Our last opportunity to put the world economy on a sustainable path

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In a nutshell

They both indicate that the current economic recovery from the global recession is inherently unsustainable.

In 2008, the world was confronted with multiple crises—fuel, food and financial—and by December the result was the worst economic recession since the Great Depression of the 1930s. Overcoming these crises required a package of policy measures similar to Roosevelt’s New Deal, but at the global scale and embracing a wider and greener vision.

My book, A Global Green New Deal, offers a range of policy prescriptions to green the economic recovery, which will also reduce threats to the inherent stability of the world economy.

Meeting the short-term challenge of reviving the global economy need not mean sacrificing long-term economic and environmental sustainability. A Global Green New Deal (GGND) is a comprehensive policy strategy for ensuring a lasting world economic recovery.

Reviving growth and creating jobs should be essential objectives, but policies should also aim to reduce carbon dependency, protect ecosystems and water resources, and alleviate poverty. Otherwise, economic recovery today will do little to avoid economic and environmental crises in the future.

“A global green recovery strategy of reducing carbon dependency and improving energy security may help to control both the large current account deficits incurred by major oil-importing economies, such as the United States, and to reduce the trade surpluses of fossil fuel exporting economies.”

The wide angle

This book is a substantial revision and expansion of my influential February 2009 report for the UN Environment Programme.

In October 2008, the global economy was reeling from a spate of shocks and crises—food, fuel and finance. It was on the verge of plunging into the worst global recession, the likes of which the world had not seen since the 1930s. The governments of the 20 largest economies of the world, the Group of 20 (G20), were willing to commit significant fiscal stimulus packages—which over the next year totaled to more than $3 trillion—towards economic recovery.

But the question begged to be asked: Would the post-recovery global economy be sustainable, or would it be prone to the very economic and environmental risks and weaknesses that had led to this latest recession?

This question is even more critical today, given our stalled and unstable world economy: Do we want the recovery simply to revive the existing “brown” world economy and its business-as-usual growth, or do we want to reorient the global recovery towards a “greener” economy that will allow it to avoid future economic and environmental pitfalls?

The GGND makes the case for the latter approach. The multiple economic and environmental crises threatening the world economy today demand the same kind of initiative that was shown by Roosevelt’s New Deal in the 1930s in the United States—but at the global scale and embracing a wider vision.

The main aim of A Global Green New Deal is to articulate this vision as well as the mixture of policy actions for creating a more sustainable recovery and world economy. The book is divided into four parts.

Part 1 puts forward the case why a GGND is essential to the sustainability of the global economy. Simply revitalizing the world economy today will do little to address the imminent threats posed by climate change, energy insecurity, growing freshwater scarcity, deteriorating ecosystems and, above all, worsening global poverty. On the other hand, if combating these threats is seen as the main objective of a global economic recovery, then we can begin formulating policies that can produce a more lasting and equitable recovery.

Parts 2 and 3 provide an overview of the key national and global policies, respectively, that are necessary for a GGND. This recommends an expenditure of at least 1% global GDP on green initiatives over the next several years. G20 countries should prioritize energy efficiency and clean energy investments, and developing countries should aim to improve agricultural productivity, freshwater management and sanitation. But increased public and private investment cannot do this alone. Such investments should be accompanied by a swath of domestic and international policies—from removing perverse agricultural, fishing and energy subsidies to taxing or trading carbon emissions, instigating tax credits for low-pollution cars and other clean-energy innovations, financing the transfer of green technologies to developing countries and creating a global carbon market through climate change negotiations.

Part 4 looks to the future, and discusses the wider implications for restructuring the world economy towards “greener” development. Important additional issues are explored, such as how green policies can help address structural imbalances in the world economy by reducing chronic deficits, inflation and debt. It is also argued that one of the advantages of a GGND is that it will help economies worldwide develop and enhance an environmental tax base for sustaining a healthy and efficient green economy of the future. Finally, the relationship between innovation policies, pricing and regulatory reform and long-term development of clean energy sectors is examined.

September 6, 2010

A close-up

Many observers of economic policy enacted during the 2008-9 recession will have noted that some governments included many investments in energy efficiency, clean energy, waste management and other environmental improvements as part of their fiscal stimulus efforts. Some people would argue that such measures, popularly referred to as “green stimulus,” were an important step in initiating a global green recovery.

Unfortunately, such a perception is misleading—the book’s Chapter 1 explains.

It is true that a unique feature of the global policy response to the 2008-9 recession is that, as part of their efforts to boost aggregate demand and growth, some governments adopted expansionary policies that also incorporated a sizable “green fiscal” component. South Korea and China devoted large chunks of their financial stimuli to green projects. The US included a sizable green fiscal component as well. By July 2009, over $460 billion had been spent globally by governments on green measures, and currently, the total is over $520 billion.

Although the total amount spent on green stimulus seems impressive, and is a promising start towards a GGND, it is not sufficient to launch a global green recovery.

First, only a handful of economies—almost exclusively members of the G20—devoted a significant chunk of their total fiscal spending to green stimulus; most were cautious about making low-carbon and other environmental investments during a recession, and some did not implement any green stimulus measures at all.

Second, fossil fuel subsidies and other market distortions, as well as the lack of effective environmental pricing policies and regulations, will diminish the impacts of G20 green stimulus investments on long-term investment and job creation in green sectors. Without correcting existing market and policy distortions that under-price the use of natural resources, contribute to environmental degradation, and worsen carbon dependency, public investments to stimulate clean energy and other green sectors in the economy will be short lived. The failure to implement and coordinate green stimulus measures across all G20 economies also limits their effectiveness in “greening” the global economy.

Finally, the G20 has devoted less effort to assisting developing economies that have faced worsening poverty and environmental degradation as a result of the global recession. Nor has the G20 taken a leadership role in facilitating negotiations towards a new global climate change agreement to replace the Kyoto Treaty that will expire in 2012.

As argued in Chapter 11, by failing to adopt a comprehensive GGND strategy the G20 and the world economy is also missing the opportunity to address global structural imbalances and chronic debt. A global green recovery strategy of reducing carbon dependency and improving energy security may help to control both the large current account deficits incurred by major oil-importing economies, such as the United States, and to reduce the trade surpluses of fossil fuel exporting economies. Increased clean energy investments from domestic and overseas sources of financing would also reduce the “savings glut” of Asian and other emerging market economies, and help them shift from labor-intensive export goods to skill, capital and technology-intensive production.

“Fossil fuel subsidies and other market distortions, as well as the lack of effective environmental pricing policies and regulations, will diminish the impacts of G20 green stimulus investments on long-term investment and job creation in green sectors.”


Overall, this book is the culmination of over twenty-five years of thinking about “greening” modern economies. And the subtitle, Rethinking the Economic Recovery, is in some respects its most important message.

In 1989, along with David Pearce and Anil Markandya, I authored Blueprint for a Green Economy, which presented, for the first time, practical policy measures for “greening” modern economies and putting them on a path to sustainable development.

Since then, some of these policy measures have been implemented. Most have been ignored, however. But a Global Green New Deal may be our last opportunity to put the world economy on a truly sustainable path.

What is urgently required is a new economic development model based on reducing environmental harm and scarcities, improving the livelihoods of the world’s poorest, training workers for twenty-first century skills and employment opportunities, and reducing the carbon dependency of the global economy.

The book demonstrates that there is not necessarily a tradeoff between policies to improve the environment and instigating a successful and lasting world economic recovery. To the contrary, it is necessary to reduce carbon dependency and ecological threats not just because of environmental concerns but because this is the correct—and only—way to reinvigorate the economy on a more sustained basis.

It is still not too late for the G20 and the international community to rethink the economic recovery, to enhance global climate change initiatives and negotiations, improve energy security, phase out fossil fuel subsidies, and reduce the economic vulnerability of the world’s poor. But we may not have another twenty-five years to wait.

© 2010 Edward Barbier
Edward B. Barbier A Global Green New Deal: Rethinking the Economic Recovery Cambridge University Press 322 pages, 9 x 6 inches ISBN 978 0521132022 ISBN 978 0521763097

Edward B. Barbier is the John S Bugas Professor of Economics at the University of Wyoming. He has worked for over 25 years at the interface between economics and ecology, and served as a consultant and policy analyst for a variety of national, international and non-governmental agencies, including many UN organizations and the World Bank. Professor Barbier has authored over 150 peer-reviewed articles and chapters, is on the editorial boards of several leading economics and natural science journals, and appears in the 4th edition of Who’s Who in Economics. Among the nineteen books he has written or edited are Blueprint for a Green Economy (with David Pearce and Anil Markandya, 1989), Natural Resources and Economic Development (2005), and A Global Green New Deal (2010), featured in his Rorotoko interview.

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September 6, 2010