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Alex Wood's presentation to the All Party Caucus on Climate Change
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Towards a greener Canadian economy
Alexander Wood Senior Director, Policy and Markets
awood@sustainableprosperity.ca 613.878.7189
Twitter: ALEXatSP
Master 2
Making markets work for the environment 2
The challenge – and necessity – of defining a green economy
• Definitions of “green economy” abound (UNEP, OECD, WB), even in Canada (CWF, GLOBE, ECO)
• But – in SP’s estimation – they do not capture full nature of what a green economy should be in the Canadian context
• Canada’s economy is diverse, composed of significant resource (primary), manufacturing (secondary), and services (tertiary) sectors. Each of these needs to be taken into account to make our economy “green”
• Just as important as scope is question of static vs. dynamic definition: is it better to talk of “green”…or “greening”?
• Reflecting all of that is need for metrics/indicators that are based on clear understanding of what constitutes ecological limits (both of consumption and sink functions)
Master 2
Making markets work for the environment 3
The economic case for a green economy
• Traditional economic growth theory focuses on interaction of various forms of capital (human, financial, built) but has typically omitted integration of natural capital
• If it has dealt with it at all, it has been as a constraint to growth
• Emerging paradigm around green economy/green growth and the overlapping economic and environmental benefits of efficiency and productivity
• That paradigm emerges from an increased understanding of gap that exists between theoretical economic models (which assume perfect efficiency) and real markets (which are anything but)
Master 2
Making markets work for the environment 3
Canada and the green economy
Why should Canada “green” its economy?
Environmental argument is clear (clean water, clean air, stable climate, etc.)
Economic arguments are getting clearer...
Line of logic goes: We derive wealth from natural capital Using natural capital more efficiently makes it more valuable (productivity
logic) Developing efficiency/productivity solutions to sell to others (innovation
logic)
Master 2
Making markets work for the environment 5
Natural Capital
• Canada has the richest allocation of natural capital in the world ($89,000 per capita: StatsCan)
• The sustainable, effective, and efficient use of that natural capital is what will make us a “green economy”
• As a country, we’ve always derived substantial social and economic benefits from that form of capital
• Key issue then become how to ensure enduring benefits from our natural capital (especially non-renewable kind) and protection of the basic services it provides
billions of dollars
1,400
1,200
Energy Timber Minerals
1,000
800
600
400
200
0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
Master 2
Making markets work for the environment 3
Greening the economy and the Resource Revolution opportunity
“In an era of persistently elevated resource prices, enhancing operating efficiency, improving resource management and developing products with a more sustainable environmental footprint make commercial and social sense. Moreover, advances in building-energy efficiency, enhanced farm yields and power plant efficiency would pay immediate domestic dividends. However, once again, the real prize may be in emerging markets, which contain an estimated 85 per cent of the resource productivity opportunities in the world”
Mark Carney, Governor of the Bank of Canada Waterloo, April 2, 2012.
Master 2
Making markets work for the environment 3
Greening the economy and the Resource Revolution opportunity
Starting this year, $900 billion needed p.a. to realize productivity opportunities that match supply to demand That is the size of the potential market for Canadian innovation in resource productivity Moreover, increased resource productivity saves us costs of expanding supply (Total savings from such investments estimated at $2.3 trillion p.a.)
Source: McKinsey Global Institute, Resource Revolution: Meeting the world’s energy, materials, food, and water needs, November, 2011.
The carbon productivity opportunity
Carbon productivity needs to rise three times as fast as labor productivity did during the Industrial Revolution
The water productivity opportunity
Exhibit I Aggregated global gap between existing accessible, reliable supply1 and 2030 water withdrawals, assuming no efficiency gains
Billion m3, 154 basins/regions
Municipal & Domestic
2%
CAGR
4,500 600
6,900
900 1,500
2,800
100
-40%
4,200 700
Groundwater
Industry
Agriculture
800 3,100
4,500
Relevant supply quantity is
much lower that the absolute renewable water
availability in nature
3,500
Surface water
Existing withdrawals2
2030 withdrawals3
Basins with deficits
Basins with surplus
Existing accessible, reliable, sustainable supply1
1 Existing supply which can be provided at 90% reliability, based on historical hydrology and infrastructure investments scheduled through 2010; net of
environmental requirements 2 Based on 2010 agricultural production analyses from IFPRI 3 Based on GDP, population projections and agricultural production projections from IFPRI; considers no water productivity gains between 2005-2030
SOURCE: Water 2030 Global Water Supply and Demand model; agricultural production based on IFPRI IMPACT-WATER base case
Conclusions
• Progress….but still a fair ways to go
• Resource productivity, as a vehicle for greening the economy, represents a massive opportunity
• Priorities Improving natural capital productivity Identifying ecological limits (metrics) Improving competitiveness and innovation Increasing climate change resilience
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