Growth policies that trigger Green Economy – I (USA)

-:By Rangika Samaraweera, Gan Shu, Nathan Small, Pankaj Arora:-

What kind of government policies can trigger economic growth in the area of green economy? Recently, my colleagues and I at Anaheim MBA worked on a paper focusing on just that. We looked at 4 different economies –USA, Japan, China, India and delved into what the leaders in these countries are up to. These countries include the world’s top 2 and the world’s fastest 2 growing economies.

For the sake of the blog posts, here’s the summarized paper with key important points. I’ll put the posts in 4 parts – each part looking at one country.

Economics 101 tells us that the kind of policy framework needed to kick start economic reforms are reached through improvements in productivity with reduced inputs of labor, capital, energy and materials. The TFP or the Total Factor Productivity has in fact failed us. When TFP came into play – there was abundance of natural resources and very few people – so TFP made sense. Today it’s the opposite – fewer natural habitats left with ever growing population. What we need is the exact opposite of TFP – something that makes immense use of manpower with as little use of nature as possible. TFP, instead of delivering more free time to enjoy our fruits of productivity, has made us slaves of it self, with free time seen something to be shunned in today’s fast changing economic environment.

But governments don’t get that. They are focused on GDP growth – now with an alibi of moving towards a green economy. Here are some policies in our view that have a high potential to initiate both short-term economic stabilization and promote long-term national economic growth for their respective countries. 

1.      USA: Intertwined Economic and Environmental Policy

Disasters bring change. And when the Love Canal or the Lake Erie fires became public, US government framed the polpular Clean Air and Clean Water acts to determine what companies are allowed to do in the air and water via the EPA’s policies. The U.S. government in some areas has incentivized policies that enable technologies that reduce or eliminate the usage of fossil fuels. 

  • Tax credits to purchase hybrid or electric vehicles
  • Credits for implementation of renewable energy sources and rebates and/or tax credits for implementing energy efficient building equipment.
  • HOV lanes providing quicker vehicular transport via carpooling
  • Increasing tree canopy cover in cities.
  • Encouraging development of more efficient transportation infrastructure.

Generally, policies push technologies that are more expensive to use than traditional equipment, but are written to help encourage private investment in the development of these technologies. This tactic can help open new markets due to people seeing first hand effectiveness and potential shortcomings in the policy framework.

Chicago has implemented a policy that requires increased canopy cover annually with native plant species. This canopy cover has done the aforementioned and has also had other unintended benefits such as reducing some types of crime. Detroit has come up with urban agriculture that makes use of immense space on terraces.

 U.S, being the largest consumer of fossil fuels has its green military policies helping spur reductions in fuel usage, construction of large solar power plants, and development of in-field solar generation.

USA is clearly not a role model of green economy. In fact, it has exported its competitive capitalistic industrial machinery to the world and China and India are fast catching up to that. And in that sense, USA has an advantage – whatever it does, world follows…largely. It has an opportunity to export these green and sustainable policies that can potentially change the trajectory we’re on.

Next…Japan: Tremendous economic growth in the Post war Japan

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