In August 2008, the President of Korea said:
Today, on the occasion of the 60th anniversary of the founding of the Republic of Korea, I want to put forward ‘Low Carbon, Green Growth’ as the core of the Republic’s new vision.
Green growth refers to sustainable growth which helps reduce greenhouse gas emission and environmental pollution. It is also a new national development paradigm that creates new growth engines and jobs with green technology and clean energy.
Green technology puts together information and communications technology, biotechnology, nanotechnology and culture technology, and transcends them all.
On further reading, there may be another agenda here. President Lee linked this vision to energy security targets.
The Government will make all-out investments to boost the use of new and renewable energy from the current 2 per cent to more than 11 per cent by 2030 and, ultimately, to more than 20 per cent by 2050.
R&D investments in green technology will be increased more than two times, thereby making Korea a leading powerhouse in the green technology market, which is expected to amount to 3 quadrillion won by 2020.
Every nook and cranny of the homeland … will be turned into a new world … where solar, wind and tidal energy are fully utilized.
The Government will carry out the Green Home Project so that one million homes will use new and renewable energy. New green energy technology for such things as pollution-free coal and light-emitting diodes will be developed.
In addition, great emphasis will be placed on nurturing eco-friendly and highly efficient green cars as one of the new growth engines. During my term in office, I will help empower Korea to emerge as one of the top four nations producing green cars in the world.
Green technology will create numerous decent jobs to tackle the problem of growth without job creation.
President Obama likewise puts emphasis on ‘green’:
President Obama does not accept a future in which the jobs and industries of tomorrow take root beyond our borders. It is time for the United States to lead again. Under President Obama, we will lead again, by developing an American clean energy industry, a 21st century economy that flourishes within our borders.
• Creating new jobs in the Clean Energy Economy. Drive the development of new, green jobs that pay well and cannot be outsourced.
• Investing in the Next Generation of Energy Technologies. Invest $150 billion over ten years in energy research and development to transition to a clean energy economy.
Interestingly, as in Korea, this statement is followed immediately by a reference to a parallel program on energy supply security:
‘We must make the investments in clean energy sources that will curb our dependence on fossil fuels and make America energy independent.’
A focus on green investments is also likely to emerge in the context of ADB President Kuroda’s call for a rebalancing of economies in Asia.
‘At a time when investment is desperately needed to stimulate economies, we need to target those investments to green development, including clean energy, to mitigate climate change,’ he said. He reiterated these points on 29 May at the East Asia Climate Forum.
It’s a debate building in Australia. My Adelaide colleague Mike Young has said that ‘Australia will need to invest heavily in green industries if it wants to keep pace with the new economic paradigm of the 21st century’.
Yes, investments in green technologies will add to short run growth, and good investment now may save costs in the future. But the issue is the institutional set-up in which those investments are chosen. Bad institutional set-up, making the wrong choices, and waste can not only shift levels of income, but also slow their growth. The best illustration of this is the intention to bring all possible mechanisms to bear on dealing with greenhouse gas emissions.
It’s a big problem so it will need a big solution. Bringing to bear all possible mechanisms – emissions pricing, plus subsidies for particular technologies and mandatory targets – might seem sensible.
But the Productivity Commission in Australia has argued that a competitive process (driven, for example, by charges for environmental inputs in production processes) is more efficient than mandatory targets for specific technologies, and certainly more efficient than mandatory targets in the presence of pricing of environment inputs.
A policy stocktake, followed by a significant reform program with a focus on introducing competition (including from foreign providers) will help get environmental policy right. A popular approach to selecting green investments is to run up a shopping list of what appear to be good ideas. But this shopping list is easily taken over by noisy interests. A policy stocktake, with a focus on preserving competition, would also be useful to help avoid that consequence.
The design of these reform systems is an area in which regional cooperation is called for– and it’s an area in which APEC has a comparative advantage. In addition, in the case of green investments, preliminary work on the development of relevant technology will be relatively more important. The same questions about incentives for innovation apply in the service sector, but they are more pointed in related green technology.
The operation of the national innovation system, international cooperation in research and technology sharing are all talking points, at both the national and the regional level. A competitive process – supported by a policy stocktake and a reasonably sound innovation system – is the best foundation for success.
Great article Christopher. Korea is clearly leading the race to create a green economy. Hysterical National Party MPs aside, Australia is waking up to this new economic reality, and we can see tentative steps by government to invest in this area. However, business is running much faster. I would be interested to see stats on the proportion and growth of new business investment in resource use efficiency in Australia vs other countries (water, energy, waste).
I like your second paragraph, Christopher. The best the government can do is to create an environment for the private sector to innovate to bring the best technologies for green growth. Government mandates are not necessarily good. It is no different for some politicians or bureaucrats to pick up winners, and they seldom can get it right.
The important thing is the price signal. If government can get a creditable pricing of carbon emissions, and have a future path for it, then the private sector will react. The government can provide some incentives to innovation and it can use the revenue from a carbon tax or emission permits.
PC sometimes makes very dry and irrelevant recommendations. But I am with PC On this point – let the market and the private sector work through competition according to price signal and incentives.
I prefer a universal carbon tax and have a schedule for the price to go up over a period. Emissions permits and trading are likely to be less effective and less efficient. They, like the current Australian government proposal, will probably leave transport emissions out of the scheme.
A universal or uniform carbon tax is the most efficient and effective way to do it, even though it is difficult to get the tax rate right at the beginning to achieve certain reductions. But that can be sorted out fairly soon.
This difficulty of a carbon tax is no different to the use of interest rate to manage the economy. It takes time.
So my approach to emissions reduction is a universal carbon tax and certain government incentives for innovation and development of new technologies.
It is better to have a global carbon tax and an international transfer system for high cost countries to pay for low cost countries. Alternatively, an international agreement on reduction targets for countries and then supplementing that agreement with an international emissions trading system.