The chapter is structured as follows. The first section examines the different
types of ‘green transformation’ that have been proposed. The following section
develops a complementary ‘typology of finance’. Then follows an examination of
the financing needs of different types of ‘green transformation’ and a comparison
with the forms of finance that exist. To better understand why we have the
configuration of finance we do, there is a review of some of the literature on the
economics of regulation and political economy of finance. In the light of this analysis
and research the chapter concludes with some thoughts on how financial systems
might be reformed to facilitate a plurality of ‘green transformations’.
A typology of transformations
Conceptions of transformation that are purely environmental still vary in scope.
Climate change-focused perspectives, for example, focus on the need to decarbonize
economies. The assumption is that, once placed on a carbon-neutral footing,
economic systems can carry on much as before.
1 Widening the lens somewhat,
the reduction of other air- and water-borne pollutants to sustainable levels is a
component of most environmental models of transformation.
Expanding the focus again brings in the sustainable use of natural resources.
The science of maintaining renewable resources such as fish stocks at sustainable
levels is well established, though the practicalities of achieving this are certainly
not (Hilborn, 2008). For forests, the issue is complicated by their role as carbon
sinks, but we have a reasonable understanding of what is needed (Nabuurs et al.,
2007). The supply of non-renewable resources is finite. Beyond a certain point,
therefore, limits to use can only be avoided by recycling materials within a ‘circular
economy’ (Andersen, 2007). Again, the assumption is that economic ‘life’ can
continue broadly as now.
For many, restructuring to decarbonize economies, protect ecosystems and ensure
the sustainable use of natural resources is what a full ‘green transformation’ would
look like. Indeed, this might be thought of as the mainstream view (e.g. UNEP’s
‘Green Economy’).
2 If this is the ‘destination’, the consensus on how to get there
is through prices and market mechanisms. For climate change, this means a carbon
price high enough to incentivize a switch to renewable energy (Bowen, 2011).
For other emissions, the ‘polluter pays’ principle would see green taxes applied to
reduce emissions to desirable levels.
3 Fiscal instruments are also central to
incentivising zero-waste resource use in a circular economy (Stahel, 2010).
For others, the phrase ‘green growth’ is an oxymoron. The idea of there being
‘limits to growth’ has a long history (Leach, this book). From Malthus (1798) to
Meadows et al. (1972), and more recently Tim Jackson (2009), there are two parts
to the argument. First, the capacities of the natural environment are finite. Popula -
tion growth combined with rising living standards will inevitably run up against
these limits; the only question is when. Second, assuming that growth can be made
compatible with these limits is unrealistic. From a climate change perspective, for
example, economic output would need to be completely ‘decoupled’ from carbon
154 Stephen Spratt
types of ‘green transformation’ that have been proposed. The following section
develops a complementary ‘typology of finance’. Then follows an examination of
the financing needs of different types of ‘green transformation’ and a comparison
with the forms of finance that exist. To better understand why we have the
configuration of finance we do, there is a review of some of the literature on the
economics of regulation and political economy of finance. In the light of this analysis
and research the chapter concludes with some thoughts on how financial systems
might be reformed to facilitate a plurality of ‘green transformations’.
A typology of transformations
Conceptions of transformation that are purely environmental still vary in scope.
Climate change-focused perspectives, for example, focus on the need to decarbonize
economies. The assumption is that, once placed on a carbon-neutral footing,
economic systems can carry on much as before.
1 Widening the lens somewhat,
the reduction of other air- and water-borne pollutants to sustainable levels is a
component of most environmental models of transformation.
Expanding the focus again brings in the sustainable use of natural resources.
The science of maintaining renewable resources such as fish stocks at sustainable
levels is well established, though the practicalities of achieving this are certainly
not (Hilborn, 2008). For forests, the issue is complicated by their role as carbon
sinks, but we have a reasonable understanding of what is needed (Nabuurs et al.,
2007). The supply of non-renewable resources is finite. Beyond a certain point,
therefore, limits to use can only be avoided by recycling materials within a ‘circular
economy’ (Andersen, 2007). Again, the assumption is that economic ‘life’ can
continue broadly as now.
For many, restructuring to decarbonize economies, protect ecosystems and ensure
the sustainable use of natural resources is what a full ‘green transformation’ would
look like. Indeed, this might be thought of as the mainstream view (e.g. UNEP’s
‘Green Economy’).
2 If this is the ‘destination’, the consensus on how to get there
is through prices and market mechanisms. For climate change, this means a carbon
price high enough to incentivize a switch to renewable energy (Bowen, 2011).
For other emissions, the ‘polluter pays’ principle would see green taxes applied to
reduce emissions to desirable levels.
3 Fiscal instruments are also central to
incentivising zero-waste resource use in a circular economy (Stahel, 2010).
For others, the phrase ‘green growth’ is an oxymoron. The idea of there being
‘limits to growth’ has a long history (Leach, this book). From Malthus (1798) to
Meadows et al. (1972), and more recently Tim Jackson (2009), there are two parts
to the argument. First, the capacities of the natural environment are finite. Popula -
tion growth combined with rising living standards will inevitably run up against
these limits; the only question is when. Second, assuming that growth can be made
compatible with these limits is unrealistic. From a climate change perspective, for
example, economic output would need to be completely ‘decoupled’ from carbon
154 Stephen Spratt