Global green growth stalled by climate finance shortfalls (commentary)

There is growing consensus that green growth – economic growth that is environmentally sustainable – is both possible and desirable: the green economy is estimated to represent $1.3 trillion in annual sales in the U.S. alone.
Calls for worldwide green growth in recent years have come from far and wide, from the United Nations to the International Monetary Fund, the World Bank, and others, but commitments to fund this growth continually fall short.
Ahead of the upcoming Sustainable Development Goals Summit in mid-September, a new op-ed argues that this event offers a chance for world leaders to make progress on climate finance and green growth, to boost sustainable growth while limiting losses due to multiplying environmental crises.
This post is a commentary. The views expressed are those of the author, not necessarily Mongabay.

A recent Gallup poll found that 43% of Americans believe that economic growth should be a higher priority than environmental protection.

But this is a false dichotomy. There is growing consensus that green growth – economic growth that is environmentally sustainable – is both possible and desirable. In the U.S. alone, the green economy is estimated to represent $1.3 trillion in annual sales revenue and to employ nearly 9.5 million workers. And last year, global trade of green goods – products that are designed to use fewer resources or emit less pollution than their traditional counterparts – held strong throughout the year, defying the downward overall global trade trend.

Clarion calls for green growth in recent years have come far and wide, from the United Nations to the International Monetary Fund, the World Bank, and the Organization for Economic Co-operation and Development. Many governments from developed countries and regions have begun to implement green growth policies into their national development strategies, most notably with the adoption of the European Green Deal in 2020.

Maldivian fishers sort their catch. — Natural resources like fisheries still dominate many developing countries’ economies: tuna is the Maldives’ biggest export, for example. Image by Asian Development Bank via Flickr (CC BY-NC 2.0).

Yet, the pursuit of green growth should not be limited to developed countries and regions. For instance, a recent UN Sustainable Development Solutions Network (SDSN) report highlights that in Southeast Asia, economic losses from climate change could reduce regional Gross Domestic Product (GDP) by 11% to 34% by 2100. By contrast, meeting the Paris Climate Agreement goal of keeping temperatures well below 2°C would limit this loss to less than 1%.

The report recommends four pillars of action for Southeast Asia – decarbonizing electricity generation; shifting from fossil fuels to electricity or other clean energy alternatives; reducing energy waste in buildings, transport, and industry; and preserving and increasing natural carbon sinks. Additionally, it noted that the development of Southeast Asia’s green economy could provide up to $1 trillion in annual economic opportunities by 2030.

There are similar findings across other regions and countries in the Global South. The Latin American Economic Outlook Report finds that an effective green transition in Latin America and the Caribbean can add 10.5% more new jobs by 2030, while the United Nations Environment Programme reports that green growth can boost real GDP in Kenya by approximately 12% in 2030 compared to business-as-usual.

Ann Dumaliang & JC's Vine. — Masungi Georeserve near Manila attracts tourist dollars to see rare species like JC’s vine, which help to conserve the area. Image courtesy of Masungi Georeserve.

Climate finance and geopolitics

However, challenges in climate financing remain, especially for developing countries, which comprise all countries but one in Southeast Asia. Developed countries have fallen short of their pledge to give $100 billion per year to poorer nations for climate mitigation and adaptation. While some countries including Sweden, France, and Norway are punching above their weight, the U.S. is overwhelmingly responsible for the climate finance gap, having provided just 5% of its fair share in 2020, with Canada, Spain, and Australia at 18%, 19%, and 23% respectively.

Inaction from Global North countries is also slowing progress at development finance institutions such as the World Bank and Asian Development Bank, which have the resources and expertise to provide climate financing for developing countries. This inaction is driven by a hawkish foreign policy regime bent on maintaining U.S. dominance in an increasingly multipolar world. Meanwhile, the Green Climate Fund, the primary climate finance mechanism under the United Nations Framework Convention on Climate Change, has been overly cautious in its funding, leading to under-funding of high-impact projects in developing countries.

China’s establishment of the Asian Infrastructure Investment Bank (AIIB) and the New Development Bank (formerly the BRICS Development Bank) over the past decade provide compelling alternatives for financing green growth in developing countries, although their scale of capital remains lower than the World Bank and Asian Development Bank. It also takes time to build up the expertise in financing complex infrastructure projects in countries plagued by governance issues.

The Philippine-endemic JC’s Vine. — The Philippine-endemic JC’s Vine (Strongylodon juangonzalezii) is characterized by its blue and lilac flowers and can only be found in four locations in the country. Image courtesy of Masungi Georeserve.

Cents-ible progress

Despite the geopolitical rivalry between major powers, the Association of Southeast Asian Nations (ASEAN) has continued collaborations to spur green growth in the region. The landmark ASEAN Energy Outlook is now in its 7^th edition and complements the ASEAN Plan of Action for Energy Cooperation. A key feature is the ASEAN Power Grid, which would facilitate the production and trading of clean, cheap energy across the region.

The science and policy pathways are crystal clear, and most countries, developing or otherwise, are on board with green growth. To kickstart the virtuous cycle, financing is required. An energy transition is a costly and complex process that requires money to flow from developed countries, which have produced the vast majority of historical emissions, towards developing countries. A just transition will enhance diplomatic and trade relations and diffuse rising global tensions. This is to the benefit of all, as developed countries rely on developing countries to produce goods at a cheaper cost.

The upcoming Sustainable Development Goals Summit in mid-September is the centerpiece of the high-level week of the United Nations General Assembly and offers a chance for world leaders to make progress on climate finance and green growth. The window of opportunity to act decisively on the environmental crisis is rapidly closing. If we continue dragging our feet on mobilizing climate finance towards green growth, we will all incur even steeper economic losses in the near future. It is time we realized that green growth and economic growth are both sides of the same coin.

Justin Liew is a Research Analyst at the United Nations Sustainable Development Solutions Network (SDSN). He is based out of the Kuala Lumpur office hosted at Sunway University, and his research focuses on accelerating decarbonization across the ASEAN region and sustainable development for Indigenous peoples.

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