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Partner in Focus: German Development Institute / Deutsches Institut fuer Entwicklungspolitik Author : Dirk MessnerIn this GGKP Partner in Focus feature, Dirk Messner, Director of the German Development Institute / Deutsches Institut fuer Entwicklungspolitik (DIE), talks about DIE’s work in the field of Green Growth.
 DIE is one of the leading research institutions and think tanks for global development and international development policy worldwide. The institute is based in the UN City of Bonn. DIE builds bridges between theory and practice and works within international research networks. The key to DIE’s success is its institutional independence, which is guaranteed by the Institute’s founding statute. Since its founding in 1964, the German Development Institute / Deutsches Institut fuer Entwicklungspolitik (DIE) has based its work on the interplay between Research, Consulting and Training. At present, about 80 researchers from around the world are working at the institute.
We can`t scale up the existing growth patterns
The world is experiencing an unprecedented period of economic growth. But the overexploitation of natural resources and limited sink capacities result in the degradation of ecosystems and may lead to ‘tipping points’ of the Earth system where environmental damage becomes irreversible. This means that continuing business-as-usual is not an option and that new development paradigms are needed. Energy systems, industrial production and natural resource use need to be re-oriented fundamentally towards sustainability in a short time period. By sustainability-oriented transformation we mean a low-carbon development and a resource efficient path that is ecologically sustainable and climate resilient and at the same time socially inclusive, opening up new development opportunities for disadvantaged strata of society. Furthermore, national strategies of developing, emerging and developed countries need to consider the global dimension: increases of prosperity should not trespass global boundaries for the use of natural resources and ecological sink capacities. For developing countries the reconciliation of economic, social and environmental objectives presents a particular challenge.
Transformation of industries and energy systems
With respect to industrial production and energy systems, environmental costs need to be systematically internalised and models of economic growth need to incorporate resource productivity. However, the framework conditions for environmental innovations in developing countries differ widely from those in developed countries. High and sustained economic growth and improved access to affordable energy are political imperatives, leaving less scope for the internalisation of environmental costs into investment decisions. At the same time, developing countries may have resource-efficient production opportunities that are not available in rich countries, because existing infrastructure and network effects lock the latter into less efficient patterns. Hence, developing countries may lose certain advantages but gain others. For the more advanced developing countries, leapfrogging into low carbon technologies may be a viable option.
By integrating different research strands (innovation systems research, environmental and behavioural economics, political economy) and conducting empirical case studies in developing and developed countries, DIE tries to gain new insights in effective green industrial and innovation policymaking.
Natural resource management within the planetary boundaries
Furthermore, natural resources need to be used in a manner that is low carbon, climate resilient, resource efficient, ecologically sustainable and social inclusive. DIE therefore examines opportunities and challenges towards the transformation of natural resources management towards these multiple objectives. Particular focus is being put on the water governance reforms, small-holder agriculture in Africa and trade-offs involved in the introduction of REDD+ (reducing emissions from forest degradation and deforestation) and hydropower schemes. In this context, DIE researchers also take a critical view at green growth discourses and examines potential trade-offs between low carbon development strategies, ecological sustainability and social inclusiveness. Overall, the focus is on understanding the political economy of the green transformation with a focus on natural resources management.
Global governance for sustainability
Eventually, development pathways need to be compatible with planetary boundaries. Ideally, this requires cooperation at the global level. DIE therefore examines the evolution of global environmental governance with a particular emphasis on the global climate and climate finance regime. DIE researcher furthermore explore the effects of changing global norms and discourses, such as on climate finance or on sustainable hydropower, on environmental policy in developing countries.
The institute as a driver of change: bridging research and policy
The DIE is the most influential German development research institute, delivering policy advisory work to the German government, the European Union and International Organizations. One important international Green Growth initiative the DIE engages in is the "Indo-German Expert Group on Inclusive and Green Economy"., which brings together renowned experts from ten leading research institutions and political think tanks in India and Germany. It has been initiated by the German Ministry for the Environment, Nature Conservation and Nuclear Safety in close dialogue with Indian partners. Its aim is to jointly explore pathways and provide guidance for policymakers in both countries to support the transformation towards a green and inclusive economy. DIE researchers are engaged in many similar networks, bridging research and policy, in countries like China, Indonesia, Peru, or in the European Union. Furthermore the German Development Institute is hosting a Global Governance School for participants from emerging economies and Europe, facilitating joint learning processes, joint research and global dialogues on sustainable development transformations.
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The latest publications by DIE: Publication Update
Opportunities and challenges: the role of trade in the green economyAuthor : Anja von MoltkeAnja von Moltke, Acting Head of UNEP's Trade, Policy and Planning Unit, outlines the imperative for greening international trade, as presented in the new UNEP Report: "Green Economy and Trade - Trends, Challenges and Opportunities."
The global debate on trade and sustainability has reached a crucial moment. Over the past forty years, as the global economy has more than quadrupled, the share of trade in the global GDP has increased to almost 30%, linking countries from around the world in value chains that connect consumers and producers in an intricate web with far reaching environmental and economic consequences.
In the context of the Rio+20 Conference, UNEP began exploring the potential of trade to become a driver not only of GDP growth but, more importantly, a transformational change to a green economy. This poses crucial questions, such as: what policies can be put into place to harness the explosive growth for new products that are responsibly produced and fairly traded? How are countries positioned to benefit from increased consumer demand for organically grown or emerging green markets? How can developing countries especially, use green trade as a tool for sustainable development?
In response to the incrementing importance of international trade for sustainable development, and coinciding with imminent changes of leadership in leading international trade organisations (WTO, UNCTAD, ITC), UNEP published the report “Green Economy and Trade – Trends, Challenges and Opportunities”, which attempts to answer some of these thorny questions. The report was launched at a High-Level event in Geneva on 8 May 2013, featuring Achim Steiner, UNEP Executive Director; Pascal Lamy, WTO Director General; selected national ministers of environment; and interdisciplinary experts from various international institutions and governments.
The report demonstrates how the relationship between trade and the transition to a green economy is complex and multifaceted. Trade clearly has the potential to facilitate the transition to a green economy, for example by fostering the exchange of environmentally friendly goods and services. Similarly, the transition to a green economy can create new trade opportunities by opening up new export markets for sustainably produced or certified products and by greening various elements of the supply chains.
The report analyses six economic sectors where a wealth of opportunities for green trade are assessed – agriculture, fisheries, forests, manufacturing, renewable energy and tourism. It identifies a number of measures, including policy reforms and certification that could help developing countries benefit from these markets, and suggests enabling actions such as public investment in key areas, market-based instruments, and regulatory frameworks. The report finds that developing countries with abundant renewable resources are well-positioned to capitalize on the opportunities to increase their share in international markets for sustainable goods and services.
The report also highlights key trends in the six identified economic sectors. For example:
- Agriculture: The global market for organic food and beverages is projected to grow to US$105 billion by 2015, compared to US$62.9 billion in 2011.
- Fisheries and aquaculture: Wild-capture fisheries already certified or in full assessment, record annual catches of around 18 million metric tonnes of seafood. The total value of seafood that has been farmed according to certified sustainability standards is forecast to increase to US$1.25 billion by 2015.
- Forestry: As of early 2013, the total area of certified forest worldwide stands at close to 400 million hectares, amounting to approximately 10 per cent of global forest resources and a sales value of over US$20 billion per annum.
- Manufacturing: Many suppliers are greening their practices in order to secure their positions within international supply chains. For example, global ISO 14001 certifications on environmental management increased by 1,500 per cent between 1999 and 2009.
- Renewable energy: Since 1990, annual global growth in solar photovoltaic, wind and biofuel supply capacity has averaged 42, 25 and 15 per cent respectively. The global market in low-carbon and energy efficient technologies, which include renewable energy supply products, is projected to nearly triple to US$ 2.2 trillion by 2020.
- Tourism: In developing countries, this industry's market share has increased from 30 per cent in 1980 to 47 per cent in 2011, and is expected to reach 57 per cent by 2030. In 2012, for the first time, international tourism arrivals reached one billion per year.
Through analysis and case studies, the report illustrates that sustainable and responsible trade has become much more prominent in recent years. However, given its as-yet small proportion in relation to global trade volumes today, there is an urgent need to significantly scale-up and expand capacity building efforts to both harness existing opportunities and create new ones.
In response to that need, UNEP engages to provide governments, the private sector and other stakeholders with targeted information and assistance for formulating trade and green economy strategies and policies through the Green Economy and Trade Opportunities Project. The private sector and civil society groups play a major and vital role in this process, and UNEP remains very keen to work with those groups to advance the green economy in the context of sustainable development and poverty eradication. Five Practical Keys to Green Growth: Lessons from the Greater Mekong SubregionAuthor : Christina Wollesen, Siv Øystese, Simone Quatrini and Harald Heubaum In June 2013, the OSLO Consortium initiated the public-private dialogue “New Opportunities from Natural Wealth Management” in the Greater Mekong Subregion (GMS). Out of the dialogue, five practical lessons were identified to scale up green growth in the region. Christina Wollesen, Siv Øystese and Simone Quatrini from the Global Mechanism outline why these are a good place to start for any economy that’s putting green growth on the agenda.
Integrated Approaches
 Building the green economy of the future will require truly integrated efforts across governments and industries: The green growth agenda concerns all sectors of the economy and society. Developments in one system (for example energy or food production) can have direct and indirect knock-on effects on other systems (for example water). Triple bottom line approaches and integrated reporting can help actors see these impacts but they will require strong linking up, sharing of information and a unified voice.
A shared vision and agenda should be reflected in the actions of all government departments. Clear and reliable policies and regulations are needed in all natural resource-intensive sectors to establish a level playing field and a conducive business and investment climate.
At Rio+20, governments agreed that the green economy has the potential to ensure that natural capital is used in such a way that continues to provide the ecosystem services that sustain economic growth and prosperity today and in the future.
More and more countries in the GMS are setting out on just such a path, as illustrated by the Green Growth Roadmap of Cambodia, the recently established Green Growth Strategy of Vietnam, as well as the Green Economy Green Growth initiative in Myanmar. Furthermore, all six nations have committed to the development of a green, inclusive, and balanced economy through the GMS Strategic Framework 2012-2022.
Public-Private Engagement
Scaling up green economic development must be done both from the top down and the bottom up. This requires strong partnerships between the public and private sector that recognize the important complementary relationship between green investments on the ground, and the policy and legislation to support and incentivize them.
 At their most basic level, public-private partnerships can address the lack of financial resources that often prevent the scaling up of innovative solutions. The financing need is enormous and far surpasses available public funds. However, there are sufficient funds available in the private sector to fill the gap. The challenge is to identify ways to incentivise private sector investment, be it through institutional investors (e.g. pension funds) who are looking for returns on their investment or through impact investors who are looking to create positive social and environmental impacts in addition to financial returns.
As public-private partnerships gain momentum, it will be important for the public sector to ensure that the economic development is not only investment driven, but guided by the ideal of the triple bottom line that provides social, environmental, and economic returns.
Beyond creating enabling conditions for responsible private sector investment, public sector can make large impacts by introducing sustainability criteria in their own procurement processes.
Finding Champions
Champions are essential to making the green growth case. A number of companies have taken early action, determining the ecological footprint of their operations and looking at the sustainability of their supply chains. Putting a monetary value on environmental impacts and requiring suppliers to adhere to stringent standards are steps in making the case for green development in the private sector. In addition, companies that have pursued sustainable practices and invested in environment, social and corporate governance tend to have a better capital market performance than their peers. The challenge now is to extend this behaviour to businesses and industries across the economy.
Linking Research to Decision-making
Scientists and ecological economists agree that there is a need for more research and data on the economic values of natural capital and ecosystem services in order to determine their true market values and better inform national strategies, policies and land use planning. Ecosystem undervaluation poses a barrier to achieving both conservation and sustainable development goals. If decisions are made based on incomplete and flawed information they may result in further environmental losses and missed social and economic opportunities. However, the numbers being generated are meaningless if they don’t translate into practical support for sustainable development. Greater progress could be made by mainstreaming the integration of natural capital considerations in loans, bonds, equities and insurance products, accounting and reporting frameworks, as well as advocacy platforms.
When a value is given to an ecosystem service, it should be used as a tool to price and compensate efforts made by those conserving and protecting this service. Values of ecosystem services can be used to establish mechanisms that can encourage private sector actors to adopt SLM practices. Incentives and market-based mechanisms can facilitate payments from beneficiaries to stakeholders.
Policymakers and the wider public are not always aware what green growth and green development mean and how they may provide benefits across economic, social and environmental dimensions. Demonstrating and communicating returns on responsible investments is an important part of making the business case for action and decision-making.
Starting Small, and Scaling Up
Small-scale pilot projects show effectiveness and competitive returns on investment, and pave the road for larger-scale initiatives. One challenge to greening the economy is that it's hard to get financing from the commercial financial institutions for innovative projects whose business models haven't yet been proven. The success of a small-scale pilot can pave the way for large-scale funding, and the mainstreaming of a project.
Encouraging trends are emerging in the capital markets, which reward responsible business operations. This includes impact investments, as well as lower cost of capital for certified products and processes (e.g. FSC labels).
For lasting change, we need to institute measures beyond election terms; we need lasting legislations, institutions, and champions.
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This event was an initiative of the OSLO Consortium, jointly organized by the Asian Development Bank (ADB), the Food and Agriculture Organization of the United Nations (FAO), the Poverty Environment Initiative of UNDP and UNEP (PEI), the WWF-Greater Mekong programme, and the Global Mechanism of the UNCCD, with support from by the Government of Norway and MacArthur Foundation.
The full report from the dialogue can be downloaded at www.capacitybuildingoslo.com/events/natural-wealth-gms/
   
Authors: (left to right) Christina Wollesen, Siv Øystese, Simone Quatrini and Dr. Harald Heubaum
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