Rio+20 side event: A Green and Inclusive Economy - The Finance Ministers' Perspective (G20 Ministerial Seminar)

Statement by Mr. Supachai Panitchpakdi, Secretary General

Rio+20 side event: A Green and Inclusive Economy - The Finance Ministers' Perspective (G20 Ministerial Seminar)

Rio de Janeiro, Brazil
21 June 2012


Distinguished Ministers,
Ladies and Gentlemen,

It is a great pleasure me to participate in this Panel, and to say a few words about the kind of measures and policies needed to bring about a structural transformation towards a green and inclusive economy. It is by now evident that a successful transition to a development-led and inclusive green economy will not be automatic, but will require active policy reforms both at the national and international levels. Allow me therefore to briefly address both of these dimensions.

At the national level, an active role for the state is critical in ensuring an accelerated and fair transition. Governments have regulation and incentive-based instruments at their disposal to promote the transition in their domestic economies, in numerous sectors, including energy, water, waste management, agriculture and fisheries.

Let me illustrate the kind of progress being made in just one of these sectors, the energy sector. Policymakers are increasingly aware of the potential benefits of renewable energy, including energy security, reduction of greenhouse gas emissions, job creation, rural development, and rural energy access. Globally, there are more than 5 million jobs in renewable energy industries, and the potential for job creation continues to be a main driver for renewable energy policies, not only in the manufacture of renewable technologies, but also in marketing, financing, installation, maintenance and repair where they are used.

This has meant that targets and regulatory requirements for renewable energy now exist in at least 118 countries, more than half of which are developing countries, and this number has more than doubled since 2005. And today, the number of countries that have enacted feed-in tariff measures to encourage renewable energy has risen to 92. More than US$70 billion of support is provided by governments to renewable energy production and consumption worldwide. And these renewable energy policies are already showing impressive results. Global new investment in renewable power and fuels increased by 17% last year to a record $257 billion, accounting for almost half of all new electric capacity installed globally in 2011. Indeed, when we get the policies right, we can move markets.

But we must not only look at what we can do right to move markets, but also what we must stop doing wrong. We know that well-designed subsidies to renewables and low-carbon energy can generate long-term economic and environmental benefits, but when subsidies are provided for inefficient fossil fuels, the costs outweigh the benefits. The G20 recognized this in 2009 when they agreed to cut fossil fuel subsidies to foster green growth. But instead, subsidies have increased from some US$ 300 billion in 2009 to more than 500 billion today. This means that, worldwide, fossil fuels receive about seven times more government subsidies than renewable-energy. Perhaps nowhere else is policy coherence more needed than in our energy policies. The Rio+20 Summit should adopt an aggressive target to phase-out fossil fuel subsidies.

Green government procurement will also be essential in the early stages of a transition to a green economy. In 2009, global green stimulus spending reached $200 billion. Green procurement makes important contributions to sustainable consumption and production by ensuring a base market to sustain green start-up industries which represent new poles of employment. It is encouraging to see this practice being mainstreamed with both developed and developing countries increasingly applying environmental and social sustainability criteria in their public procurement practices.

Increasingly today, the private sector is a major source of investment in public infrastructure. Regulatory and institutional frameworks in infrastructure sectors must not only support environmental and social objectives, but they must also create an enabling business environment in these sectors to encourage private investment. Reforms needed to encourage and support public-private partnerships should be promoted.

Beyond regulation, incentives and government procurement, information dissemination campaigns to facilitate the choices of consumers and businesses will also be essential in enabling the transition. Governments can also institute labeling requirements to help consumers identify more efficient, less polluting products. They can also encourage workers to opt for jobs in new green businesses by providing training opportunities.

While policies and actions are needed at the national level to drive a green economy transition, they are also essential at the international level to steer the transition and spread it globally. The latter requires addressing the significant challenges facing many developing countries that lack the required financial, technological and human capital needed to transform their economies. To fill these gaps, international cooperation will be essential in providing capacity building, facilitating technology transfer and coordinating financial assistance.

Promoting a green economy will depend largely on open markets in world trade. No one country is positioned to supply all of the goods and services needed in a green economy. Trade thus has a unique and central role to play in ensuring an inclusive transition to a green economy. In this context, I must say a word about protectionism. Indeed, countries' national green economy policies involving grants, subsidies and other favorable treatment to national firms, may reduce foreign access to their markets. So too would the application of more stringent environmental regulation on traded products. Here we need to better be able to distinguish what constitutes a legitimate measure and what is protectionism. It is not clear to what extent green economy policies and regulations will give rise to green protectionism, but UNCTAD will be playing a central role in monitoring green protectionism should it emerge in world markets. We hope that UNCTAD's soon to be launched Global Forum on the Green Economy and Trade can also make a contribution to better understand the interface between legitimate environmental measures and trade.

The dynamic growth of markets for green economy goods, such as efficient and renewable energy technologies, cleaner production technologies, sustainably produced agricultural, biodiversity including timber and fisheries products, as well as for green services such as ecotourism, is already creating new export opportunities. However, not all developing countries are take advantage of these opportunities. Capacity building and some degree of financial support will be critical in building an inclusive global green economy that ensures the full participation of developing countries in greening world trade. Initially, financial support may be needed to raise rates of returns for green business ventures and thereby leverage investment in green sectors.

To date, there is no international financing mechanism to assist developing countries to advance their own national green economy transition. In this context, we could explore an expanded role for national and regional development banks, as well as the new Green Climate Fund and other existing funding mechanisms as sources of financing for green technologies and related capacity building. But these and other international mechanisms that may be agreed upon must refrain from imposing new conditionalities. They should also avoid imposing a 'one-size-fits-all' template that fails to account for countries' different starting points and diverse development priorities.

Ladies and Gentlemen,

Far beyond the difficulties arising from the ongoing fallout of the Global Financial Crisis, mitigating climate change will truly be the challenge of this century. In addressing it, cooperative solutions will not only be required to have an effective environmental impact, but will also help to lower the economic cost and allay concerns about competitiveness. Rio+20 is the place to make a start.

Thank you.

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