“Green Growth” is a relatively recent and still somewhat amorphous concept. It can be understood in very general terms as balancing investments emphasizing nearer-term income growth to reduce poverty, and investments in sustaining longer-term environmental wealth. Some proponents of Green Growth go further to emphasize the potential for strategically crafted environmental investments and policies to achieve sustainability at low cost, perhaps even to help stimulate nearer-term growth. Standard economic theory on growth and environmental sustainability does not provide assurance of substantial positive spillovers from environmental policies to income growth, and it shows that the “greenness” of an economically efficient growth path can depend substantially on the starting point for the economy. Factor-augmenting technical-change targeting at offsetting resource depletion is critical to sustaining long-term growth within natural limits on the availability of natural resources and environmental services. There are some plausible channels indicating a potential for more synergy between economic growth and environmental sustainability than implied by standard economic theory. These include spillover effects from environmental measures on the productivity of other productive factors; correction of pre-existing economic distortions; and economy-wide “coordination failures” that can be linked to environmental sustainability. However, there is not enough empirical evidence yet available to confidently address their practical significance. Consequently, some claims of substantial win-win opportunities between growth and the environment may need to be tempered.
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