Annual Progress Report A GUIDANCE MANUAL FOR GREEN ECONOMY .

1 IntroductionSince the term “green economy” appeared in thereport Blueprint for a Green Economy (Pearce,Markandya, & Barbier, 1989), interest in a greentransition has evolved and intensified, particularlywith the emergence of global challenges in the areasof climate, biodiversity depletion, energy prices andwater scarcity. UNEP has confirmed the headwaywith the publication of its landmark Green EconomyReport1 in 2011, which set forth the definition ofa green economy – one that improves human wellbeing and social equity while significantly reducingenvironmental risks and ecological scarcities – andshowed that the process of greening economies canbe a new engine of sustainable growth.In this context, the 2012 Rio 20 Conference reasserted the importance of green economy as a toolfor achieving social, economic and environmentalsustainable development. It specifically acknowledgedthat this approach can be tailored according to localand regional development needs, while workingtowards meeting broader international obligationsand targets. Rio 20 called on all relevant stakeholdersto form partnerships, strengthen institutional andfinancial capacity, and disseminate technology thatwill create an enabling environment for the transitionto a more resilient development pathway in varioussectors of national and international economies.This manual provides a customized guidance on howto conduct a target-driven Green Economy PolicyAssessment (GEPA) in order for policymakers todevelop and adopt green economy policies to achievetheir sustainable development targets. It is aimed atall those who are involved in managing, designing orimplementing projects in the name of green economy(or green growth, green development, low-carbondevelopment and the like). With this manual, UNEPhopes to address some of the growing demand fora methodology from counterparts and focal points inlocal ministries and national policy research institutesas well as high-level decision makers or other relevant2stakeholders engaged in incorporating green economyprinciples into their national development agenda.A typical GEPA includes five activities: 1) establishingpriority sustainable development targets based on theoverall development plans of countries; 2) estimatingthe amount of investments required to achieve thetargets; 3) identifying the policies or policy reforms thatare essential for enabling the required investments; 4)assessing the impacts of the required investments aswell as the enabling policies using a range of economic,social and environmental indicators and comparingthe results with the business-as-usual scenario; and5) presenting the assessment results to inform themaking of specific decisions.What are “green economy policies”? From UNEP’sperspective, green economy as a tool (as opposed to aparticular state of an economy) focuses on mobilising amore efficient allocation of resources through society’sinvestments – enabled by public policies – to achievesustainable development. Based on this perspective,any policy that is able to mobilise and shift investmentsto attain specific sustainable development targets canbe considered a green economy policy.Why focus on investments? Because investments shapethe future of our economies. Investment decisionschoose one type of infrastructure over others, anothertype of production or technology over others, whichnarrows down the options for future choices. Somewill lock in certain technologies and lock out others,while contributing to technological upgrade. Thisseems to be the case for many developing countriesthat are under the technological frontier (in mostsectors). Then there are investment decisions thatcan be physically irreversible such as the clearingof an old-growth forest. With regard to a greeneconomy, transition involves shifting investments toinfrastructure, clean technologies, natural capital andhuman development.

a guidance manual for green economy policy assessmentA wide array of policy reforms, regulatory changes andtargeted public expenditure are needed to trigger andsupport investments that work towards “improvedhuman well-being and social equity while significantlyreducing environmental risks and ecological scarcity” –the results from green economy as defined by UNEP.2In addition, behavioural change and institutionaldevelopment are also important as there is a crucialinteraction between change in households’ and firms’day-to-day behaviour and a shift in investments.This manual thus addresses the following questions:—— How are sustainable development (or similar)targets for guiding green economy policymakingidentified and prioritised (Section 2)?—— How is the amount of the investment required forachieving the priority targets estimated (Section3)?—— How are barriers to the required investmentsanalysed and how are the needed policy reformsidentified (Section 4)?—— How are the overall impacts of the requiredinvestments as well as the enabling policiesassessed (Section 5)?—— How can quantitative modelling be used toconduct the policy assessments (Chapter 6)?—— How should we present the assessment results toenable decision-making? (Section 7).In this regard, a summary of generic sectoral goalsand policy options is given in the Annex to illustratethe policymaking possibilities. It is expected thatexperiences from using the manual will also provideinputs to further improve to this living document.As this manual is unlikely to address all the issues facedby countries in moving towards their respective greeneconomy pathways, other related UNEP publicationsmay also be utilized. One of them is a working paperon the use of indicators to support green economypolicy making, which provides guidelines on how toestablish priority goals, targets and baselines, measurethe extent of policy interventions, and assess theimpacts of these interventions ex ante and ex post.3The other is a guide describing major modelling toolsthat can be used for the various assessments describedin this manual.4 Finally, the “Manual on IntegratedPolicymaking for Sustainable Development”, providesguidance on the process of public policy formulation.5Moreover, it provides general guidance that should beused in an adaptive manner. Countries interested inusing green economy as a tool to achieve sustainabledevelopment have varying contexts. Some may startfrom scratch, while others may have already prioritisedtheir targets and have been searching for ways toachieve them. Some may have developed policies buthave not been able to integrate them into developmentplans and budgets, partly because the impacts ofthe proposed policies are not fully assessed. Othersmay already have made huge investments in greensectors, but have encountered new challenges suchas the marketing of the related products or skills andhuman capacity gaps. Depending on where countriesare positioned in their green economy pathways, themanual needs to be used flexibly, bearing in mindthe overarching objective that it is meant to enabledecisions on green economy policy interventions(plans, strategies, or roadmaps).3

2 Targets, policies and stakeholders2.1 IntroductionThis chapter provides guidance on how to buildan analytical basis for conducting a GEPA. Its basisincludes: 1) the identification of priority sustainabledevelopment issues and the sectors including relatedgoals, targets, indicators, baselines and trends; 2)relevant existing policies and large-scale infrastructureprojects; and 3) major stakeholders. The effort to buildsuch an analytical basis may well lead to a stand-aloneproduct – a stocktaking study. This chapter, however,takes the key elements from a stocktaking study andintegrate them into a full assessment exercise. Thechecklist in Box 1 summarises the steps for buildingthe analytical basis.2.2 Setting targetsThe Rio 20 Outcome Document, “The Future WeWant”, endorsed the green economy as a tool forachieving sustainable development. In applying thistool, it is, therefore, necessary to revisit and list outexisting sustainable development goals, targets andindicators. It is important to keep in mind that suchgoals, targets and indicators are not always framedin the context of sustainable development and thatsome may well have been presented in the name ofgreen economy, green growth, human developmentor environmental protection.Many countries have developed a variety of suchgoals, targets and indicators over the last two decades.Usually, these have been devised through bottom-upparticipatory processes following the first Rio Summit,which adopted sustainable development as a global,overarching destination. Some countries are alsodeveloping new sets of goals, targets and indicatorsin the context of the post Rio 20 internationalnegotiations on Sustainable Development Goals(SDGs). Further yet, in some countries these goals andtargets may overlap with the Millennium Development4Goals (MDGs) or may stem from MEAs such as theStrategic Plan for Biodiversity 2011-2020, adoptedin 2010 by the Conference of the Parties to theConvention on Biological Diversity, which includestwenty global policy targets.As an example of the types of goals, targets andindicators to be considered for a GEPA, Box 2 givesthe example of Mongolia where a green developmentstrategy has been formulated, pending adoption bythe legislators.2.2.1 The need for prioritisationExisting goals, targets and indicators are often toomany. How then does one prioritise? Politically,stakeholder participation is essential for achieving aconsensus on what gets prioritised and for continuedpolitical support of the ensuing decision. Another wayto prioritise is to examine at the scientific evidence onenvironmental degradation and see how it impactson the overall well-being of the country’s population.Analytically, priorities should be given to issues thathave a strong nexus among the social, economic andenvironmental dimensions of sustainable development,not least because a green economy aims to generatemultiple benefits along all these dimensions.If few relevant targets exist, UNEP’s publication “UsingIndicators for Green Economy Policymaking” providesguidance on how to use indicators for identifyingpriority sustainable development issues as well as formeasuring policy interventions and assessing policyimpacts. It employs an approach that highlightscrosssectoral relations across indicators to shed lighton the importance of the underlying issues. Examplesinclude indicators of storm-related damages relatedto the impacts of climate change or of water usageintensity related to the depletion of groundwater.Box 3 shows the steps for using indicators to identifypriority issues.10

a guidance manual for green economy policy assessmentBox 1 Checklist for building an analytical basis for GEPA1. Review existing sustainable development (or

3.2.2 measuring investments for mdgs 3.2.3 measuring investments for climate actions 3.2.4 measuring investments in the t21 model 4 Identification of enabling policies 4.1 investment and enabling policies 4.2 Public expenditure 4.2.1 financing the provision of green public goods 4.2.2 stimulating green markets 4.2.3 fiscal policy