A green economy is an economy that works to reduce harm to the environment and use natural resources wisely. It focuses on growing the economy in a way that protects the environment. It is connected to ecological economics but places more attention on how governments can apply these ideas. The 2011 UNEP Green Economy Report states that a green economy must be both efficient and fair. Fairness means treating all countries and people fairly, especially by ensuring a fair transition to an economy that uses less carbon, uses resources efficiently, and includes everyone in its benefits.

One key difference between a green economy and older economic systems is that it gives value to natural resources and the services ecosystems provide, such as clean water and air. It also requires that all costs, including those that harm the environment, are tracked and held as responsibilities of the businesses or groups that cause the harm.

Green stickers and ecolabels are signs that show products are friendly to the environment and support sustainable development. Many industries use these labels to show they are working to reduce harm to the environment. These labels, also called sustainability standards, are rules that ensure products do not harm the environment or the people who make them. The number of these standards has grown in recent years, helping build a greener economy. However, their success is often limited because rules are not always followed the same way across the world, countries do not always agree on how to apply them, and there are not enough rewards for following them. These standards focus on industries like farming, mining, and fishing, and address issues like protecting water and wildlife, reducing pollution, supporting workers’ rights, and focusing on specific steps in making products.

Green economists and economics

Green economics is a way of thinking about economics that sees an economy as part of the natural environment, as described by Lynn Margulis. This approach often combines economic ideas with other subjects, depending on the person or group explaining it. Supporters of feminism, postmodernism, environmental efforts, peace movements, Green politics, green anarchism, and anti-globalization have used the term to describe different ideas, all outside of traditional economic theories.

According to Büscher, since the 1990s, the growing freedom in politics has led to the idea that biodiversity must be explained in economic terms. Many groups, such as non-governmental organizations, governments, banks, and companies, now claim the right to define and protect biodiversity. They do this in a way that focuses on market values, which affects how biodiversity's social, political, and environmental aspects are judged.

Some economists see green economics as a part of other well-known economic theories. For example, it can be linked to classical economics, where natural resources are treated like land, and compared to labor and physical capital (such as rivers being similar to human-made structures like canals). It can also be connected to Marxist economics, where nature is seen as a group of non-human workers that help create value for humans. In neoclassical economics, green economics might involve setting prices for life in developed and developing nations based on power balances, while the value of non-human life is very low.

The United Nations Environment Programme (UNEP) and some national governments, like the UK, are increasingly supporting the idea of natural capital and full cost accounting under the "green economy" banner. This might cause confusion between different economic theories and make them all seem like types of "green economics." By 2010, global financial institutions like the World Bank and International Monetary Fund (through its "Green Fund" program) had stated their goal to value biodiversity and create official, worldwide funding for it.

The UNEP 2011 Green Economy Report states that to make the global economy more environmentally friendly, an estimated $1.05 to $2.59 trillion is needed each year. This amount is about one-tenth of the total global investment each year, as measured by global Gross Capital Formation.

At COP26, the European Investment Bank announced a set of fair transition guidelines agreed upon with other international development banks. These guidelines align with the Paris Agreement and focus on funding the shift to zero-carbon economies while considering social and economic impacts. They also include plans for policy involvement, inclusion, and gender equality to support long-term economic change.

Multilateral development banks, including the African Development Bank, Asian Development Bank, Islamic Development Bank, Council of Europe Development Bank, Asian Infrastructure Investment Bank, European Bank for Reconstruction and Development, New Development Bank, and Inter-American Development Bank, have pledged to support efforts to reduce climate change and promote a fair transition. The World Bank Group has also joined these efforts.

Definition

Karl Burkart described a green economy as one that includes six main areas:

• Renewable energy
• Green buildings
• Sustainable transport
• Water management
• Waste management
• Land management

The International Chamber of Commerce (ICC), which represents businesses worldwide, defines a green economy as "an economy where economic growth and environmental responsibility support each other while helping to improve social development."

In 2012, the ICC released the Green Economy Roadmap. This document includes ideas from international experts who met every two years. The Roadmap is a detailed plan that explains the concept of a green economy. It shows how businesses can help solve global problems. It also lists 10 conditions that guide businesses and industries in moving toward a green economy:

• Open and fair markets
• Ways to measure and report progress
• Money and investments
• Raising awareness
• Considering the full life cycle of products
• Using resources wisely and reducing waste
• Creating jobs
• Teaching and training people
• Working with governments and groups
• Making decisions that consider all parts of the economy and environment

Finance and investing

Eco-investing, also called green investing, is a way of investing money in companies that make products or use methods that are good for the environment. These companies help create new technologies that move away from using carbon (like coal and oil) to more eco-friendly options. Green finance refers to financial activities that are designed to improve the environment.

As industries had more negative effects on the environment, environmental sustainability became important in both popular culture and the financial world. In the 1990s, many investors chose to support institutions that were better for the environment. Although some investors used their money to reduce their impact on the environment, many continued using old methods. Investing in companies that harm the environment and the systems that support them goes against eco-friendly investing.

The Global Climate Prosperity Scoreboard, created by Ethical Markets Media and The Climate Prosperity Alliance to track investments in green companies, found that over $1.248 trillion has been invested in solar, wind, geothermal, ocean/hydro, and other green sectors since 2007. This amount includes investments from North America, China, India, Brazil, and other developing countries.

Green growth

Green growth is an idea in economics and planning that describes ways to grow an economy while protecting the environment. The term was first used in 2005 by Rae Kwon Chung, a director at the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP). It is based on the idea that if economic growth remains a main goal, it must be separated from using too many natural resources and causing harm to the environment. Green growth is closely connected to ideas like the green economy, low-carbon development, and sustainable growth. A major reason for green growth is moving toward energy systems that are more sustainable. Supporters of green growth say that well-designed policies can create jobs in areas like renewable energy, agriculture that protects the environment, and forestry that is managed responsibly.

Many countries and groups, such as the Organisation for Economic Co-operation and Development (OECD), the World Bank, and the United Nations, have created plans for green growth. Some groups, like the Global Green Growth Institute (GGGI), focus only on this topic. The term "green growth" has been used to describe plans for economic recovery after the COVID-19 pandemic, often called "green recovery."

People who disagree with green growth say it does not fully address the changes needed in economic systems to solve problems like the climate crisis, loss of wildlife, and other environmental harm. They suggest other ideas, such as a circular economy, steady-state economy, degrowth, and doughnut economics, as better ways to change how economies work.

About 57% of companies surveyed are investing in ways to use energy more efficiently, 64% are working to reduce and recycle waste, and 32% are investing in new industries and technologies that cause less pollution. Around 40% of companies invested in energy efficiency in 2021.

Ecological measurements

Economic progress is measured using indicators called economic indexes. Green indexes were created to assess how human activities affect the environment, how efficiently sectors like transportation, energy, buildings, and tourism operate, and how investments are directed toward areas such as renewable energy and clean technology.

• The Green Score City Index, studied from 2016 to 2022, tracks how human activities harm or benefit nature.
• The Global Green Economy Index™ (GGEI), published by Dual Citizen LLC from 2010 to 2018, is now in its sixth edition. It evaluates green economic performance and public opinions about it in 130 countries across four areas: leadership and climate change, efficiency in key sectors, markets and investments, and environmental conditions.
• The Circles of Sustainability project, active from 2009 to 2013, assessed five cities in five different countries.
• The Green City Index, a global study conducted from 2009 to 2012, was commissioned by Siemens.

Ecological footprint measurements are another tool used to measure human impact on the environment. These are also used by local governments to evaluate sustainability.

Green energy issues

Green economies need to switch to renewable energy sources like solar and wind. This helps replace fossil fuels and use energy more efficiently. Renewable energy may stop using fossil fuels for electricity by 2035 and completely replace them by 2050.

Markets sometimes fail to protect the environment because of high costs for developing green energy and products. Governments may need to provide financial support to encourage companies to create green energy and services. Laws like Germany’s Renewable Energy Act, European Union member states’ regulations, and the American Recovery and Reinvestment Act of 2009 offer such support. Some experts say companies that understand the benefits of sustainability can profit from green strategies by selling green products to a wide range of customers.

In the United States, the nuclear industry declined by the mid-1990s. No new nuclear power plants were built from 1977 until 2013. This was partly because the economy relied on fossil fuels and because of public fear after events like the Three Mile Island accident and the Chernobyl disaster. The 2005 Energy Bill provided the nuclear industry with $10 million for research and development. With climate change growing more urgent, nuclear energy is now seen as a way to reduce carbon emissions. However, its use raises debates about whether it should be included in green efforts.

A European climate survey found that 63% of EU residents, 59% of Britons, 50% of Americans, and 60% of Chinese people support switching to renewable energy. In 2021, 18% of Americans supported natural gas as an energy source. Nuclear energy is more popular among Britons and EU citizens than among Americans.

After the COVID-19 pandemic, businesses in Eastern Europe and Central Asia had lower-quality green management practices compared to those in Southern Europe. Factors like consumer pressure and energy taxes are more important than a company’s size or age in improving green practices. Companies with more financial resources and better green management are more likely to invest in a wide range of environmental efforts. Energy efficiency benefits both businesses and the environment.

A 2022 survey found that moving to greener energy and stronger climate rules could positively affect 30% of businesses by creating new opportunities and negatively affect another 30% due to challenges. Over 40% of the same businesses believe the shift to greener alternatives will not change their operations.

Criticism

Many groups and individuals have criticized parts of the "Green Economy," especially the common idea of using prices to protect nature. They argue this could let companies have more control in areas like forests and water. Edgardo Lander, a professor from Venezuela, says the UNEP report, "Towards a Green Economy," although well-meaning, ignores that current political systems struggle to create rules and limits for markets. This is because corporations have strong political and financial power, even when most people want such rules. Ulrich Hoffmann, in a paper for UNCTAD, says focusing on the Green Economy, especially "green growth," which relies on gradual changes, may not be enough to handle the complexity of climate change. He believes this approach might create false hope and allow people to avoid making major changes needed to reduce global greenhouse gas emissions. Clive Spash, an ecological economist, has criticized using economic growth to fix environmental problems. He argues that the Green Economy, as promoted by the UN, is not a new idea but a distraction from the real causes of environmental issues. He also criticized the UN's project on the economics of ecosystems and biodiversity (TEEB) and the way ecosystems are valued in money terms.