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: outline
• Necessity
• Potential
• Challenges
• Policy implications
‘Green’ growth: necessity
• Business as usual
• Costly
• Risky
• Unsustainable
• Growth still necessary
• Poverty alleviation
• Politics
Projected primary energy supply
EJ
BAU
Source: WITCH model runs for the RECIPE project
410 ppm CO2
Change in UK emission intensity
required to meet 2050 target
Emission intensity
Country
United Kingdom
Year
1998
2007
2050
CO2 per head
(tCO2)
9.2
8.7
2.0
GDP per head
(Intl$ppp2005)
27,708
34,206
85,334
CO2
emissions/energy
use (tCO2/toe)
2.4
2.5
0.85
Energy use/GDP
(toe/Intl$ppp2005)
x 10^6
137.1
101.3
27.6
Assume energy intensity remains constant to 2050
Assume CO2 per head from energy around 2 t/cap. in 2050
Trend 1998-2007
Energy growth (toe) p.a.
GDP growth p.a.
Energy intensity p.a.
-0.5%
2.6%
-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.
Population
(millions)
58.5
61.0
72.4
The challenge of sustainability
Net national savings (NNS) and Adjusted national savings (ANS), 2007, as a
percentage of GNI, selected regions
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Source: World Bank data. Green Accounting: Adjusted Net Savings.
‘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)
Perez: techno-economic paradigm shifts
6th industrial revolution: new energy technologies? Biotech?
Source: Perez (2010)
Sources of energy used for power in UK
‘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
Global consumption costs
Target of 410
ppm CO2
Source: RECIPE project synthesis report (2009)
Job creation or low productivity?
Source: Wei et al (2010)
Not all measures equally ‘jobs-friendly:’
the Korean stimulus
Structural adjustment challenge
Source: Babiker and Eckaus (2007)
‘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
Industry contributions to total gross
value added, UK
Selected UK industries as a share of total GVA (current basic prices)
1990-2007
Share of total GVA
10%
8%
6%
4%
2%
0%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Mining of coal, extraction of oil and gas, coke, petroluem and nuclear fuel, electricity, gas and water.
Transport, storage and communication
Source: ONS Blue Book 2010 edition
Energy substitutions in lighting (UK)
Innovation to
dominance
Source: Fouquet (2010)
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
Total Green Stimulus Spending and Emissions per head
Total green stimulus spend - % of GDP
8%
7%
China
6%
5%
4%
South Korea
3%
Saudi Arabia
2%
Australia
US
1%
Indonesia
Canada
0%
0
5
10
15
Em issions per head (CO2e)
Source: HSBC (May 2009) and WRI CAIT
20
25
30
Focus on energy efficiency
Source: HSBC (2009): ‘Taking stock of the green stimulus’ November
Promoting technological innovation
Source: World Bank WDR 2010
Promoting technological innovation
Source: World Bank WDR 2010
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)
Promoting technological innovation
versus