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How Governments can Promote Sustainable Economic Growth

How Governments can Promote Sustainable Economic Growth

16th Apr 2023


Sustainable economic growth according to the United Nations Environment Programme, is possible only if environmental degradation and climate change are addressed concurrently. In addition to having a devastating effect on the natural environment; we are seeing extreme weather occurrences, resource depletion, and prolonged drought more regularly.

If we do nothing to address these dangers, they will worsen, plunging millions into abject poverty and increasing health and socioeconomic disparities. It will also reduce some areas and even some countries' ability to withstand shocks in the future.

National CO2 emissions promise given before the 2021 United Nations Climate Change Conference, more commonly referred to as COP26 meeting, shows that the world is headed for a 2.7 °C temperature rise by the end of this century, which is far over the 1.5 °C Paris Agreement target. If we keep going this way, by 2050, our global economy will be worth 10% less than it is today.

Many nations' goals have been raised in the wake of COP26 in Glasgow. The latest pledges, however, still leave a large gap in emissions reductions needed by 2030 to keep 1.5 °C within reach, as reported by the International Energy Agency (IEA).

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A more sustainable future that balances environmental, economic, and social consequences may be within reach if governments act now. Yet time is of the essence, and progress necessitates setting priorities; to that end, this blog compiles a list of some ways governments may support eco-friendly products and sustainability.

Provide Specific Plans of Action With Defined Responsibilities.

The gap between lofty promises and realistic, time-bound goals can be closed with the help of detailed, industry-specific road maps developed in partnership with businesses.

Policy measures, initiatives, desired outcomes, deadlines, and required resources should all be outlined in detail. These plans allow governments to announce their progress toward environmental targets and establish who is responsible for what.

The responsibility for implementing a green action plan cannot be limited to the energy or environment ministries alone. Education, health care, social services, infrastructure, housing, transportation, and national security all become inextricably intertwined in this program.

To connect the efforts of all departments to achieve shared goals, a clear vision and a holistic plan are required. Other policies or priorities may conflict with climate goals.

To ensure a whole-of-government, coordinated approach across all sectors, one organization, either new or existing, should be responsible for overseeing implementation. This group is equipped to oversee projects that span multiple departments, analyze them for interdependencies and synergies, predict and prevent problems, and implement fixes as needed.

Because of the importance of their role, local and regional governments should be included in policy design and development from the outset and have the authority and resources necessary to implement more environmentally sustainable programs.

Increase Efforts to Force the Market and Encourage Eco-friendly Innovation.

The environmental crisis demands bold policies that emphasize combating climate change and convey a clear and consistent message to the market and the public about how to bring about profound transformation. A well developed policy will grant governments flexibility to overcome obstacles and provide support across sectors.

Incentives and penalties can encourage or deter businesses and individuals to invest and pursue economic activities consistent with climate goals. To hasten decarbonization, several governments, for instance, are gradually eliminating subsidies for the fossil fuel industry.

Others are implementing carbon taxes and emissions trading to make renewables more cost-effective and ensure that the pricing of goods and services reflects the social value of the natural resources utilized in their creation.

Carbon taxes discourage carbon emissions and generate new cash for governments. The World Bank estimates that by 2021, 64 carbon pricing programs across 45 national jurisdictions will have reduced world emissions by 21.5%.

To monitor environmental impact, governments and regulators must implement consistent, required reporting standards and effective carbon accounting for enterprises to record both upstream and downstream emissions.

Invest More Money Into Eco-Friendly Innovations

Public and private investment in new infrastructure and new technologies, such as development and early-stage demonstration projects, can be accelerated through government policy tools to accomplish climate goals.

The International Energy Agency estimates that a portfolio of demonstration projects will require roughly US$90 billion in public funding worldwide to be completed by 2030. Yet, only about US$25 billion is budgeted, which leaves a massive funding gap.

Governments can better direct their investments in research and innovation if they use a mission-driven approach. To achieve this goal, governments must pool resources to fund projects with well-defined goals and encourage collaboration between the public, commercial, and nonprofit sectors.

More is needed for governments to increase public financing for research and development; they must also foster a policy framework and enabling environment that reduces risk and maximizes the returns on private investment.

Land area covered with solar panel images

Government intervention, such as the creation of alternative markets, the breaking up of monopolies, the opening of more capitalist investment channels, and the encouragement of entrepreneurship, can all speed up innovation.

Increased funding opportunities and long-term stability for institutional investors and insurers would result from more transparent government promises on infrastructure spending and information on pipelines of relevant initiatives expected to be supported.

A growing number of publicly funded, business-focused green investment banks are formed by national and regional governments. They lower the threshold for private capital to flow into climate-friendly, sustainable projects by assuming some associated economic and political risks.

In locations where banks are hesitant to spend heavily, governments must also pave the way for private companies to attract long-term capital. Options, such as sector-specific risk-mitigating systems and policies, as well as sector-specific structured finance.

For instance, feed-in tariffs and quota schemes have aided growth in the renewable energy, wind power and solar power sectors. Contracts for difference agreements, which stabilize future cash streams by lowering price volatility, are also gaining popularity in encouraging investment in renewable energy.

Green Initiative Delivery and Design Should Be Improved.

Governments should thoroughly plan ecological programs before launching them into action. They need a defined goal, reasonable deadlines, sufficient resources, and a receptive regulatory climate, much like any other large government effort.

The proper workforce skills and supply chain capacity are essential to success, but so are engaging with industry and key stakeholders to identify other significant dependencies and barriers to change. It is essential to consider the bigger picture by adopting a "whole systems approach" based on collaboration between governments and non-governmental organizations (NGOs).

It can aid governments in comprehending the myriad of aspects that could influence the program's result, such as system limits or pressures, and in developing strategies to deal with them. The lack of comprehensive data and insights has been a major obstacle in developing a holistic system understanding.

Governments previously could not gather and distribute information to facilitate smooth interactions and inform decision-making, but developments in integrated systems and powerful analytical tools are changing that. Through consistent dialogue and reporting, policymakers will be alerted to the need to take action when necessary.

Drive a People-focused and Systemic Change.

Climate change is a massive and complicated problem that will require the help of people and institutions worldwide to solve.

In the Netherlands, for instance, the Energy Accord for Sustainable Development, signed in 2013, provided the impetus for the energy transition by bringing together government, business, trade unions, and the third sector to set the country's objectives.

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With time and cooperation from labor unions, NGOs, business groups, and local authorities, this process culminated in 2018 national climate commitments for the country.

People can help solve climatic and environmental challenges by altering their habits and sharing their perspectives with legislators. People are more likely to make personal lifestyle changes if they believe they contribute to a larger national effort to reduce emissions.

People can be more actively involved in problem-solving and climate change policy through more participatory modes of public engagement, such as online deliberation and citizens’ assemblies.

Governments may do more to inform citizens of the consequences of their daily actions and encourage them to make sustainable choices in areas such as ethical investing, electric vehicles, home retrofitting, and dietary adjustments.