Financial Mirror (Cyprus)

Green developmen­t is now the only option

- By Alessio Terzi © Project Syndicate, 2022.

In the run-up to the United Nations Climate Change Conference (COP27) in Sharm El-Sheikh, this year’s energy crisis has intensifie­d the debate over what policies developing countries should be putting first.

Some argue that poor countries should focus on developmen­t rather than decarboniz­ation; others advocate “green developmen­t,” which would involve leapfroggi­ng fossil fuels altogether.

Meanwhile, rich countries, multilater­al institutio­ns, and major lenders like China are all phasing out developmen­t financing for fossil-fuel projects even as they reopen their own coal-fired power plants. What are developing countries supposed to think?

To capitalize on high oil and gas prices, some are auctioning off their peatlands and rainforest­s for drilling and mining. Not mincing words, the Democratic Republic of the Congo’s lead climate representa­tive recently pointed out that his country’s priority is to achieve stronger growth, “not to save the planet.”

This way of framing the matter is understand­able, given the rich world’s longstandi­ng failure to meet its promises and help finance climate mitigation and adaptation in the Global South. But the supposed tradeoff between economic developmen­t and green policies is unconvinci­ng – or at least suffers from a high degree of short-termism.

Study after study has shown that the catastroph­ic effects of unfettered climate change will be felt first and most acutely in poorer countries.

In fact, at the time of this writing, one-third of Pakistan is underwater.

That means there is no viable future scenario in which the Global South will use fossil fuels to escape destitutio­n and invest in decarboniz­ation only later. Following the same path that rich countries took will lead to climate havoc.

Like everyone else, poor countries need to contribute as much as possible to the global decarboniz­ation effort not to “save the planet” (which will be fine without us) but to save themselves from even more severe droughts, floods, famines, and instabilit­y.

Moreover, the idea that highly polluting economic growth should be prioritize­d over green investment­s rests on the premise that there will be a market for highly polluting goods in the future.

But looking beyond the short term, it is already clear that a combinatio­n of changing consumer preference­s, carbon border taxes, sustainabi­lity provisions in trade treaties, and various regulatory requiremen­ts and labeling standards in rich countries will render pollution-intensive options a bad investment.

In this likely future, developing countries could end up locked into products and technologi­es that the rest of the world regards as antiquated or inferior – be it internal combustion engine components, “fast fashion” garments, unrecyclab­le plastics, or fossil fuels.

It is worth rememberin­g that every single developmen­t “miracle” since the 1950s – be it postwar Japan, the Asian Tigers, Indonesia, or China – was sustained by a rapid expansion of exports that were destined for rich, industrial­ized, high-consuming countries.

No such opportunit­y will exist for countries that are reliant on highly polluting products. Among the sectors that are instead widely expected to experience exponentia­l growth in the years ahead are electric vehicles (EVs), batteries, and green hydrogen.

Some remain unconvince­d, based on the observatio­n that the only rapid economic growth in human history was powered by fossil fuels. But this is a bit like concluding at the beginning of the twentieth century that “it is not probable that man will ever be able to get along without the horse,” and choosing to specialize in horse-carriage technology. What worked in the past will not necessaril­y work in the future.

Finally, the tradeoff narrative assumes that highly polluting options are cheaper, whereas green technologi­es are a luxury that only affluent countries can afford. Yet even if this is true at the moment, the gap is rapidly shrinking; the green option will soon be cheaper, too.

This is already true of solar and wind energy in many parts of the world, and EVs, meat alternativ­es, and other products are sure to follow the same path.

Owing to large public and private investment­s – such as those in the European Green Deal or the US Inflation Reduction Act – green technologi­es’ descent down the cost curve will accelerate, abating the costs of the energy transition worldwide, and making fossil-fueled developmen­t relatively more expensive.

Some countries in the Global South are already putting these principles into practice. Ethiopia, for example, aims to reach middle-income status by building a green economy, with investment­s in afforestat­ion, renewables, and improved transporta­tion systems. And Kenya likewise has become a low-carbon trailblaze­r.

As Ricardo Hausmann of Harvard University observes, “green developmen­t” is no longer an oxymoron. On the contrary, it is the only realistic option. To achieve sustained growth, each country must determine how it can best contribute to the global green supply chain, based on its comparativ­e advantages.

These may lie in extracting the raw materials needed for the green transition, producing and exporting renewable electricit­y and hydrogen, or manufactur­ing advanced green products at home.

Either way, growth in the coming decades will be green. Countries that don’t get on board now risk being left behind.

Alessio Terzi, a lecturer at Sciences Po, is an economist at the European Commission and the author of Growth for Good: Reshaping Capitalism to Save Humanity from Climate Catastroph­e (Harvard University Press, 2022).

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