GREEN GROWTH: FROM RELIGION TO REALITY 7 case studies on ambitious strategies to shape green growth The Pathways Project and CRESTS Discovering the path to a low-carbon tomorrow Prepared for Green Growth Leaders by: Mark Huberty, Huan Gao, and Juliana Mandell, John Zysman, Nina Kelsey, Jakob Riiskjaer Nygård, Jeremy Pilaar, Andrea Seow, Pilar Fox, Alice Madden with Jany Gao, Kate Goldman, Irene Choi, Crystal Chang and Benjamin Allen © June 2011 The Berkeley Roundtable on the International Economy INDEX 1: From Religion to Reality 04 Energy systems transformation for sustainable prosperity 2: An Analytical Overview 18 Seven Green Growth Cases 3: European Union 21 Green Growth as Necessity and Liability 4: Denmark 31 Country Case Analysis 5: United States Federal Green Policy Overview 44 California 50 State Case Analysis Colorado 61 State Case Analysis 6: Korea 67 Country Case Analysis 7: China 75 Country Case Analysis 8: Brazil 85 Country Case Analysis Chapter xxx FROM RELIGION TO REALITY: Energy systems transformation for sustainable prosperity1 John Zysman2 and Mark Huberty3 ©BRIE 1 Earlier versions of this paper were pre- 2 John Zysman is Professor of Political pared for the European Council Informal Science, University of California Berkeley Competitiveness Discussion − Internal and Co-Director, Berkeley Roundtable on Market during the Belgian Presidency the International Economy. Brussels, September 30, 2010; and Green Korea 2010: Strengthening Glo- 3 Mark Huberty is a Ph.D. Candidate in bal Green Growth Strategy: Policy and Political Science at the University of Cali- Cooperation."September 9, Seoul Korea, fornia Berkeley and Graduate Researcher sponsored by the National Research Coun- at the Berkeley Roundtable on the Interna- cil for Economics, Humanities, and Social tional Economy. Support for this research Sciences (NRCS), the Presidential Com- came from the United States Environmen- mittee on Green Growth (PCGG) and Uni- tal Protection Agency STAR Fellowship ted Nations Department of Economic and and the Fulbright-Schuman Fellowship. Social Affairs (UNDESA). 4 Chapter 1 4 Certainly, climate change mitiga- 1: Green growth: moving the discussion economic growth and emissions reduction. Doing so, it tion will require significant reduc- tions in carbon emissions over the from religion to reality? would solve the political economy problems created by next century. The enormous car- the transition to a low-carbon society, offering a world bon footprint of fossil fuels suggests that this goal will require the trans- There are compelling and varied arguments for moving where a growing green economy rewards the winners of formation of today’s energy system. Dependence on imported energy to low-carbon, high-efficiency energy systems. Reduc- the green energy revolution and compensates to its los- poses, for many countries, signifi- ing emissions to limit or avoid climate change leads the ers. Given these advantages, it is no surprise that politi- cant economic and political secu- rity risks, quite apart from the im- public debate, but reduced dependence on imported en- cians from Brussels to Beijing have embraced the prom- pact on their balance of payments. ergy, avoidance of conflicts over energy resources, and ise of green growth via energy systems transformation.5 Conflict over energy resources will, very likely, become more in- the rising price of fossil fuels also motivate action. Nev- tense as the energy requirements of ertheless, the potential cost and difficulty of making the the emerging economies particu- larly the new titans – China, India transition to a new energy system have generated sub- "The easiest arguments about green growth are not and Brazil – expand. Apart from stantial opposition from entrenched economic interests conflicts over access to resources satisfactory" as demand pressures mount fossil and consumers alike.4 fuel prices will rise and often spike. In this article we ask whether and how this transfor- A broadly cast solution will be needed to contain emissions, limit mation could become an economic opportunity rather But the easiest arguments about green growth are not import costs and political vulner- than a costly burden. Could a transformation to a low- satisfactory. Indeed, both politically and technically, the ability and help stabilize energy cost. Just adding energy efficient carbon energy system induce net economic growth that green growth arguments are fraught with challenges. lighting or solar panels to the ex- isting system will not solve any of can ease the transition to a low carbon economy? Or New “green collar” jobs may not be enough to offset the these problems. The changes re- must it only be a pricey impediment whose costs offer “brown collar” jobs they replace. Green growth wholly quired will be significant. support to those who would resist change? We address dependent on export of green energy products threatens 5 For a full review of the debates three aspects of this problem: a new green mercantilism where countries view green on green growth and the evidence for the positions in that debate, see: growth as a zero-sum game. And while green energy may Mark Huberty et al, "Shaping the 1. What are the proper roles for markets, prices, and gov- offer new opportunities to the energy sector, it remains Green Growth Economy: a review of the public debate and prospects ernments in the move to a new energy system? unclear what new prospects an energy system built on for success", prepared for The 2. Which policy interventions can become investments “green electrons” offers to the wider economy, which al- Mandag Morgen Green Growth Leaders Forum, April 2011. Avail- in a productive future, and which are just costs that ready enjoys abundant, dependable energy from other- able at greengrowthleaders.org/ we must bear to achieve our other policy objectives? wise indistinguishable—but cheaper—“brown electrons.” wp-content/uploads/2011/04/ Shaping-the-Green-Growth-Econ- 3. Can the shift to low-carbon, high-efficiency energy Debates over energy policy remain rooted in issues omy_report.pdf. Last accessed 9 drive “green growth” and business opportunity? of how much must be paid and by whom, and solutions May 2011. mired in what appears to be diffuse, hard-to-identify As we shall argue, answering these questions must be- benefits in the face of acute and easily observed costs. gin with the concept of an energy systems transformation, Whether right or wrong, those fears limit support for the which we turn to in the next section. transformation. Moreover, given the central importance To date, such discussions of “green growth” have been of the energy system to modern industrial society, the more religion than reality. For those convinced of the effort to change the system will in any case encounter urgency of a low-carbon energy systems transformation, determined interests entrenched in the old order. In “green growth” holds out the hope that the investment this context, it’s no wonder that change has been slow and innovation required for this transformation can be- in coming for all but those economies most exposed to come the foundations of a new wave of economic growth. unstable energy prices and supplies. This would cut the Gordian knot of tradeoffs between Green Growth: From religion to reality 5 Chapter 1 2: “Green growth and the transformation power grid and energy use to accommodate wind pow- 6 Roger Noll (2011) writes “ As a result, many prospective tech- of the energy system: a first step toward er’s fundamental intermittency. Likewise, an efficient, nologies that might contribute reliable electric car will require substantial increases in to reducing the cost of curtailing reality" GHG emissions are complements electricity supply from low-emissions sources, and a new of either other potential green The advocates of “green growth” may be correct. Indeed, technologies or other investments network of refueling stations, even as it promises to radi- that must be made to accommo- we hope they are. But moving green growth from re- cally reduce the role of oil in transportation. These prob- date their widespread adoption. “ ligion to reality will require going beyond jobs or ex- See “Encouraging green energy: lems demonstrate the importance of energy as a system, a comment”, Energy Policy, forth- ports to examine how changes in to the energy system and inform against approaching treating the problem as coming. can create pervasive economic growth. Earlier systems one of isolated solutions.7 7 This system transformation will transformations—the railroads or information technol- This article argues that political and economic suc- require difficult changes in three distinct domains, 1) Energy ef- ogy—drove growth by changing the possibilities for pro- cess at such a green energy-led systems transformation ficiency can reduce demand, but duction in the broader economy. The opportunities that can only come from the possibilities it would create for those demand reductions make planning harder and diminish the emerged from these transformations created powerful the broader economy. Facilitating those possibilities requirements for new capital in- interests that sustained them, and generated the prof- confronts policymakers with two problems: first, how vestments potentially embodying low carbon technology. 2) Rene- its and employment to continue investment in the new to shift the development of the energy system from its wable electrical energy sources system and absorb the workers displaced from the old. present high-emissions, low-efficiency trajectory to a are intermittent, creating new de- mands for grid management. Bio- Green growth, if it emerges, must come from this kind of low-emissions, high-efficiency alternative; and second, fuels require significant alteration systems transformation. of fuel distribution systems; and 3) how to enable the broader economy to discover and ex- Decarbonizing existing fuel sour- press the presently unknown—and unknowable—oppor- ces, as well as introducing renew- ables, comes at the price of higher tunities that such a new system may create.