Over the past few decades, technological, governance, and market progress has lifted an unprecedented number of people out of poverty (extreme poverty rate has declined from 36 percent in 1990 to an estimated 8.6 percent in 2018) and delivered incredible new economic opportunities. But, at the same time, this progress has come at a real cost—growing inequalities (the world’s richest 26 people possess the same wealth as the poorest half of humanity) and an increasingly dangerous degradation of the natural resource base which supports life on earth and our economies.
This environmental degradation is starting to reverberate and affect economic growth. If unchecked, there is a real risk of serious impacts on financial stability and the welfare of people around the world. Disasters triggered by weather and climate-related hazards were responsible for thousands of deaths and $320 billion in losses in 2017, and the 2018 Intergovernmental Panel on Climate Change (IPCC) special report “Global Warming of 1.5oC” raised the alarm on the potentially irreversible risks of a changing climate. Water stress linked to climate change is already contributing to migration, which in turn can lead to conflict and political instability. Today, outdoor air pollution kills an estimated 4.2 million people annually according to the WHO.
In the past, many viewed environmental quality as a trade-off with economic growth. Any increase in environmental quality came at a cost or slow-down in economic development prospects. As new clean technologies have emerged and their costs plummeted, it has been increasingly clear that many green alternatives can be cost-competitive. We can have both a clean environment and robust growth. More recently, evidence has shown that sustained growth is, in fact, dependent on environmental protection, and the two must go together. The only viable growth path is one that is low-carbon, resilient, and sustainable.
The challenge now, we argue, is to accelerate the transformation to a better, more inclusive, sustainable economy. This is especially urgent in emerging economies, where growth is advancing most rapidly. These countries are in the process of designing the cities, energy, food, water, and transport systems of the future. The results will lock in growth paths for decades to come. Globally we have witnessed an ability to produce and consume more efficiently and with less waste and pollution in recent decades. However, excessive consumption by the rich along with growth in demand, especially from a growing global middle class, has overwhelmed efficiency gains.
The challenge now is to accelerate the transformation to a better, more inclusive, sustainable economy. This is especially urgent in emerging economies, where growth is advancing most rapidly
In the coming decade, we have a window of opportunity to make this transformation, given the major structural changes occurring across the globe, including rapid urbanization, a growing global middle class with changing consumption preferences, shifts to service-based economies, and increasing automation. The question is: How do we seize this opportunity with the urgency required to tackle the global climate and environmental crisis?
We have organized this chapter around four key changes to economic policy and institutions that we believe are needed to deliver a more inclusive and sustainable future: (1) how to measure economic well-being; (2) how to manage consumption; (3) how to design effective environmental policy; and (4) how to ensure government works well with the private sector and more engaged citizens.
Environmental policymaking today is being informed by policy and institutional choices that often deviate from original notions of neoliberalism. Past writings on neoliberalism say little about the environment, but we can infer some key directions or principles: rely on the private sector and the market to solve environmental problems; limit regulation as this distorts markets; grow now and clean up later; and focus on privatizing property rights. While some of these principles have played a role in advancing environmental protection at the margins, new models are urgently needed. We are rapidly approaching tipping points on inter alia, land use change, freshwater use, biodiversity loss, and climate change that could irreversibly affect growth and development pathways for humanity.