1. Economic Policy Considerations in the Transition to a Green Economy
Michael A. Trueblood
Director, USAID/CAR Economic Development Office
Astana Economic Forum
22 May 2013

2. Presentation Outline Concepts and Definitions
Best Practices and Lessons Learned from Other Countries
US Policy and Research Experience

3. Concepts, Definitions, and Rationale Related to the Green Economy

4. Green Economy Defined
There are many different definitions of a green economy
UNEP’s working definition of a green economy is:
“one that results in improved human well-being and social equity, while significantly reducing environmental risks and ecological scarcities. In its simplest expression, a green economy can be thought of as one which is low carbon, resource efficient and socially inclusive.”

5. Key Dimensions of Green Economy
Economic
Environmental
Social
The three pillars of sustainable development

6. Elements of a Green Economy
Low Carbon Intensity
High end-use efficiency
Low-carbon power sources
Natural resource management
Water, forests, biodiversity, soil
Resilient to climate change
Improved environmental practices
Waste treatment, local air and water quality
Benefits distributed throughout the population
Urban v. Rural

7. Why Green Growth in General?
Preserves the natural resource base for future generations
Modeling results shows higher rates of economic growth over the long run than traditional (“brown”) growth paths
More job creation in the long run

8. Why Green Growth Locally?
High commodity dependency in Central Asia region
Prices high now, but may not be in the future
Opportunity to “leap frog” technologies and avoid locking in old “brown” technologies
Opportunity to plan new developments and cities using efficient designs

9. Energy Inefficiency is High in Central Asia
OECD average
Source: World Bank, World Development Indicators

10. Challenge of Diversification
Aluminum
Oil
Natural gas
Gold
Energy
Ask people which industries they think are the largest in each country

11. Real Primary Commodity Prices Are Prone to Large Long Run Variations
Oil (right axis)
Prices are adjusted for inflation
Natural gas (left axis)

12. Best Practices and Lessons Learned from Other Countries

13. Economic Policy Overview
“One size doesn’t fit all”
“A mix of policy instruments will be required” (OECD 2011)
“A combination of policy instruments [are needed], including price-based policies, norms and regulations, public production and direct investment, information creation and dissemination, education and moral suasion, and industrial and innovation policies” (World Bank (2012)

14. Six “I’s” of the Economic Policy Toolbox to Promote A Green Economy
Internalizing (externalities)
Incentivizing
Institutional development
Investments
Information
Inclusion
Source: UN, A Guide to the Green Economy - Issue 3 (2012)

15. Some Common Policy Instruments
Taxes on economic “bads”
Market mechanisms, e.g. “cap and trade”
Regulations
Integrated planning
Investments
R&D
Infrastructure
Human capital
Natural resources capital
Agriculture

16. Principles of Good National Sustainable Development Strategies (NSDS)*
Integrate policies
Take an intergenerational timeframe
Conduct strong analysis and assessments
Coordinate across government and develop institutions
Involve local and regional governments
Encourage stakeholder participation
Develop indicators and targets
Monitoring and evaluation follow through
* 106 countries have completed NSDS as of 2009 (UN 2012)
Source: UN, A Guide to the Green Economy - Issue 3 (2012)

17. Related: Low-Emission Development Strategies (LEDS) - Lessons Learned
Best practices:
Strategies are fact-based
Develop capacity building
Strong leadership and awareness building
Coordinate government action
Involve stakeholders
Source: UN, A Guide to the Green Economy - Issue 3 (2012)

18. Positive Examples of Recent NSDS Strategies
Adapted from UN, A Guide to the Green Economy - Issue 3 (2012)

19. US Policy and Research Experience

20. The US Experience
Different levels of government carry different types of authority:
Federal: regulation, provide subsidies to states/sectors, platforms, standards, data, research
State: planning, regulation, taxation, education
Local: “where the rubber meets the road”
Policy design and implementation can be both top down and bottom up
States can act as laboratories for innovative policies
Strong emphasis on both compulsory and voluntary measures

21. US Economic Theory Often Ahead of Economic Policy
There are several examples:
Pollution taxes – 1920’s (Pigou)
Polluter pays principle (internalizing pollution externality)
Not really noticed until the 1960’s
Green GDP accounting (1980s and 1990s)
Green productivity measurements (1980s and 1990s)
Tradable permits / cap and trade (1980s and 1990s)
Efficiency measurement with jointly produced goods and bads
Data are very limited, sometimes expensive to collect
Economic agencies such as BEA (Commerce Department) and ERS (Agriculture Dept.) are advancing research methods

22. States as Laboratories for Green Policy
Consider California’s example*
California Environmental Quality Act (CEQA) – 1970
Following the oil spill off Santa Barbara
Promoted alternative energies for decades
Including windmill farms
Several policies to promote clean air (see next slide)
AB32 law (2006)
Will cut greenhouse gas emissions to 1990 levels by 2020
Implements a cap and trade system (second biggest after EU)
Carmakers have to reduce emissions
13 other states followed, so industry complied to avoid patchwork regulations
* If California were a country, it would have the world’s 12th largest GDP.

23. California and Air Pollution
Let’s learn some lessons from Los Angeles, California
Air quality in LA is one of the most rapidly improving in the United States
A typical day in the 1970s
A typical day today

24. Thank You!
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25. Appendix Slides

26. Natural Resource Management
Water management inefficiency
Water still given a zero price in most CAR countries
Not treated as a commodity that is scarce like other commodities when it is in fact scarce
Leads to waste and inefficiency
Rest of world is moving toward water markets – CAR region is not moving in this direction yet
Water districts along historical political districts rather than watershed management districts
Uncertainty of global climate change effects on snow melt