1

Critical Elements for

An Inclusive and Pro-poor Green Economy

Introduction

A significant body of knowledge and literature has emerged in the area of green economy,

building on lessons learnt from the last 30 years of efforts towards sustainable development.

Within the UNDP, as evidenced at the UNDP Global Management meeting1, there is a

convergence of opinions on the definition of inclusive green growth which was defined as

“growth which embraces social, economic and environmental pillars and is promoted based on

principles of inclusiveness, equity, particularly gender equity and women’s empowerment, and

sustainability. It supports the alleviation of poverty through green job creation, sustainable

energy for all, low-carbon technologies; and promotion of sustainable urban living. It recognizes

the importance of and interplay between natural capital and social capital, equally important

assets that must be managed and invested in.” However, there is a significant gap in knowledge and evidence of “how” a green economy will

actually benefit the poor and contribute to increased social equity. Concerns have been expressed

by development partners, governments and civil society actors on the under-representation of

equity and social dimensions in the current debate on green economy. To-date, the intentions for

a green economy to be inclusive and pro-poor are implied rather than clearly defined.

It should therefore not be assumed that a “green economy will automatically lead to poverty

reduction and social equity. A green economy must explicitly pursue inclusiveness and poverty

reduction as a core objective and strategy, addressing fundamental drivers and factors that

interconnect environmental degradation, poverty and social inequity.

This paper identifies the critical elements for making green economy inclusive and pro-poor.

This paper is a synthesis of existing information and knowledge related to green economy within

and outside UNDP and is an input to UNDP’s approach to sustainable human development.

Drafted by Leisa Perch, UNDP International Policy Centre for Inclusive Growth, Seon-mi

Choi and Estefania Samper, UNDP Environment and Energy Group with supervision under

supervision by Selim Jahan, UNDP Director of Poverty Group and Veerle Vandeweerd, UNDP

Director of Environment and Energy Group

1 UNDP (2011), Global Management Meeting session report on greening human development report

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Table of Contents 1. Equity .................................................................................................................................................... 3

2. Social protection ................................................................................................................................... 5

3. Targeted Green and Inclusive Employment .......................................................................................... 7

4. Participation, Access and Local Solutions ........................................................................................... 11

4.1. Participation in the decision making process ............................................................................. 11

4.2. Community based institutions and local management systems ................................................ 11

4.3. Access to land and resource rights ............................................................................................. 12

4.4. Access to finance ......................................................................................................................... 13

5. Pro-poor environmental fiscal and financial tools .............................................................................. 15

6. Resilience and adaptive capacity ........................................................................................................ 17

7. Measuring progress on pro-poor and inclusive Green Economy ....................................................... 19

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1. Equity

To ensure the transformation towards green economy benefits the poorest and most vulnerable,

green economy should tackle drivers and fundamental factors of poverty and inequity. Green

economy must also address transitional costs by systematically promoting redistributive policies

ranging from generating decent and green jobs to ensuring poor people’s access to land, finance,

infrastructure, services and social protection. Equity concerns including gender equity should be

at the core of the green economy agenda across sectors.

Global inequality

We live in a world where top 20 percent of the population enjoys more than 70 percent of total

income and those in the bottom quintile gets only two percent of global income (using PPP-

adjusted exchange rates in 2007) 2. This extreme inequality at global, regional and national levels

makes us question the current development model which has exacerbated inequalities and

produced an alarming level of negative environmental externalities.

Economic equity

The recent report by UNICEF titled “Global inequality: beyond the bottom billion” shows that

developing countries with high inequality tend to grow more slowly. Inequality is also associated

with its negative impacts on social and health conditions and political instability. Income

distribution is equally a critical element for poverty reduction as economic growth. Income

inequality can offset significant gains made in health and education inequality leading to the

aggregate loss in human development3. It is critical that economic choices and investment

decisions are made with adequate consideration of their impacts on income distribution.

In addition to redistributive mechanisms, strategic investments in key sectors can also deliver

more inclusive and pro poor growth from the outset. Analysis from a number of sources suggest

that investments in growth in key sectors, such as agriculture, can be significant multipliers for

poverty reduction (UNDESA, 20114; Lin et al, 2009 and Ligon and Sadoulet, 2007

5),

Gender equity

Gender inequality has proved costly to growth (Klasen, 2006)6 and the benefits of growth still

remain out of the reach for a large percentage of women. Often, the poor have borne the largest

share of the burden of natural disasters, particularly women (UNFPA, 2009)7. Of the millions

allocated for climate change, relatively little has been spent on or allocated to women (Palitza,

2011). Women have a critical role in contributing to the development of a green economy and

2 UNICEF, 2011, Isabel Ortiz, Matthew Cummins, Global inequality: beyond the bottom billion (page 7)

3 UNDP (2011) Human Development Report: Chapter 2

4 UNDESA (2011). World Economic and Social Survey 2011: The Great Green Technological Transformation, Overview. Available

from http://www.un.org/en/development/desa/policy/wess/wess_current/2011wess_overview_en.pdf. Accessed on July 5th, 2011 5 Ligon, Ethan and Elisabeth Sadoulet (2007). 6 Klasen, Stephan (2006). ‘Pro Poor Growth and Gender Inequality’ in L Menkhoff (ed.), Pro-Poor Growth: Policy and Evidence.

Berlin, Duncker and Humblot. Accessed from<http://www2.vwl.wiso.uni-goettingen.de/ibero/papers/DB151.pdf> on 3 September 2010. 7 State of World Population, 2009. Facing a Changing World: Women, Population, and Climate’, UNFPA website,

<http://www.unfpa.org/swp/2009/en/pdf/EN_SOWP09.pdf>(accessed on 28 August 2010).

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not just as beneficiaries. Green innovation and investment must support women’s empowerment.

There is a great need to further strengthen women’s property rights, accessibility to capital and

natural assets and their participation in economic and investment decision-making processes.

Women’s access to technology and finance should be promoted and enabled, ensuring that

women are prioritized in small-scale technology development and distribution efforts.

Need for more explicit focus on equity

The world must transition from the unsustainable economic growth model to the economy that

serves the entire society and operates within ecological limits. Green economy has the potential

to lead to fundamental transformation of society in terms of its income distribution and poverty

as well as the labour market.

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2. Social protection

To realize a just transition towards green economy, social protection must be an integral part of

the green economy agenda. Given what we know about the structural factors which determine

and feed marginalization and exclusion, there is a need for innovative social protection

mechanisms and schemes that can reach the poorest and most vulnerable people in developing

countries, particularly those not presently covered by the formal social protection system.

As both a preventive and transformative mechanism for development, social protection is

important for delivering:

Freedom from want and hunger – reflected mostly in the context of poverty and hunger

and access to FOOD;

Access to school and learning including more recently functional literacy – reflected in

education, literacy and capabilities;

Access to health care and income – reflected in the life expectancy, reducing mortality

and morbidity, access to reproductive and other health services, environmental health and

capabilities;

Access to sustained income - through jobs, decent work and or income-generating

opportunities and access to finance and other support services; and

A safe and enabling environment – freedom from violence, the right to physical security

(Jenkins, 2011)8, access to housing and access to sanitation.

The UN’s Social Protection Floor initiative9 could provide a framework for the design of more

targeted social protection measures. A Social Protection Floor could consist of two main

elements that help to realize human rights:

• geographical and financial access to essential services such as water and sanitation,

health, and education; and

• a basic set of essential social transfers, in cash or in kind, to provide minimum income

security and access to essential services.

Social protection can greatly reduce possible negative impacts of green economy policies and

programmes on the poor and vulnerable segments of the population. For instance, in Indonesia,

after removing the fossil fuel subsidies, the government provided direct cash transfers to poor

citizens to ensure their adequate access to energy10. Social protection can also support workers,

enterprises and communities in their efforts to seize the opportunities offered by green economy

8 Jenkins, Rob (2011). Women, food security and peacebuilding: from gender essentialism to market fundamentalism. 50.50

Inclusive Democracy. Published on 28 June 2011. http://www.opendemocracy.net/5050/rob-jenkins/women-food-security-

andpeacebuilding-from-gender-essentialism-to-market-fundamenta. Accessed July 3rd, 2011. 9 www.ilo.org

10 OECD 2011, OECD Green Growth and Development Workshop

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by providing access to training and education in new green business skills and sustainable

livelihood options.

Given the increasing economic, social and environmental cost of natural hazards and shocks,

social protection must now also support risk reduction and reduce household fragility to external

shocks, particularly those which are environmental/natural. Well-designed social security

schemes could play an important role in mitigating the vulnerability of the poor who will be

increasingly exposed to various shocks and stresses including impacts of climate change11

. In

this context, the concept of Adaptive Social Protection is particularly relevant to consider in

designing social protection schemes. Adaptive Social Protection refers to a series of measures

which aim to build resilience of the poorest and most vulnerable people to weather-related

shocksby combining elements of social protection, disaster risk reduction and climate change in

programmes and projects12. It leverages the transformative potential of social protection, to prevent and

mitigate frequent negative shocks on poor and vulnerable households. For instance, the Government of

Sri Lanka has adopted several policy measures aimed at assisting disaster affected populations

including various cash grants, cash transfer, (ACEDRR, 2007: 6) as well as the provision of

permanent shelter with electricity, running water, and sanitation and drainage facilities.

Sustainable consumption and production may also be strengthened from social protection,

particularly transfers which may enable the poor to move towards greener forms of production

and consumption. It can also serve to recognize and reward environmental stewardship and

actions. The proposed Bolsa Verde of Brazil is an example of how such schemes could work in

reality. The Bolsa Verde13

targets families already part of the Bolsa Familia programming,

providing additional support for the conservation of environmental assets, through an additional

cash transfer which would be paid every 3 months. It targets those Bolsa Familia recipients who

live and/or work in national forests, areas designated for sustainable extractive activities and

other areas involved in land reform projects.

11

ILO 2011, Social security for social justice and a fair globalization 12 www.ids.ac.uk/download.cfm?file=wp345.pdf

13 Ministério do Desenvolvimento Social e Combate à Fome(2011). Plano Brasil Sem Miseria. Government of Brazil

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3. Targeted Green and Inclusive Employment

Targeted investments are required to maximize benefits for poverty reduction and social equity.

The investments are critically needed for the poor and marginalized particularly in developing

countries including those affected by conflicts and disasters. Key economic sectors with high

poverty reduction potential especially with pro-poor and decent job creation must be targeted.

Targeted investments in developing and least developed countries

Unemployment, especially among youth, has been a persistent and long-term challenge to

eveloping countries in their efforts for poverty reduction. The 2008 UN Green Jobs report

provides a positive outlook for increased job creation in green sectors for instance estimating that

the possible total employment for renewables alone by 2030 is 20 million jobs. However, it is not

evident if these jobs will actually be created for the poor and marginalized in developing

countries and will provide opportunities for those who are further discriminated against in the

formal labour markets. The uneven geographical distribution of investment in clean energy is

alarming to the development community. 90 percent of the public and private investments in the

clean energy sector worldwide from 2009-2010 were made in G20 countries. The uneven

balance of investments is also apparent within countries, as more funds are directed to urban

regions rather than poorer rural areas. Public-private partnerships will be critical to creating an

enabling environment - policies and regulatory frameworks - to attract quality private

investment and financing to developing countries, not only major emerging economie.

Investment must be spread more evenly around the world, and within countries, in order to reach

all sectors of society and economy, including the poor. Such investment is key for employment

and sustained decent employment which is, in turn, critical for achieving MDG 1.

Targeting key sectors with highest poverty reduction potential

Public and private investments need to be targeted to priority sectors that have the biggest

potential for poverty reduction in poor countries. Agriculture, fishing and forestry are for

instance, the sectors that the poor depend on heavily for their livelihoods and income generation

especially in rural areas. Agriculture in particular has been proven to be an effective multiplier

for poverty reduction. Targeting agriculture, particularly small holder farmers, allows policy to

deliver services such as access to food, income, security and shelter and it also allows for the

targeting of marginalized groups such as women. Sustainable agriculture can offer agricultural

diversification and new income generation opportunities benefiting from growing world demand

for organic products to small holder farmers in developing countries.

Overall, there is a great potential for employment-generating environmental activities relevant

for enhancing access to public environmental goods and services, as well as for improving the

productive livelihoods of the poor. A number of the activities to support the continued

functioning of ecosystems (e.g. removing invasive species, controlling soil erosion, watershed

management) are highly labour intensive and have the potential to create employment for the

poor. In urban areas, green business opportunities exist in solid waste management and

recycling. In all these targeted sectors, private sector including small and micro enterprises has a

crucial role to play and clear government policies and adequate financial incentives are needed to

stimulate private sector engagement and public-private partnership.

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Employment creation for the poor

Governments should take the lead in making these investments targeting the poor, including

through public employment programmes. Employment creation for the poor should be an

integral part of poverty reduction strategies and governments have a role to play when markets

are dysfunctional in capturing the value of ecosystem services and driving investments in

sustainable management of ecosystems. These investments can better contribute to local job

creation and income generation when they maximize local content and local knowledge. Micro

and small enterprises also generate employment and collectively represent a key driver of small

scale production and small-scale innovation.

Youth are a key constituency for targeted employment creation efforts. Their under and

unemployment undermines the he sustainability of growth. It limits the productive and

innovation capacity of developing countries. As youth also make up a significant percentage of

those who are displaced, affected by war, and who fall below the poverty line, specific attention

must be given to green jobs which are accessible to youth.

Women make up a significant proportion who earn a living from the informal economy. A green

economy should provide opportunities for women’s economic empowerment and security and in

particular women’s green business.

Inclusive and decent jobs for the poor

Investments in green job creation must integrate the equitable and inclusive components to

protect the most vulnerable and ensure decent jobs for all. Decent work is not automatically

created by jobs in green sectors. Many of these jobs are dirty, dangerous and difficult and often

precarious and low-paid. Policy makers and industries in green sectors must weave equity,

inclusiveness and decent work into green job initiatives

Agriculture remains an important source of employment also at the global level. According to

CIA (201114

), labour force participation was highest in services (41.9%), agriculture (36.6%) and

industry (21.5%). Opportunities therefore exist to also improve social and environmental

sustainability of the agriculture sector and other connected sectors.

Inclusive and decent jobs must also provide opportunities for persons living with HIV/AIDS,

persons with disabilities and indigenous persons who respectively represent 33.3 million persons

(2009 figures from UNAIDS15

); 650 million (2007 figures16

); and a 300 million 17

at the global

level Currently, 82 % of disabled people live below the poverty line (UN).18

Collectively, these

three groups of marginalized and excluded peoples number almost one billion. A green

economy which does not deliver for these groups specifically as well as for women will deny

14

https://www.cia.gov/library/publications/the-world-factbook/geos/xx.html 15

http://www.avert.org/worldstats.htm 16

UN Nations Convention on Rights of Persons with Disabilities, 2007 from http://www.realising-potential.org/stakeholder-

factbox/disabled-people-worldwide/#fnref1 17

http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTSOCIALDEVELOPMENT/EXTINDPEOPLE/0,,menuPK:40780

8~pagePK:149018~piPK:149093~theSitePK:407802,00.html 18 http://www.fidida.fi/english/MDG/

9

many households opportunities for development, essential freedoms and moreover limit the

capacity for collective action.

Need to develop new skills for green and decent jobs

Investment to create new green jobs should be accompanied by support for training and skill

development. Poor people often lack access to education and training to acquire new skills

required for green and decent jobs. To address the growing demand for skilled labour in the

green sectors, there will be increasing shift in employment patterns at the global and national

levels. Labour market policies must support the poor and marginalized groups to acquire

adequate skills for the new jobs and provide social protections to ensure negative impacts of

these labour market shifts through income protection and educational support.

Importantly, a green economy must define how to provide sources of employment and income

for the millions of displaced persons worldwide, many stateless due to onflict and or disasters. In

Africa alone, displaced persons and refugees number nearly 15 million. Globally, there are over

30 million displaced persons or peoples of concern to the UNHCR, a significant number of

whom are women and persons under 18 years of age19

. For them, the normal process of job

creation does not apply and a lack of attention to their specific needs would result in new green

growth which is not inclusive.

Green jobs for conflict prevention and recovery

The toll of conflicts in Africa over a fifteen year period (1990 and 2005) is estimated to have cost

USD 300 billion, equivalent to the ODA received during that period (Muggah, 2007:3)20

; many

of which have been linked, either directly or indirectly, to issues of access to resources such as

land and livelihoods (UN, 2009: 16). The transition from conflict to peace poses new challenges

to such countries, many of which are characterized as low income and especially vulnerable in

the recovery process (UNDP BCPR 2008).21

Employment creation is seen as a crucial tool to re-direct the energies of communities affected

by war, whether displaced people or ex-combatants, to avoid social unrest, reduce poverty and

sustain peace. More than 250 million Africans (over a quarter of the region’s population) live in

countries where natural resources account for more than 80% of exports. These countries’

growth is likely to be heavily dependent on the exploitation of natural resources for the short to

medium-term and placing greater pressure on the sustainability of such growth for development

as well as environmental sustainability. Many of the conflicts have been deemed to have been

linked, in part, to tensions and conflicts over natural resources and conflicts more generally are

expected to escalate as environmental resources become scarcer and more degraded.

Accordingly, the creation and sustained generation of green jobs in post-conflict environments

must employ conflict-sensitive approaches and mechanisms and reduce the potential likelihood

19 UNHCR (2011). Populations of concern to UNHCR – 2011 Update. Sourced from http://www.unhcr.org/4cd91dc29.html on

September 8th, 2011. 20

Muggah, Robert (2007). Armed Violence in Africa: Reflections on the Cost of Crime and Conflict. Conference Background

Paper. UNDP, Swiss Confederation and the Government of the Republic of Kenya. Accessed from

http://www.undp.org/cpr/documents/armed_violence/AV_crime_conflict.pdf on June 22nd, 2011.

21 UNDP (2008) Bureau for Crisis Prevention and Recovery (BCPR) Report:

http://www.undp.org/cpr/content/economic_recovery/PCERreport.pdf, pp. 3

10

for a return to conflict due to increasing conflict and competition over resources. According to

UNDP’s BCPR (2008) there were 35 countries (almost 20% of UN member states) in a post-

conflict phase. The UN Policy on Post-conflict Employment, Income-generation and Re-

integration (200922

) also points to the need for post-conflict economies to diversify away from

natural resource exports towards labour-intensive exports as part of a broader strategy for

sustained employment and income.

22

UN Policy for Post-Conflict Employment (2009): http://www.ilo.org/integration/resources/pubs/lang--

en/WCMS_107815/index.htm

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4. Participation, Access and Local Solutions

4.1.Participation in the decision making process

Participation of the poor in the development planning and investment decision making process is

essential for an inclusive green economy.

Countries need to adopt participatory and accountability mechanisms that foster inclusion for all:

the poor, women, indigenous peoples, people with disabilities, people living with HIV, migrants,

and other marginalized peoples. The state and the private sector have important roles to play in

the process of growth, but the active participation of households and individuals, local actors and

informal networks are a key ingredient for long lasting sustainable transformation.

Growth, equity and sustainability are compatible if the poor actively participate and define their

own social futures. It is clear that participation and empowerment of the poor and marginalized

will have a better outcome in securing long lasting environmental gains. In a review of multi-

country studies the 2011 HDR found that women’s participation in decision making is correlated

positively with environmental awareness, creation of protected land areas, less deforestation, and

better quality environmental management. More importantly, women’s capacity to participate

and benefit directly from green growth will be influenced by their access to secure tenure,

education, health care and skills. Globally, women’s access to tenure, education, non-agriculture

employment and health care still falls sharply below that of women and the desirable levels for

productivity and development.

Local actors must be supported to enhance their communication and organizing skills to

advocate for themselves. Multi-stakeholder dialogues are effective in integrating local voices

into national and international policy making processes. Knowledge sharing, demonstration and

media outreach are also important actions to reinforce local capacity and representation in the

relevant legal, financial and institutional systems.

4.2. Community based institutions and local management systems

Local solutions must be fully incorporated into green economy policies and programmes to

harness the untapped potential of local actors including farmers, households, communities and

local businesses.

Local action—action that reflects and supports the demands, perspectives, and commitment of

local actors—is critical to sustainably managing the environment to reduce poverty and achieve

the Millennium Development Goals (MDGs)23

.

There are many examples of natural resource management activities that successfully contributed

to environmental sustainability and income and job generation. These include among others

micro-watershed management, local ecotourism enterprises, community forestry, community-

23

UNDP (2010), Local Capacity Strategy: enabling action for the environment and sustainable development

12

based coastal zone fisheries management and community based rural energy development

through clean biomass and off-grid renewable energy. With the success of such initiatives,

development partners are investing more in decentralized development programmes including in

the area of natural resource management. For instance, community driven development programs

now account for an important part of new IDA and IBRD investment lending each year.

However, most of these successful cases of community based natural resource management

(CBNRM) systems are limited to a small scale and are not systematically adopted in the main

development planning process. Green economy policies need to invest in developing capacity of

community-driven institutions that can help poor and marginalized people access finance,

insurance, education, health and social protection. There also has to be support for providing the

right enabling policy and financial environment for scaling up local best practice.

Examples:

The Self-Employed Women’s Association in India has put in place a system in which poor

women in the informal sector get organized, receive training and earn better wages by providing

communities with electricity through renewable energy sources24.

4.3. Access to land and resource rights

Clear land and property rights are critical to ensure poor people are not marginalized and lose

their access and rights to use land and resources. Secure resource rights also provide important

incentive for local ecosystem management and sustainability of local initiatives.

Rural households without access to land are often the poorest segment of the population. In quite

a number of developing countries, landless households represent a significant part of the rural

population. Some policies and programmes towards green economy may increase global demand

for land and other resources which will in turn exert more pressure on the already constrained

resource base of the landless rural poor. The case of biofuels clearly illustrates the potential

adverse impacts on the rural poor. Biofuel production is often capital intensive and tends to

benefit large firms rather than small holder farms. Biofuels demand can also increase

competition for resources such as land and water on which the rural poor heavily depend for their

livelihoods and health.

Public policies and institutions must serve as guardians of rights and lead protagonists in efforts

to strengthen tenure systems which could provide more security for the rural poor and vulnerable

groups. At the same time, affected local actors must be given adequate compensation for any

losses and damage to their assets and livelihoods. Development partners must support

government efforts in ensuring the establishment of a legal basis and financial incentives for

local actors to invest in sustainable natural resource management for local development.

24

Green economy coalition, 2010, Green, fair and productive: how the 2012 Rio conference can

move the world towards sustainability

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4.4. Access to finance

The design and operation of the global and national sources of environmental and climate

finance must ensure these sources of finance benefit local communities on the ground and

enhance local capacity to access these resources. Effective and innovative local financing

mechanisms engaging the poor men and women need to be scaled up.

Global to local

Many local natural resource management efforts have benefited from grants from development

partners and government programmes. However, such financing has been limited in scope,

predictability and has often been provided on a project by project basis without sufficient

programmatic support.

The global community has seen a proliferation of various sources of environmental finance

ranging from global environment trust funds, multilateral and bilateral funds, UNFCCC related

funds and market-based and innovative sources of fund. The coming years are likely to see a

continued increase in the total number of international public climate funds.

A local component could be incorporated in the design and operation of the global and national

sources of environmental finance to ensure these sources of finance benefit local communities on

the ground. Development of adequate financial infrastructure is important to facilitate the

transfer of resources to the local level. Economic incentives can be designed for banks, donors

and businesses to invest at the local level. International and national support is needed to make

local actors aware of the opportunities of increasingly available international public finance.

Accountability

Equally important is support for capacity development to fulfill mandatory financial,

accountability and reporting requirements. Local actors need capacity development support for

financial management, technological advice and skills transfer. Empowered local actors can

access these resources and use them to scale up and expand their reach and fulfill governance

requirements. With effective and transparent accountability system, local communities will be

able to benefit from internationally available climate and environmental financing and apply

these resources to scale up delivery of their best practices and to ensure their long-term

sustainability.

Microfinance

Microfinance has been one of the more examined delivery mechanisms for engaging the poor.

Microfinance can be loans, savings, money transfer services and micro-insurance. The Grameen

Bank example is one of the better known private sector models and mechanisms, credited with

significant results in Asia particularly effective in engaging women and improving their income-

generation prospects and more recently enabling access to energy and technology.

Microfinance can also help enhance the poor’s resilience to environmental disasters. Micro-

finance institutions, for instance, have also proved to be an important source of credit for

14

reconstruction and rehabilitation after disasters25

. Micro-insurance has been found essential in

delivering development results for families exposed to disasters such as floods and tsunamis.

Microfinance has been growing with the entry of commercial banks into the market. This could

potentially increase the amount of credit available to local natural resource management,

renewable energy development and risk management. This could help microfinance meet the

needs of successful local initiatives as they scale up.

25

ACEDRR (2007). The Role of Microfinance and Micro-insurance in Disaster Management. Research Brief No.2. Advanced

Centre for Enabling Disaster Risk Reduction. www.preventionweb.net/files/20073_researchbrief2roleofmicrofinanceind.pdf

Grameen Shakti- Bangladesh

A combination of renewable energy technology and micro-credit allows rural communities

in Bangladesh to benefit from off-grid electricity. Currently, Grameen Shakti installs 7,000

solar home units per month. In addition to solar energy systems renewable programs

including wind, biogas, organic fertilizer, and smokeless cooking stoves have created new

jobs. Recognizing that women are greatly affected by conventional energy uses and that

they have a part to play innovation energy systems Grameen Shakti provides training and

opportunities to make extra income. Improved Cooking Stoves (ICS) reduce the amount of

energy consumed in the home, improve indoor air quality, and provide jobs for women. To

date 600 young women have been trained to make, sell and repair ICSs. Biogas technology

offers a sustainable way to manage farm waste through the creation of an alternative energy

source to replace natural gas while providing extra income to farmers who produce Biogas.

http://www.gshakti.org/index.php

GS Plans to create 100,000 female entrepreneurs by 2015

http://www.socialearth.org/grameen-shakti-powering-bangladesh%E2%80%99s-rural-poor-

with-renewable-energy

15

5. Pro-poor environmental fiscal and financial tools

Fiscal and financial tools need to be designed to simultaneously achieve revenue generation,

environmental improvement and poverty reduction. Adequate capacity building support must be

provided to ensure the success and sustainability of various financial tools as mechanisms to

finance pro-poor and inclusive green economy.

Fiscal mechanisms provide financial incentives and disincentives towards environmentally and

socially sustainable development outcomes. Taxation and pricing measures need to be designed

and implemented to simultaneously achieve revenue generation, environmental improvement and

poverty reduction.

Assessment of equity and poverty impacts

Without adequate assessment of distributional impacts and the stakeholder analysis, fiscal

mechanisms could restrict access to resources and negatively affect job security for low income

households. For instance, water or diesel fuel pricing could drive the market price too high for

equal access. It is thus critical that fiscal mechanisms under the green economy agenda

systematically assess the equity and poverty impacts of such measures and identify who is

directly and indirectly affected by the measures.

Compensation measures and budget allocation for the poor

Fiscal mechanisms can also raise or free up public spending on environmentally polluting and

damaging activities and redirect revenues to social and sustainable livelihood investments. How

this freed up revenue is used is critical. These resources can be allocated to compensate the

poorest and those most affected by such measures. For any fiscal mechanisms, adequate

compensation schemes must be deployed to offset negative impacts on household income

distribution. For instance, the phasing out of certain subsidies can be accompanied by financial

compensation for affected workers and households. Targeted compensation policies need to be

complemented by other instruments where needed such as free school meals for children,

reduced fees for education or health services or subsidized transport26

. OECD Tools for

delivering green growth27

suggests possible strategies to compensate low-income groups

including lump sum compensation, calculated on the basis of average tax payments per

household in the form of cash transfers or credits against income tax; income-tested

compensation and reduction of other taxes to offset the regressive impact of a green tax. The

freed up resources can also be invested in the provision of essential services to the poor and

training in new green jobs.

Capacity building for financial tools

UNDP’s review of over 100 pro-poor environmental finance case studies28

shows that while

financial tools are promising mechanisms to finance pro-poor and inclusive green economy,

significant capacity building is required for any successful finance tools, especially in developing

countries. Various finance tools including taxes, fees, loans, subsidies and market based

26

Issue Management Group, Environment Management Group, 2011, draft report part 6 27

OECD 2011, Tools for delivering green growth 28

Draft note, nternational Guidebook of Environmental Finance Tools, UNDP 2011

16

mechanisms require initial capacity building investments to support accessible financial

institutions, strong management structures, proven supply chains and mature markets to provide

viable social, environmental and financial return. NGO, development agency, and government

support are crucial elements during the early phase. From growing a supply chain to building an

environmental trust fund, complex support structures, financial literacy and significant

stakeholder buy-in should be established before financial tools are introduced. Once the enabling

infrastructure is in place, financial risk is reduced, investment becomes more attractive, the

private sector will respond and the green economy will grow.

Finance tools can create beneficial social, environmental and economic impacts, yet each tool

presents its own unique challenges, may require years to execute and relies on grants and

government subsidies to build capacity and reduce risk. Understanding of this reality is

fundamental for success of any finance tool. Pro-poor credit schemes coupled with supply chain

development can promote renewable energy, foster local economies and reduce GHG emissions.

Payment for Ecosystem Services (PES), linked to stakeholder engagement and support, can

prevent deforestation, generate carbon revenue and build sustainable livelihoods. Value chain

finance tied to financial literacy education can fund the “cashless gap” between seed and harvest,

allowing farmers to access organic markets and forgo fossil fuel inputs like fertilizers and

pesticides. When financial tools are applied successfully, green economies can emerge.

17

6. Resilience and adaptive capacity

Enhancing the poor’s resilience to associated impacts of climate change and other environmental

and economic shocks must be an integral part of development policies and programmes.

Adaptive capacity of the poor to climate change should receive explicit attention as climate

change may cause considerable loss and damage and health risks. Such capacity must be built at

a system level and at a household level.

Natural resource management for social and economic resilience

There are many examples of national and local initiatives that have provided multiple benefits of

job creation, ecosystem restoration and communities’ resilience. For example, public works

schemes such as the National Rural Employment Guarantee Scheme of India, Ethiopia’s PSNP

and South Africa’s Expanded Public Works Programme (EPWP) have provided employment

opportunities and restored ecosystems. Many local ecosystem management initiatives have also

contributed to help poor families adapt to climate change and build their ecological, social and

economic resilience. New livelihood activities based on sustainable ecosystem management can

expand the economic opportunities of the households involved and allow them to diversity their

income sources and thereby increase their resilience to economic and environmental shocks.

Governments will need to guide, incentivize and finance investment that can provide these

multiple development benefits including the poor’s resilience and adaptive capacity. Proactive

support to enhance the poor’s adaptive capacity can be given including crop management, soil

moisture conservation, improved groundwater management, reforestation, and water harvesting

structures. Innovative public and private partnerships are also needed to support the development

of risk management schemes for the poor such as micro-insurance and weather index-based

insurance.

Resilient infrastructure

Another critical entry point for resilience will be the construction sector. The construction sector

is a driver for growth in many countries including China. It is also a key driver of economic

recovery for post-disaster and post-conflict economies as evidenced in analysis of the flow of

credit and investment in Indonesia’s Aceh province in the years following the 2004 tsunami.29

.

According to a study, conducted by market research firms Global Construction Perspectives and

Oxford Economics, 97.7 trillion USD is forecasted to be spent on construction globally during

the next decade and the sector expected to expand by over 5% on average annually, outpacing

global GDP growth30. The resulting demand for natural resources and other raw materials

including steel, copper and aluminium will be source of growth for many mineral-dependent

economies, many of which are in Africa, and potentially also a source of environmental

29

http://www.hks.harvard.edu/fs/drodrik/Growth%20diagnostics%20papers/Aceh%20Growth%20

Diagnostic_english.pdf 30

http://www.globalconstruction2020.com/downloadable/download/link/id/MC40OTE3MDkwMCAxMzE1NTM3ODQzMTY5OT

E3NzgyNTY,/

18

degradation and further negative externalities. At the same time, failures in construction at a

systemic level have proven costly31

as seen in the case of Haiti. Identifying a number of

conclusions from a study funded by the OAS on construction in Haiti, pre-earthquake, the link

between the quality and pervasiveness of poor-quality infrastructure in Haiti and its legacy of

grinding poverty was also noted. Building resilience must therefore also focus on infrastructure

itself and modes of construction which help social resilience and are also important economic

drivers of development and growth. Urgent attention to building codes, supported by regulations

and fiscal incentives, will be important for maintaining human and environmental sustainability.

31 http://articles.cnn.com/2010-01-13/world/haiti.construction_1_building-code-haiti-earthquake?_s=PM:WORLD

19

7. Measuring progress on pro-poor and inclusive Green Economy

Further analysis is needed to develop globally agreed ways to measure the progress towards

poverty reduction, environmental sustainability and social equity.

It is important to measure whether policies and programmes for an inclusive and pro-poor green

economy actually delivered results both on environmental sustainability and social equity.

Further analysis and research is needed on identifying the limited number of aggregate indicators

that can measure the progress countries have made in their just transition towards inclusive green

economy. Significant efforts are required to reflect the linkages between economic growth, social

equity and environmental sustainability. There are some global initiatives to go beyond GDP as

measurement of growth and development such as the Wealth Accounting and Valuation of

Ecosystem Services with a focus on integrating the value of ecosystem services in national

accounting systems. However, what is missing on this front is social equity dimension.

Measuring development at a national economy level needs to reflect the level of equity including

the distribution efficiency of economic growth. This must build on existing work on aggregate

measures of sustainability such as World Bank’s adjusted net savings (ANS) and the Integrated

Environmental and Economic Accounting (SEEA) of the Statistics Division of DESA as well as

measures of human development and human well-being such as human development index

(HDI), inequality adjusted HDI and Social Protection Index32

.

Monitoring the impact on the marginalized

Additionally, indicators and measurement of the quality of impact of green and inclusive growth

i.e. its inclusiveness and poverty reduction impact, must support the identification and

monitoring of the millions who comprise the major groups who have been broadly and often

systematically marginalized: including Indigenous Peoples, Persons with Disabilities, Persons

Living with HIV and AIDS, Displaced Persons and refugees.

Measuring and reviewing progress for adaptive policy making and accountability

In addition, efforts to measure and monitor progress to green growth must also undertake to

measure its sustainability. As the economy, society and environment continue to change, green

and inclusive strategies need to constantly be adjusted based on accurate measurement and

review of progress. In this context, the new calls for “adaptive” policy making which is flexible

and informed by new and emerging information takes on greater resonance.

Accountability mechanisms, responsibility and safeguard mechanisms, particularly those geared

to accounting for both social costs and gains will be key structural elements and mechanisms for

sustaining and securing green and inclusive growth. Ensuring that green growth strategies

consider trade-offs and negative consequences for the poor will require the consistent application

of tools such as poverty and social impact analysis (PSIA) 33

.

32

http://www.adb.org/documents/conference/enhancing-social-protection/proceedings-enhancing-social-

protection.pdf 33

Poverty and Social Impact Analysis (PSIA), has been used by the World Bank, UNDP, DFID, GTZ and other development

partners, for evaluating the distributional impacts of policy reforms around the world. Well over 200 PSIAs have been conducted in at least 70 countries. They can be found at:: http://content.undp.org/go/newsroom/publications/poverty-reduction/poverty-

website/psia/crisis-project/caribbean-synthesis-article.en.