Cycling in Beijing.
There are reasons and motivation to be hopeful about China's progress
for a greener economy. Photograph: Frederic J. Brown/AFP/Getty Images
Times are tough, but I predict 2014 is going to be a vintage year for sustainability-focused policymakers.
Global investment in clean energy was down last year at $254bn (£153bn) from a high of $317.9bn of 2011, with Europe leading the downward charge with a year-on-year decline of 41%.
These poor statistics may not reflect future trends. Japanese as well as emerging market investments in renewables have increased and remained stable respectively. However, they reinforce the view that financial markets are not doing their job, allocating capital in ways that will support a sustainable global economy over the long term.
Without reshaping the financial system, there is little prospect of private capital driving the transition to a sustainable economy. More likely is that it will reinforce the problem by continuing to flow to carbon and natural resource intense investments.
Against all the odds, and despite the recent evidence of how difficult it is to move forward any substantive financial regulatory agenda, I am optimistic that we can green the financial system, and that 2014 can be a year where significant progress is made.
My optimism is largely through the lens of two initiatives in which I am involved. The first concerns growing policy interest in China as to whether and how its game-changing financial market reform process can be made greener.
Last week in Beijing, the Financial Research Institute of the influential Development Research Center of the State Council, together with the International Institute for Sustainable Development, released the report of an initial exploration on Greening China's Financial System (PDF). The report, which I co-authored, makes the case for financial policy and regulatory action in ensuring that financial institutions correctly value climate and broader green risks, and that financial regulators recognise their role in ensuring that financial markets fulfil their underlying purpose of investing in the long-term health of the real economy.
China's interest in such an agenda, along with a growing number of other emerging nations, carries no mystery. The country's success depends on massive investment in developing a less toxic, more viable economy, covering carbon but more immediately addressing water scarcity and quality, air pollution and food safety.
China's financial regulators are very attuned to high-level policy signals, and so consider real economy issues more readily than most of their OECD counterparts. The relevant policy memo simply says the problem has to be fixed quickly and that China can derive major economic benefits along the way.
The country's financial system is very much still in development, and China does not wish to emulate the problems of Wall Street and the City. Actors in China's financial markets have neither the political muscle, nor necessarily the will, to overcome strong policy channelling by the Chinese government.
My second source of optimism derives from the launch on Wednesday in Geneva of an international inquiry into policy options for advancing a sustainable financial system. Alongside Nick Robins, currently head of the HSBC Climate Change Centre, I am to be part of the inquiry's leadership team. The inquiry, championed by UNEP as part of its green economy focus and leveraging the strengths of the UNEP Finance Initiative, aims to map existing experimentation in green financial regulation, catalyse and collaborate with policy research partners, and link a growing number of complementary initiatives in green and sustainable finance.
Optimism about advancing financial market reform may seem pollyannaish in the light of the complex political economy that has made progress so difficult. Yet each quantum change has its historical moment, that peculiar confluence of circumstances that makes change possible if not inevitable.
That moment may well have arrived for the financial system, made possible in particular by its recent track record, the leadership of emerging nations, the start of the world's first inquiry into how to make green the financial markets, and of course the increasingly obvious green imperative.
Like the author of this piece I also am optimistic about a greener economy and if China has to pave the way then so be it. Currently capitalism is the focus of every economical move that is made and it’s great to see that China wants to change that way of thinking. Some of the changes in China’s thought process that the article highlighted that I found most interesting was how each financial policy or regulation should take into consideration the value of climate and green risks. The system we live in does not calculate how the environment is affected while making products we buy and that is wrong. I applaud China in its possible moves towards a true green economy and hope that other countries follow suite.
ReplyDeleteIf China is ready to begin heading towards a greener economy, I would credit the heavy smog that plagued Beijing at the end of 2013 and maybe continues now. Generally, government regulations and policies pertaining to environmental protection and conservation are rarely if ever successful if the private sector and general population do not sense the impacts of standard practices. With capitalism being run on the pursuit of self interest, few industries are willing to take the leap into environmentally friendly practices as they may be costly in the short run, while government regulations could be met with opposition if jobs are lost as a result. Only when individuals and companies finally begin to see the long term consequences of their actions do they realize that their best interest is protecting the environment and their resources. If China, notorious for its pollution, is willing to change, then that can only mean they are beginning to see some financial damage, whether it be a smaller tourist population or fewer investors willing to bring money into cities where pollution is keeping people away. Unfortunately, with China's heavy handed pursuit of economic power, I do not believe that they will change if the short run costs are too great.
ReplyDeleteWhile reading the article what intrigued me is China's disinterest of emulating Wall Street, which sets the their future goals on a different course than the United States. China sees the bigger picture and isn't caught up in the present moment. Hopefully with their success in pursuing a greener economy other will be soon to follow. Also a big factor in this dilemma is climate, maybe China's population and amount of pollutions being released into the atmosphere has created enough concerns to forced them to think green, this might not be the case for other nations. Unless the impact is clearly visible financially and physically I'm afraid a greener economy won't occur in other parts of the world.
ReplyDeleteI think that China's attempt to have greener business practices is a step in the right direction. China is realizing the effects of constantly releasing harmful pollutants into the atmosphere and are now actively pursuing a greener option. That's great, but is it a little too late? If the particular nation waits until the pollution is at such a high point to finally seek greener alternatives it may be too late. Nations need to start pursuing more environmentally friendly practices before they reach such a bad state. China is changing and hopefully it causes other nations to follow suit, if not for environmental reasons, for the long term benefits.
ReplyDeleteI'd like to think that more countries are transitioning into a green economy. However, I doubt this is going to happen anytime soon.This post seems a bit too optimistic. First, China has become one of the largest greenhouse gas emitters in recent years. I'd like to think that China will pave the way towards a green economy. The only problem is that a growing economy is correlated with a higher degree of greenhouse gas emissions. There have been many studies and articles that prove that greenhouse gas emissions rise with GDP (ex. http://www.huffingtonpost.com/2012/10/07/greenhouse-gas-emissions-gdp_n_1946477.html). Seeing as how China's economy is growing rapidly and one of the country's main focuses right now is to become an economic powerhouse, it is hard to believe that China will change its ways anytime soon. Cutting greenhouse gas emissions is too costly right now, especially since modern technology and products that produce huge profits, are so reliant on these emissions. Yes, creating a new market for green technology may prove to beneficial and profitable in the long term. However, right now there is still a lack of this clean technology as well as substitutes for non environmentally friendly products. Therefore, many countries are still dependent on non eco-friendly forms of technology and products to gain a profit. In addition, many countries are more concerned with short term goals and how to make the most amount of money in the least amount of time, rather than creating a new market for green products that have yet to be developed. Nevertheless, I do hope that I am wrong, and countries do start making the transition towards a green economy soon.
ReplyDeleteIn today's world greed takes over the humans conscious, where he only cares about the money that is obtained by a specific investment, nothing else matters. Over years, humans have exploited the nature, and hurt the environment by events such as oil spill, carbon omissions and mining etc. This article makes me believe that there will be an end. I think that it will be impossible for just organizations to protest and start making greener decision to have a big impact. The financial markets are always thought of these callous creatures that don't care what gets destroyed on their way to making more money. It is a great news that china has started to integrate green method and greener options for their financial markets decision making processes. Since china has a great impact in the global economy, I hope that this can serve as a wake up call to the other countries responsible for a lot of pollution. Unless the financial markets start to care about the environment the initiatives needed will not be unfilled.
ReplyDeleteAmina
First off I felt like this article was very optimistic. China has become an economic powerhouse. Being that China's economy has been rapidly growing the country's main focus is to keep growing, without taking into consideration all the pollutants. China's air is filled with many pollutants and that hasn't gone in their way to stop them from economic growth. Since that is their focus on how to grow and boost the country's GDP as quickly as possible, their main focus is on the short-run effects. Transitioning into a green economy is timely and costly, something that will have long-run effects, which I believe China is not fully for that. It is great to see that the country is taking it into consideration and taking small steps to transition into a green economy. But with all the pollution accumulating in China will it be too late to fix anything? I hope that China will transition completely into a green economy. It will set off incentives in other countries to do the same.
ReplyDeleteMonika
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ReplyDeleteSince 2008 China is number one on the list with the highest tonnes of Carbon Dioxide( (greenhouse gas)emission in the atmosphere due to certain form of human activity, the US isn't doing much better as they fall in second place. But it is interesting to see that China is looking to move towards a green economy. I believe that China is capable of pursuing a green economy but I don't believe that this is going to happen overnight. China is known for manufacturing a lot if products, but there are also pros and cons for going green. Results will lead to a healthy economy but also major job lost and also reduce in profits/ revenues of businesses during the transition period. Going green is not simply the government's decision, its people should also see the need and the future results and be willing to fight for the change as well. According to the article China Greenhouse Gas Emission set to rise well Past the US by Lisa Friedman and, she stated that China will emit by 2015 50% more greenhouse gas than the USA, their major setback is that there overall energy use skyrocketed with its growth. It is also said that technological developments and not structural changes have has the largest impact on the country’s low-carbon performance. Again it is important that China is making the step towards a green economy and if they pursue it other countries will follow since China in number one emitter and work towards making the world a better place.
ReplyDeleteChina’s potential transition to a green economy not only brings the nation closer to sustainable relief, but it can also help move the rural cities out of poverty through job creation. The fast-paced industrial revolution in China in recent decades brought the country to the forefront of economic growth. However, the almost uncontrollable growth led the nation to dangerously high pollution rates; in 2008 the United Nations reported that China was accountable for 23.5% of the world’s green house gas emission. Unfortunately, it will take much longer to reverse the environmental damage China has acquired than it did to create the circumstances. On a more positive note, the United Nations reported in 2012 that China has taken steps to “shift to a low-carbon growth strategy based on the development of renewable energy sources to create jobs, income and revenue streams for promising low-carbon industries”. Clearly there is hope that China is moving in a greener direction, and the initiatives discussed in this post support a brighter future for China. Just yesterday (Feb 6, 2014), I read an article in business week explaining the Chinese government’s new policy for more than 15,000 factories to report “real-time date about air and water pollution to the public”. This will make it much more difficult for factories to avoid sustainable development, which is a great sign for China’s green future in 2014!
ReplyDelete-Courtney Baxter
China’s growing economy and rise as a global powerhouse is in its early stages as economic stability is still a process. However, I do think this initiative of a green agenda in its financial markets is a reinforcement of its importance. Financial capital being allocated to certain markets and industries deplete natural resources as a raw material in manufacturing companies to make a profit and as a result is causing a multiplier effect. The importance of financial investments in a green economy is imperative for a substantial future. I do feel that it will be difficult to move forward any agenda and receive some benefits of its outcome anytime soon. China’s push toward a green economy is a result of its choking air pollution, water scarcity, food safety and other factors. When the need is imperative that’s when financial players consider making a change, once the money is flowing investments normally get allocated to more ways of making it, quickly. Regarding UNEP’s international inquiry toward developing countries, I do feel optimistic on their agendas. A great initiative would definitely be to use existing green financial regulation and develop politic policies that link these to green, sustainable financial investments. These three factors could make a difference and become a catalyst as an economic model for other developing countries.
ReplyDeleteI think Green Economy is a possible for China. I think it is a realistic, long-term goal, that is within reach if they keep at it for a good 4 years. The reason I am apprehensive about their future is because I think they are, like many people and places, in love with the idea that the Green Economy is going to suddenly fix all problems. Yes, it is true that it will open up job opportunities, influence other countries as well as their relationships with China, and increase the global productivity of China's resources. But I am trying to say that this is all a BYPRODUCT of what a Green Economy could bring. Their impact on the environment and the world, thus far, is definitely going to dictate the gestation period needed to manifest their desire.
ReplyDeleteAbraham Alvi
The Green Economy for China is although a challenging goal, it is not an unobtainable one. It seems that Green Economy is a big topic in global economics during these hard and ever changing times, yes it is obtainable but it will be hard. It is important that in order for the Green economy to flourish the right foundation is built and one of them is financial investments. It is imperative that China find a solution to its highly polluted air, water scarcity, food hazards and other extremely hazardous conditions to which its people live by. Sustainable financial investments can be used in order to mold the foundation of the Green Economics in China. The Green Economy movement can also spark a change in job creation helping reduce poverty and hunger and health by the means of new jobs. If it does spark a change in China it will become a base on how to start in other countries like India, and other parts of Asia.
ReplyDelete- Paloma Perez