Dr Alex Bowen Principal Research Fellow, Grantham Research Institute on Climate Change and the Environment, London School of Economics and Political Science Overseas Development Institute, London, 13 March 2013

‘Going green’ as a development strategy for Asia The application of sustainable development principles? –‘Green’ to the fore because of the increase in the perceived threat of environmental degradation, especially by climate change –Growth to the fore because of the experience of recent decades, especially in Asia –The three pillars still relevant Environmental Economic Social 2

Innovation Market failures –Spill-overs from knowledge –Need to differentiate the ‘price’ of new ideas –Difficult to capture returns –Danger of introducing monopoly power Changing sources of growth –In the past, capital accumulation and the reallocation of workers from less to more productive sectors –But populations age, saving rates decline and the movement of people out of rural agriculture into urban industry and services slows over time –Increasing importance of knowledge-based growth, including growth based on new skills 3

Innovation 4 Source: Batelle/ R&D Magazine

Innovation 5 Source: OECD

Innovation 6

Policy implications –Strengthen national innovation systems Examples from Japan, Korea, China and Singapore –For most countries in Asia, focus R,D, and D on Adapting innovations from leading innovators Exploiting comparative advantages Delivering innovations appropriate to the structure and resources of the economy –Environmental pricing –Take into account the problem of overcoming previous path dependence –Use UNFCCC negotiations 7

Green jobs Another area where market failures abound –Labour market frictions –Acquisition of (general) skills –Macroeconomic shocks –Segmented labour markets e.g. rural/urban, formal/informal –Poor information and inadequate opportunities to reduce risks 8

9 Need for additional jobs

Green jobs ‘Green jobs’ difficult to define Much scope for gross job creation in the transition to green growth But policy-makers seeking co-benefits should focus on net job creation Studies for high-income countries not necessarily a good guide for developing countries 10

11 Not all measures equally ‘jobs-friendly’ The Korean stimulus

12 India: jobs in wind energy Source: TERI (2010)

13 Erosion of natural capital Source: World Bank Little Green Data Book 2011 Energy depletion Mineral depletion Net forest depletion CO2 damage Particulate emissions damage Total East Asia/ Pacific South Asia World

14 Damages from particulate pollution

15 Costs of adjustment in labour markets Source: Babiker and Eckaus (2007): ‘Unemployment effects of climate policy’

16 Preparedness of Asian countries Source: ABC

Green jobs Policy implications –Active labour market policies –Facilitating investment in skills –Tailoring public employment programmes –Taking account of the state of the macro-economy –Understanding the structure of labour markets –Look beyond formal urban jobs –Focus more on net than gross job formation 17

18 Rebalancing Asia: Implications for inclusive green growth Thank you for your attention! Dr Alex Bowen