Green economy

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The three pillars of sustainability

'Green' economy is a fast growing new economic development model in contrast to the existing 'black' economic model based on fossil fuels, such as coal, petroleum, and natural gas. The green economy is based on the knowledge of Ecological economics and Green economics that aim at addressing the interdependence of human economies and natural ecosystem and the adverse impact of human economic activities on climate change and global warming. In the midst of the global economic crisis, the UNEP called for a Global Green Deal according to which governments were encouraged to support its economic transformation to a greener economy (UNEP, October 22, 2008).

Green economy includes green energy generation based on renewable energy to substitute for fossil fuels and energy conservation for efficient energy use. The green economy is considered being able to both create green jobs, ensure real, sustainable economic growth, and prevent environmental pollution, global warming, resource depletion, and environmental degradation.

Because the market failure related to environmental and climate protection as a result of high future commercial rates and associated high initial costs for research, development, and marketing of green energy sources and green products prevents firms from being voluntarily interested in reducing environment-unfriendly activities (Reinhardt, 1999; King and Lenox, 2002; Wagner, 203; Wagner, et al., 2005), the green economy is considered needing government subsidies as market incentives to motivate firms to invest and produce green products and services. The German Renewable Energy Act, legislations of many other EU countries and the American Recovery and Reinvestment Act of 2009, all provide such market incentives.

However, there are still incompatibilities between the UN global green new deal call and the existing international trade mechanism in terms of market incentives. For example, the WTO Subsidies Agreement has strict rules against government subsidies, especially for exported goods. Such incompatibilities may serve as obstacles to governments' responses to the UN Global green new deal call. WTO needs to update its subsidy rules to account for the needs of accelerating the transition to the green economy. Research is urgently needed to inform the governments and the international community how the governments should promote the green economy within their national borders without being engaged in trade wars in the name of the green economy and how they should cooperate in their promotional efforts at a coordinated international level.

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  • Common, M. and Stagl, S. 2005. Ecological Economics: An Introduction. New York: Cambridge University Press.
  • Daly, H. and Townsend, K. (eds.) 1993. Valuing The Earth: Economics, Ecology, Ethics. Cambridge, Mass.; London, England: MIT Press.
  • Georgescu-Roegen, N. 1975. Energy and economic myths. Southern Economic Journal 41: 347-381.
  • King, Andrew; Lenox, Michael, 2002. ‘Does it really pay to be green?’ Journal of Industrial Ecology 5, 105-117.
  • Martinez-Alier, J. (1990) Ecological Economics: Energy, Environment and Society. Oxford, England: Basil Blackwell.
  • Røpke, I. (2004) The early history of modern ecological economics. Ecological Economics 50(3-4): 293-314.
  • Røpke, I. (2005) Trends in the development of ecological economics from the late 1980s to the early 2000s. Ecological Economics 55(2): 262-290.
  • Reinhardt, F. (1999) ‘Market failure and the environmental policies of firms: economic rationales for ‘beyond compliance’ behavior.’ Journal of Industrial Ecology 3(1), 9-21.
  • Spash, C. L. (1999) The development of environmental thinking in economics. Environmental Values 8(4): 413-435.
  • Vatn, A. (2005) Institutions and the Environment. Cheltenham: Edward Elgar
  • Krishnan R, Harris JM, Goodwin NR. (1995). A Survey of Ecological Economics. Island Press. ISBN 1559634111, 9781559634113.
  • Martinez-Alier, J., Ropke, I. eds., Recent Developments in Ecological Economics, 2 vols., E. Elgar, Cheltenham, UK, 2008.
  • United Nation Environment Programme (UNEP), 2008a. ‘Global green new deal - environmentally-focused investment historic opportunity for 21st century prosperity and job generation.’ London/Nairobi, October 22.
  • Wagner, Ma. (2003) "Does it pay to be eco-efficient in the European energy supply industry?" Zeitschrift für Energiewirtschaft 27(4), 309-318.
  • Wagner, M. et al. (2002) "The relationship between environmental and economic performance of firms: what does the theory propose and what does the empirical evidence tell us?" Greener Management International 34, 95-108.

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