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South Africa's Pursuit of Green Economy Offers Major Economic and Environmental Benefits

November 22, 2011

Johannesburg, November 22, 2011 – The pursuit of green policies can have major direct environmental and economic benefits for South Africa, but the costs of transition to a green economy should be carefully weighed against the benefits argues a new World Bank report released today.

The report, written against the backdrop of slowing global economic prospects shows how the South African economy, with its close links to the world economy, has suffered, leading to a lower 2011 GDP forecast of 3.2 percent, down from the 3.5 percent projected in an earlier update. For 2012 and 2013, the report forecasts 3.1 and 3.7 percent growth rate respectively, down from the 4.1 and 4.4 percent of the earlier report released in July 2011.

“The report finds that green policies can also have significant co-benefits with growth and jobs but these are not automatic and need to be backed by complementary reforms” said Ruth Kagia, World Bank Country Director for South Africa. “However, green policies are not a ‘silver bullet,’ and they cannot be a substitute for pro-growth, job-boosting policies just as fast growth cannot replace the need for well-designed environmental policies.”

The policy objectives of pursuing a greener economy and green growth are laudable and there are strong economic and environmental benefits to be reaped. However, such policy reforms invariably involve costs and tradeoffs. The report takes a hard look at the entire spectrum of green economy issues and offers fresh insights with a view to informing policymaking for broad-based growth and sustained poverty reduction.

“Green growth means fostering economic growth and development,while protecting natural assets,” said Milan Brahmbhatt and Michael Toman, World Bank Senior Advisor and Research Manager respectively, co-authors of the report. “But natural capital is nearly always overused because it lacks a price that reflects the social cost of depletion due to market or policy failures. Rectifying such failures is key to securing long-term sustainability of the resource base and people’s well-being.”

The report recommends that policymakers make choices in ways that fully reflect social costs and benefits of natural capital. Faster growth needs to be accompanied by stronger environmental protection.

The report cautions that there is no single policy lever that by itself will deliver both growth and environmental protection. There are important synergies to be derived between growth and the environment and that these are likely larger when growth and environment policies are well coordinated.

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