Green Growth and Developing Countries

Posted: November 7th, 2023

Green Growth and Developing Countries

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Green Growth and Developing Countries

Mounting pressure on global resources, increasing environmental concerns, and non-inclusive economic growth are some of the main reasons behind the growing emphasis on green and inclusive growth. A green economy is perceived as essential in achieving progressive societies and maintaining the sustainability of natural assets. However, there is no single green growth model for developing countries to adopt. Green growth strategies vary across nations, mirroring local preferences, contexts, and resources. Challenges to implementing green economies vary. Due to the different implications and barriers to green growth, the question for policymakers is how to balance the trade-offs between the possible environmental, social, and economic benefits with the potential reductions due to investments, income, and consumption. While green growth strategies and outcomes are bound to vary, green growth is more likely to benefit households living in poverty, which is why these policies should be designed to amplify benefits and minimize costs for the poor.

State of Policies for Green Growth

            Several factors outline the increased uptake of green growth in developing countries. One of the heavily cited reasons is economic diversification for enhanced economic growth. Ethiopia is an example of a nation that has taken this route. Gaye et al. (2015) report that Ethiopia has transformed into one of Africa’s largest non-oil exporting nations over the last decade. The country initiated a structural transformation agenda in 2011 that emphasizes reducing carbon emissions in the agricultural and manufacturing sectors (Gaye et al., 2015). The national plan also recognized the importance of conserving and managing the use of natural resources in the country. Ethiopia has also introduced the Climate Resilient and Green Economy (CGRE) strategy (Gaye et al., 2015). The plan examines various green economy projects designed to reinforce Ethiopia’s long-term economic vision. CGRE targets carbon emission reductions through improved energy consumption. Therefore, the underlying projects have focused on hydropower production, rural cooking technologies, forestry development, and optimization of livestock value chains (Gaye et al., 2015). There is a clear embracing of green growth in Ethiopia.

            Other developing countries are adopting green growth to transition from low-income economies to middle-income economies. The majority of green initiatives have prioritized economic welfare over social and environmental. An example of such a developing country is Burkina Faso. According to UNICEF, with a poverty rate of over 40%, Burkina Faso is one of the poorest nations in the world (UNICEF, 2022). The statistic means 1 out of 3 people live below the poverty line, meaning its residents make less than a dollar daily. Since 2011, the country has adopted the Strategy for Accelerated Growth and Sustainable Development (SCADD) (Gaye et al., 2015). The initiative targets accelerating growth in primary sectors, including agricultural productivity. For instance, SCAA targets a 10% growth in agriculture through improved water management, grants for agricultural inputs, professional consultation, and support for agricultural research and development (Gaye et al., 2015). Burkina Faso is a country that relies largely on its natural resources. Its emphasis on green growth can be perceived as motivated by the need for economic diversification.

Developing economies that are oil-based exhibit the biggest need for economic diversification through green growth. Oil has contributed to the sustained economic growth of many developing countries, some of which have failed to diversify their economic structure. An example of such an emerging economy is Tunisia. Through the National Conference on Sustainable Development of 2014, Tunisia introduced the National Strategy for Sustainable Development (NSSD). The initiative is a ten-year plan to improve intra-sectional transformation (Gaye et al., 2015). The approach is perceived as essential in creating new jobs in new sectors. A 2% GDP investment in the initiative was expected would create 227000-307000 new jobs (Gaye et al., 2015). NSSD has been creating new jobs via crop diversification. As an arid and oil-dependent nation, Tunisia has been focusing on expanding its agricultural sector. Soil and water conservation is a policy applied under NSSD (Gaye et al., 2015). Positive agricultural yields are known to impact rural poverty and reduce rural-to-urban migration.

The Effectiveness of the Green Growth Policies

            Emerging economies exhibit different levels of success with their green growth policies. For one, Ethiopia’s GGRE has been quite impressive to the extent it has attracted the attention of the OECD and its neighboring countries. According to Paul (2016), the CGRE has been able to build on a series of development strategies that connect poverty reduction, economic growth, and sustainability. The green growth initiative has led to significant economic growth and poverty reduction through enhanced exportation of agricultural products and in-country energy production. Paul (2016) outlines that the CGRE is a comprehensive example of how a low-income country can rapidly carry out economic development through effective climate change policies. However, the case of Ethiopia highlights some of the challenges facing many emerging economies. Government efforts for the climate change policy to impact rural areas have been limited. The analysis highlights a confluence of factors behind the concerning performance, including poor performance and a lack of institutional autonomy and capacity in the country (Paul, 2016). Ethiopia remains a good example of mitigation policies necessary for low-income countries.

            Some emerging economies are lagging more than others with respect to the performance of their green growth policies. Burkina Faso is an example of a country still in the conceptualization phase of its climate change and economic diversification policies. The World Bank (n.d.) ranks the country 144^th out of 157 countries in its human capital index. While the performance of the primary sector has been fairly high in the last five years due to subsistence farming and cotton exportation, the secondary sector has experienced a massive drop by nearly 25% (World Bank, n.d.). The sector has reduced by nearly 5% and has recorded a sharp increase in gold mining (World Bank, n.d.). Economic diversification through green growth policies should reduce reliance on natural resources, yet Burkina Faso has expanded its gold mining. The country has equally had a negligible effect on its national poverty rate. Moreover, improved green growth adaption should result in the expansion of the service sector, such as tourism. Burkina Faso has not improved or expanded such sectors.

            Tunisia has significantly progressed in consolidating its economy under its national green strategy. The country has realized about 2.2% of increased forest cover since 2015 (United Nations, 2021). Significant challenges exist in improving water and waste management in the industrial sector. For instance, the budget for the Ministry of Environment does not exceed 1% of the GDP. The minimal funding implies reduced enforcement capacity. One of Tunisia’s main achievements under its green strategy is the expansion of its organic farming. The nation is ranked the second topmost African producer of organic agricultural products and 24^th worldwide (El-Amine, 2023). There is considerable concern that Tunisia’s political landscape could be stalling the transition of its energy sector from fossil-fuel-based production to renewable production. The country is gradually introducing authoritarianism as its political model (El-Amine, 2023). An autocratic regime implies reduced public ownership and participation in energy initiatives. The political model will monopolize the energy sector, increasing Tunisia’s reliance on its fossil fuel reserves.

Recommendations for a Transition to Green Economies

            The problem with the solutions for enabling the transition to green economies in emerging countries is the fact that they have to be contextual. Recommended strategies for one economy might not be suitable for the other because of economic, political, social, and cultural differences, among many other factors (UNICEF, 2022). The performance of Ethiopia, Tunisia, and Burkina Faso highlights that government experimentation and financial incentives, including grants, loans, and tax exemptions, are necessary for driving investments and acceptance of green technologies. Ofori et al. (2022) cite a substantial degree of cultural impediments in African leadership behind the slow adoption of green growth policies. Emerging economies must commit a significant percentage of their GDP to the actualization of their national green strategies. Burkina Faso is lagging in diversifying its economy because most initiatives have been conceptualized but not funded for implementation (World Bank, n.d.). A lack of genuine political commitment continues to plague the implementation of national strategies for many developing countries.

            Another identified concern is developing countries’ failure to mainstream the transition to green growth. Most changes are not internally motivated but based on international pressures from global bodies, such as the World Bank and the United Nations. The OECD (2012) reports that creating a national strategy for green growth as the sole mechanism for change risks benefiting particular actors only. Emerging economies can pressure governments and private institutions into increased implementation if there is improved awareness of potential benefits for the average household. Green awareness campaigns must be conducted to generate public support for the green transitions. Governments can equally mainstream the process by introducing standardized assessments, such as the Public Environmental Expenditure Review (PEER), which ensures budget allocations meet project needs (OECD, 2012). Mainstreaming should prioritize raising awareness on the entry points of the green strategies to guarantee their commencement.

            Improved public-private partnerships are critical in ensuring the availability of resources for the green economic transition in emerging economies. Burkina Faso is an example of a country struggling to attract foreign direct investments for its national strategy. Ofori et al. (2023) developed a dynamic Generalized Method of Moments (GMM) indicator for their research to find that foreign direct investment is crucial in achieving inclusive green growth. Emphasis should be placed on the term ‘inclusive’. To attract FDI, emerging economies must accompany their green initiatives with suitable governance policies that curtail corruption, increase transparency, and promote energy efficiency (Ofori et al., 2023). National governments must devise strategies and policies that integrate them into the global architecture promoting the shift towards green growth. Access to the global community is essential to ensuring the availability and quality of green technologies and the application of best practices.

Conclusion

            While most developing economies’ climate change impact is negligible, moving to green economies entails more than becoming environmentally friendly. Developing countries are transitioning to green growth to improve their economic and social welfare. However, the success of green strategies continues to vary from one state to the other. The report finds that a lack of political support, public awareness, foreign direct investment, and public-private partnerships impedes many emerging economies from realizing their sustainability objectives. Developing countries have to internalize the shift to green economies by embracing the changes from a sociocultural perspective. A bottom-up approach that begins with the inclusion of the average populace will help establish a sustainable national green strategy. The policy priority is inclusivity to accelerate the green transition. The global economy is already actualizing the shift to sustainable economies, meaning it is time for emerging economies to move from concepts and agreements to fulfilments.

References

El-Amine, Y. (2023, March 2). Tunisia’s energy sector: A just transition analysis. Arab Reform Initiative, https://www.arab-reform.net/publication/tunisias-energy-sector-a-just-transition-analysis/

Gaye, I., Gnegne, Y, Akol, C, Banda, B., Allieu, A. Kinda, R. & Osaliya, R. (2015). Inclusive green economy and structural transformation in Africa. Brief for GSDR, https://sustainabledevelopment.un.org/content/documents/6856146-Gaye-Inclusive%20Green%20Economy%20and%20Structural%20Transformation%20in%20Africa.pdf

OECD. (2012). Green growth and developing countries: A summary for policymakers. OECD Press. https://www.oecd.org/dac/50526354.pdf

Ofori, I. K., Gbolonyo, E. Y. & Ojong, N. (2022). Towards inclusive green growth in Africa: Critical energy efficiency synergies and governance thresholds. Journal of Cleaner Production, 369(132917). https://www.sciencedirect.com/science/article/abs/pii/S0959652622025100

Ofori, I. K., Gbolonyo, E. Y. & Ojong, N. (2023). Foreign direct investment and inclusive green growth in Africa: Energy efficiency contingencies and thresholds. Energy Economics, 117 (106414). https://www.sciencedirect.com/science/article/pii/S0140988322005436

Paul, C. P. (2016). The development of Ethiopia’s climate-resilient green economy 2011-2014. Climate and Development, 11(3), 193-202. https://www.tandfonline.com/doi/abs/10.1080/17565529.2018.1442802

The World Bank. (n.d.). The World Bank in Burkina Faso. The World Bank, https://www.worldbank.org/en/country/burkinafaso/overview#1

UNICEF. (2022). Country office annual report: Burkina Faso. UNICEF, https://www.unicef.org/media/135541/file/Burkina-Faso-2022-COAR.pdf

United Nations Economic Commission for Africa. (2021). The green economy in Tunisia: An implementation tool of the new sustainable development strategy. UNECAO, https://archive.uneca.org/sites/default/files/uploaded-documents/SROs/NA/AHEGM-ISDGE/egm_ge-_tunisa_eng.pdf