The scope for ‘green’ growth and a new technological revolution
Alex Bowen,
Grantham Research Institute on Climate Change and the Environment, LSE
CAGE/CCCEP workshop, 25 January 2011
‘Green’ growth: necessity
• Business as usual
• Costly
• Risky
• Unsustainable
• Growth still necessary
• Poverty alleviation
• Politics
Change in UK emission intensity required to meet 2050 target
Emission intensity
Country YearCO2 per head
(tCO2)GDP per head (Intl$ppp2005)
CO2 emissions/energy
use (tCO2/toe)
Energy use/GDP (toe/Intl$ppp2005)
x 10^6Population (millions)
United Kingdom 1998 9.2 27,708 2.4 137.1 58.52007 8.7 34,206 2.5 101.3 61.02050 2.0 85,334 0.85 27.6 72.4
Assume energy intensity remains constant to 2050Assume CO2 per head from energy around 2 t/cap. in 2050
Trend 1998-2007Energy growth (toe) p.a. -0.5%GDP growth p.a. 2.6%Energy intensity p.a. -3.0%
Source: toe and GDP - World Bank Development Indicators.Source: Energy CO2 emissions - UK UNFCCC National Inventory Report 2008.Source: Population - World Bank Development Indicators; UN Population Prospects Database: 2008 revision.
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Source: World Bank data. Green Accounting: Adjusted Net Savings.
Net national savings (NNS) and Adjusted national savings (ANS), 2007, as a percentage of GNI, selected regions
-5
0
5
10
15
20
25
30
35
40
Euro a
rea
High in
come
World
South A
sia
East A
sia &
Pac
ific
Latin
Am
eric
a & C
arib
bean
Low inco
me
Mid
dle E
ast &
North
Afri
ca
Heavi
ly in
debte
d poor c
ountries
LDCs: U
N cla
ssifi
catio
n
Sub-Sah
aran
Afri
ca
% o
f G
NI
2007
NNS ANS
The challenge of sustainability
‘Green’ growth: potential
• Keynesian stimulus in the short run
• Wave of innovation in the medium run
• Loosening the energy resource straightjacket in the long run
• Global primary energy consumption c. 12,000 mtoe p.a.
• Technical potential for renewable energy >180,000 mtoe, 2/3 geothermal (Rogner, 2000)
6th industrial revolution: new energy technologies? Biotech?Source: Perez (2010)
Perez: techno-economic paradigm shifts
‘Green’ growth: challenges
• Costs
• Lower productivity (for how long?)
• Crowding out consumption and/or other investment
• Managing structural change
• Timing with respect to macroeconomic conditions
‘Green’ growth: challenges• Are the conditions for a new long
wave of development present?
• Size of sector
• Competition from old technologies
• Sailing ship effect
• Fossil fuel rents
• Difficulties in differentiating the product
Source: ONS Blue Book 2010 edition
Industry contributions to total gross value added, UK
Selected UK industries as a share of total GVA (current basic prices)1990-2007
0%
2%
4%
6%
8%
10%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Sh
are
of
tota
l GV
A
Mining of coal, extraction of oil and gas, coke, petroluem and nuclear fuel, electricity, gas and water.
Transport, storage and communication
Energy substitutions in lighting (UK)
Source: Fouquet (2010)
Innovation to dominance
Diffusion to dominance
Where are the new jobs going to be?
Source: Pollin, Heintz and Garrett-Peltier (2009): ‘The economic benefits of investing in clean energy’ CAP/PERI, June
‘Green’ growth: challenges
• Dependence on policies
• Credibility
• Time inconsistency
• Lack of understanding
• Rent seeking
• Free riders
• Lags in implementation
‘Effort’ versus carbon intensity
Source: HSBC (May 2009) and WRI CAIT
Total Green Stimulus Spending and Emissions per head
0%
1%
2%
3%
4%
5%
6%
7%
8%
0 5 10 15 20 25 30
Emissions per head (CO2e)
To
tal g
reen
sti
mu
lus
spen
d -
% o
f G
DP China
South Korea
Saudi Arabia
AustraliaUS
CanadaIndonesia
Environmental MDG: progress by 2010
Source: UN Millennium Development Goals progress Chart 2010. www.un.org/millenniumgoals/reports.shtml
‘Green’ growth: policies and the need to use all the tools in the tool-kit• The GHG externality
• Innovation
• Competition
• Network externalities
• Financial system (need for a GIB)
• Trade (energy security issue)
• Scrutiny of policies and learning
Ratio of ‘clean’ to ‘dirty’ auto patents
Source: Aghion, P, Dechezlepretre, A, Hemous, D, Martin, R, and J Van Reenen (2010)
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