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Today, climate change has taken the centre stage in every global and national level discourse. This has led to the emergence of a new economic paradigm which intertwines economic growth with sustainability i.e, green economy. A green economy is defined as a low-carbon, energy-efficient economy wherein the growth and development are driven by public and private investment into economic activities that reduce carbon emissions and prevent damage to biodiversity and ecosystem services.
According to the United Nations Environment Programme, the green economy provides a macroeconomic approach to sustainable economic growth with emphasis on green jobs, green investment and green skills. The multi-stakeholder partnership is integral to the success of the green economy which includes the community following environmentally friendly lifestyles, businesses and proper regulatory framework by the government. The Green Economy is based on the following principles; the well-being principle– prioritising investment and access for everyone for shared prosperity, the justice principle– based on encouraging social enterprises and the promotion of rights of workers, human rights, minorities and women to combat the challenge of inequality and second is the planet boundaries principle– including the green economy projects and greater investment in biodiversity conservation, and growth and management of natural systems, the efficiency and sufficiency principle and the Good Governance Principle.
The priorities for transitioning to a green economy include decarbonisation of the economy, conservation of the biosphere and commitment of the environmental community to justice and equity. An inclusive green economy is the essence of the good governance principle which necessitates public participation, transparency and accountability. This is integral to achieving the ambitious net zero targets and limiting global warming to 1.5 centigrade.
In 2020, the United Nations Environment Programme (UNEP) took a bold step by rebuffing the prevailing notion that sustainability initiatives are solely a cost centre and economic drag by reporting that “there is a need for sustainable evidence that the greening of economies neither inhibits wealth creation nor employment opportunities, and that there are many green sectors which show significant opportunities for investment and related growth in wealth and jobs.” The potential of a green growth economy provides a practical and flexible approach for achieving progress in its economic and environmental pillars while taking into account the social consequences of greening the growth dynamic of economies. Secondly, this also includes the provisioning of critical life support services- clean air and water.
Green GDP is one of the building blocks for working out the green growth strategy. It refers to the incorporation of both environmentally beneficial and harmful products and their social value. This is an attempt to measure the economic performance of the country (GDP) while taking into account environmentally harmful products. The countries that have adopted the use of green GDP include the USA, which has developed a comprehensive system of environmental-economic accounts; Europe, which has produced a compilation of the green environmental policies, taxes and materials; and Sweden, which has included a dashboard of indicators for monitoring the progress towards green growth.
Drivers of Growth in the Green Economy: India and Global Context
Greenployment: The Silicon Valley, a global hub for technology has been undergoing several changes to shift towards sustainability. These include the growth of green startups focused on electrical vehicles, energy storage, development of new technologies and increased investment in the renewable energy sector. In the green sector, new opportunities have given rise to new career paths and industries.
According to the International Renewable Energy Agency (IRENA), the renewable energy sector has been a major source of employment for around 11.5 million people globally, as per its 2020 press release. The Solar Photovoltaic Cell (PVC) and wind power energy sector has led to the generation of over 3.7 million jobs in 2019 alone. According to the new ILO report “Working Towards Sustainable Development”, the shift to a greener economy would translate into employment gains in the order of 0.5-2% which translates into 15-60 million jobs added globally. On the other hand, it is expected to affect around 1% of the labour workforce in industrialised countries. Nevertheless, the net impact is expected to be positive.
The inadequate green skills in sectors like renewable energy, energy and resource efficiency, renovation of buildings, construction of environmental services, and manufacturing and clean technology, can potentially create a demand-supply gap problem in the green economy.
Greenification: According to the International Energy Agency (IEA), renewable energy is expected to account for almost 95% of the increase in global power capacity by 2026. In 2022, India's renewable energy additions reached the highest year-on-year growth– around 9.83%. According to Invest India, the installed solar energy capacity has jumped high around 24.4 times in the last 9 years and the installed renewable energy capacity has grown by 128% since 2014. Moreover, the total global biofuel demand is expected to see an expansion of 22% over the same time period. This acceleration in the renewable energy sector offers opportunities for bringing the countries closer to their ambitious net-zero targets.
Greenulus: Fiscal stimulus is the increase of subsidies or creation of tax incentives by governments to boost growth, and the same strategy can be used for a green stimulus like the one in Europe and the U.S. Clean energy, its storage, and transportation are examples of industries that could attract their green economies and take advantage of this accelerating transition. The circular economy of green growth for steel can potentially give a boost to green growth in sustainable development. Green/ climate financing can also be a potential method. For example, India has established the National Adaptation Fund for Climate Change (NAFCC) and the National Clean Energy Fund, signifying its commitment to promoting clean energy and climate-resilient infrastructure.
GLOBAL GROWTH IN GREEN ECONOMY
The green growth policies aim to achieve the integral part of the structural reforms needed for a strong and sustainable growth. It enhances the productive use of resources, boosts investor confidence through greater predictability in the ways governments deal with environmental issues, contributes to green taxes through environmentally harmful subsidies through the imposition of green taxes, and opens up new markets. The policy framework for the green growth strategies for developing countries includes the national green growth plan for the creation of enabling conditions, and green growth mainstreaming strategies. The eight green growth policy instruments include certification of sustainable production and trade, green energy investment frameworks, green innovation and setting up of councils of sustainable development. Moreover, it also includes the environmental fiscal reform through the environmental taxes.
The OECD Report on Green Growth and Developing Countries stated that it is integral for developing countries to focus on green growth as a driver of their economic development. However, there are questions with regard to the lack of equity and inclusiveness in developing countries. Green growth is also being impeded by high-cost barriers as most of the developing countries are lacking in the field of wastewater management, energy efficiency and integrated waste resource management. This also includes the promotion of the use of green technologies as it would require the governments to invest considerably in the usage of green technologies. Countries like Brazil, India and China have become drivers of green growth. Moreover, the shift to a low-carbon economy should be a just transition.
Case Studies
In Costa Rica, there is a system of payments for environmental services programmes created by law in 1996 and financed through taxes on fuel and water, which discourages deforestation as the forest owners pay for the environmental services that the forest producers such as watershed and biodiversity protection and greenhouse gas mitigation. This has paid over USD 230 million since its inception. The forests of Nepal account for almost 40% of the land in Nepal. The Forest Act and the Forest Rules recognise the community forest user groups through the benefits of the community forestry system. WasteConcern is a social enterprise that turns agricultural organic roadside waste into agricultural compost. Through this, around 1,24,400 tonnes of waste was processed and direct jobs were created. It is currently assisting 10 Asian and 10 African cities in replicating its model. China is another example wherein it has launched the Belt and Road Initiative International Green Development Coalition and aims to reach carbon-neutral goals by 2060.
INDIA'S TRYST WITH GREEN ECONOMY
India has committed to international commitments of the 2030 Global Development Agenda and the Paris Agreement. According to the latest report in 2022 from the Global Green Economy Index, India ranks 60 out of 160 countries. The Green Economy Barometer gives insights into the successes of the Indian economy across the high-impact sectors, making it indispensable for India’s development initiative in the next 15-year plan.
According to the Renewables 2022 Global Status Report by REN21, India ranks third in renewable energy capacity installations. So, it has become one of the fastest growing economies among the world's economies with the vision of production of around 500 gigawatts by 2030. It has set ambitious goals of achieving panchamrit and net-zero carbon emission by 2070 to usher in an era of green industrial and economic transition.
Assessing Green Growth Initiatives of India
India has been making great strides in boosting the green economy to reach its ambitious net-zero targets. Firstly, India has taken initiatives for the adoption of renewable energy. It is one of the seven top priorities of the Union Budget 2023-24 for boosting green industrial and economic transition, environmentally friendly agriculture and sustainable energy in the country. Green Growth is a revolutionary opportunity as expounded by the recent budget in India's Amrit Kaal. Several initiatives include the Green Hydrogen Mission, Energy Transition, Energy Storage Projects, Green Credit Program, PM-PRANAM, Coastal Shipping and Vehicle Replacement. Moreover, India has been the fastest in renewable energy capacity addition among major economies. Other initiatives include Amrit Dhamar for optimal usage of wetlands, promotion of coastal shipping for energy-efficient transportation and promotion of coastal shipping for better energy efficiency.
The three pillars of the green transition in India include “increasing the production of renewable energy, reducing the usage of fossil fuel in the economy and moving towards the gas-based economy.” In the past few years, the budget has given a boost to achieving green growth in India. It has been successfully moving towards achieving 20% ethanol blending in petrol by 2025-26. The launch of E20 fuel and emphasis on biofuels has brought new opportunities for investors. The development of waterways is given priority for encouraging water-based transport and greener cargo handling. Under the National Green Hydrogen Mission, India is moving with a target of production of 5 Million Metric Tonnes of green hydrogen. India's Green GDP however, is not officially calculated in its GDP. According to a paper published by the RBI in October 2022, the green GDP of India is estimated to be around Rs 167 trillion for 2019. This signifies a reduction of about 10% from the conventional GDP of about Rs. 185.8 trillion for the same year.
The Hydrogen Energy Mission aims to generate hydrogen from renewable energy sources with the potential to bring about a revolution in the transportation industry and the adoption of green fuels. Another initiative including the Deep Ocean Mission is aimed at conducting deep sea exploration and deep maritime biodiversity with a budget of around INR 4000 crore over the next five years. The Partnership for Action on Green Economy (PAGE) in response to the Rio+20 appeal for assisting nations with more equitable economic paths. PAGE India has great potential to play an important role in the global green economy. Other notable initiatives include PM-KUSUM which is aimed at ensuring energy security for farmers in India. India’s commitment to increase the share of installed capacity of electric power from non-fossil-fuel sources to 40% by 2030 as a part of Intended Nationally Determined Contributions (INDCs) and for solarisation of 10 lakh Grid Connected Agriculture Pumps. The principle of Reuse, Recycle, and Recovery gives new strength to our circular economy. The recent Vehicle Scrapping Policy among others will play an integral role in green growth and the creation of a new market for a cleaner fleet of vehicles, especially the Electric Vehicle market. India has a huge potential to lead the world in the domain of green energy and cause global good apart from the generation of green jobs. This has been a priority area, as sustainable development has become an important aspect of Indian policymaking in G20.
Moreover, cleantech has a huge potential to play an important role in an inclusive green future in India. It can realise the country’s potential to deliver on climate and development action in rural areas. The examples include solar dryers for the conversion of throwaway tomatoes into sun-dried ones in Andhra Pradesh, biomass-powered cold storage that helped farmers in Maharashtra to make a profit, and the solar silk reeling machines reducing drudgery for high-reelers, contributing to the income of rural women and men. The Pradhan Mantri MUDRA Yojana provides collateral-free loans for micro-enterprises for the adoption of cleantech solutions. These are the examples of few schemes that would help in driving the green growth in India.
Challenges
The challenges of transition to a green economy include weak management, increasing poverty, the dynamic political will to keep changing economic policies, economic dependency on conventional resources, particularly fossil fuels and increasing food insecurity, especially for developing and underdeveloped countries. This also includes the lack of access to the global competitive markets to meet the high-sustainability standards and severe vulnerability of the Least Developing Countries (LDCs) and developing nations. Moreover, these countries are also disproportionately facing the brunt of climate change. The transition to a green economy means a fundamental transformation and development of sustainable technological change. The developing countries face the constraints of resources for investing in sustainable practices, and economic disruptions associated with the replacement of fossil fuels, agriculture and mining with green energy alternatives. Moreover, there is a lack of infrastructure to support the adoption of green technologies and renewable energy grids.
This green growth transition should be inclusive and just in nature. It also involves the societal, organisational, political and economic endeavours of the governments along with the active participation from the government. There have also been debates regarding whether the green transition is applicable for poor and developing economies, it is only possible in case the green growth helps in combating poverty alleviation and overdependence on the agricultural economy. There are arguments that environmental pricing and regulation can impact consumer pricing negatively. The low-carbon transition is expensive as it is capital-intensive and requires advanced technology usage. Some of the fair tradeoffs between the growth policies and the green policies include the example of South Africa, and the measures include shifting away from environmentally harmful fertilisers in Malawi, and the promotion of biofuels in Mozambique among other measures.
Green growth is also being impeded by high-cost barriers as most of the developing countries are lacking in the field of wastewater management, energy efficiency and integrated waste resource management. The 2023-24 as well as the 2024-25 budget have emphasised on ‘energy transition’ and ‘green growth’ has fallen short of its resources. Secondly, though over the years, the Ministry of Renewable Energy budget has also risen, it has been more directed towards meeting energy demands than climate change mitigation. Thirdly, there is a lack of investment in India’s green energy finance sector which is one of the challenges for India’s green economy. The transition to a green economy means a fundamental transformation and development of sustainable technological change. The developing countries face the constraints of resources for investing in sustainable practices, and economic disruptions associated with the replacement of fossil fuels, agriculture and mining with green energy alternatives. Moreover, there is a lack of infrastructure to support the adoption of green technologies and renewable energy grids. These are the potential challenges for a developing nation like India. This is one of the challenges associated with the green taxation in India. So, this green growth transition should be inclusive and just in nature. It also involves the societal, organisational, political and economic endeavours of the governments along with their active participation.
The Way Forward
The green growth strategy in the domain of green skills would require various strategies at national, sub-national and local levels, including the development of pilot projects at the sectoral and local levels on green entrepreneurship, more R&D investment, green businesses and employment-intensive infrastructure. Some of the examples under the green jobs programme projects include renewable energy, for example, the promotion of solar power in their households, sustainable construction through the usage of local and recycled materials, exploitation of renewable energy, promotion of sustainable agriculture and green enterprises modelled on the training for green entrepreneurship in China and Kenya. India’s fishery sector can play an integral role in achieving a green economy which includes the promotion of sustainable fishing and responsible fishing. The transportation, energy as well as the agricultural sector can play a transformational role in the development and growth of the green economy in India. Multilateral Development Banks like the World Bank and IMF can potentially play an important role in supporting renewable energy projects in developing countries. Some other international efforts include the Technology Mechanism under UNFCCC, the Clean Development Mechanism and the Global Environmental Facility (GEF) which have objectives related to green tech transfer, innovation and collaborations.
India’s G20 Presidency is also focused on accelerating investments in sustainable lifestyle, energy transitions and investments in sustainable development, energy transitions and accelerating progress on the SDGs. The five pillars of the Green Development Fact under India’s G20 Presidency have been envisaged to include Lifestyle of Environment (LiFE), Circular Economy, Climate Finance and Accelerating Progress on SDGs, energy transitions and energy security. The developing economies across the world need to invest more proactively in the R&D aspect of green growth policies. India has been forging international partnerships in order to combat climate change, such as 2023 India-France Partnership, Technology Transfer and Innovation: Nettenergy and Shrike Energy.
The foreign investment in India’s green sectors such as renewable energy and EVs is one of the potential areas that India could leverage to forward its climate change goals. Last but not the least, India can also take example from the ASEAN region wherein a green taxonomy system with focus on sustainable trajectories has been developed. The RBI has taken some positive steps including the issuance of Rs. 16,000 crore worth of sovereign green bonds and expanding the resource pool by allowing the foreign investors for participation in future green government securities. The RBI should also take steps to understand a thorough assessment on the qualitative and quantitative impact on financial stability on account of climate change. Climate change education is one of the ways in which India can develop a policy at the intersection of education and climate change. To conclude, India needs to gradually shift its developmental policies to a more environment-centric approach.
By Sourishree Ghosh
Sourishree Ghosh is currently pursuing her undergraduate studies in political science from Jadavpur University, Kolkata. Her interests lie in India's Foreign Policy, China Studies and the Global South Discourse of IR. She is always up for any talk on international relations, public policy and sustainability!
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