SD Models & Tools

1. SD Models & Tools Raekwon Chung EDD Director UN ESCAP chung1@un.org

2. Vicious cycle/Quantity of Growth/ TRADE-Off of 3 pillars Exploiting Human Capital Worsening social exclusion Low labor productivity Widening income gap Natural Capital High resource intensity Low resource efficiency Ecological unsustainability exacerbating Low economic Dynamism/ resilience High economic vulnerability Undermining economic vitality

3. Virtuous cycle/Quality of Growth/Synergy of 3 pillars Investing Human Capital High labor productivity Social inclusion Equitable income distribution Natural Capital High resource efficiency Low resource intensity Ecological sustainability enhancing High economic Dynamism/ resilience Low economic vulnerability Reinforcing economic vitality

4. SD Model: Purple & Green Growth Human Capital Inclusive<Purple>Growth Investing SD Natural Capital Ecological<Green>Growth Investing

5. From <Exploiting/Trade-off> to <Investing/synergy> • Fundamental Transformation of Economic System • Invisible Structure: Fiscal Policy, lifestyle, regulations, • Visible Structure: Physical Infra, urban design, • Time & Price Gap: long term benefit vs short term cost • 5 tracks of “Low Carbon Green Growth Roadmap” • From Quantity to Quality of Growth • Reform Invisible Structure • Changing Visible Structure: Green Infra • Promotion of Green Business • Low Carbon Development Strategies • Available on the Web.

6. Closing the time gap • Short-term costs < Long-term benefits 2 Gaps of GG System Change: Time&Price gap • Closing the price gap • Market price < Ecological cost • Integrate: economic + ecological efficiency • = Eco-efficiency(Green Economy) •  Resource/Energy/Carbon Efficiency • LCGG strategy for Eco-efficient Growth pattern, aim to decouple growth from resource consumption

7. 5 tracks for LCGG System Change • TRACK 1: Improving the quality of growth and maximizing net growth • TRACK 2: Changing the invisible structure of the economy: Closing the gap between economic and ecological efficiencies • TRACK 3: Changing the visible structure of the economy: Planning and designing eco-efficient infrastructure • TRACK 4: Turning green into a business opportunity • TRACK 5: Formulating and implementing low-carbon development strategies

8. TRACK 2: Changing the invisible structure • Invisible Structure: Market Price, Life Style, Institution, Governance, Regulations, Technology • Market Price Structure: powerful in changing the way economy operates • Can we change Market Price without damaging the economy and the Poor? YES - Environmental tax/fiscal reform (ETR/EFR): Key Tool for GG

9. Environmental tax/fiscal reform : shifting tax base from income/labor to resource consumption/pollution  Double Dividend REVENUE NEUTRALITY Total tax burden remains same Tax “Bads” not “Goods”

10. Environmental tax/fiscal reform • Tool for DOUBLE DIVIDEND: more employment & Growth with less energy consumption & emission • Mainly implemented in Europe: Germany, Sweden, Denmark, • Will it work for Developing countries in AP? • Recent Indonesia Fuel Subsidy Phase-out; best practice • ESCAP Roadmap Research Paper: First Modeling for DC, found out Great potential Asia-Pacific: • Almost 8% reduction in global CO2 emissions and potential increase in GDP up to 2.8% (Vietnam) by 2020 (AP regional carbon tax scenario) • Unilateral scenario: 2% (Japan)-7% (India) CO2 reduction & up to 1.9% GDP increase (China) (ESCAP, Park, 2012)

11. ETR for 7 countries in AP