�School of Economics�University for Development Studies�Nyankpala Campus ���ECN 304 -Green Economics��Prof. Joseph A. AWUNI�Department of Economics of SoEC�Email: aawuni@uds.edu.gh �mobile phone: 0246285049���

��Acar, S. and Yeldan, E. (2019). Handbook of Green Economics: 1^st Edition 2019�

The Good Governance Principle (5)�

The green economy is guided by integrated, accountable and resilient institutions.

• An inclusive green economy is evidence-based – its norms and institutions are interdisciplinary, deploying both sound science and economics along with local knowledge for adaptive strategy.
• It is supported by institutions that are integrated, collaborative and coherent – horizontally across sectors and vertically across governance levels – and with adequate capacity to meet their respective roles in effective, efficient and accountable ways

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�The Good Governance Principle (5) 1/2�

• It requires public participation, prior informed consent, transparency, social dialogue, democratic accountability, and freedom from vested interests in all institutions – public, private and civil society – so that enlightened leadership is complemented by societal demand. Economic instruments of greening � Financing the green economy
• It promotes devolved decision-making for local economies and management of natural systems while maintaining strong common, centralized standards, procedures, and compliance systems.

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• It builds a financial system with the purpose of delivering wellbeing and sustainability, set up in ways that safely serve the interests of society.

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The Five Capitals model

• Natural Capital is any stock or flow of energy and material that produces goods and services. It includes:
• Resources - renewable and non-renewable materials
• Sinks - that absorb, neutralize or recycle wastes
• Processes - such as climate regulation
• Natural capital is the basis not only of production but of life itself!

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The Five Capitals model

• Human Capital consists of people's health, knowledge, skills and motivation. All these things are needed for productive work.
• Enhancing human capital through education and training is central to a flourishing economy.
• Social Capital concerns the institutions that help us maintain and develop human capital in partnership with others; e.g. families, communities, businesses, trade unions, schools, and voluntary organizations

The Five Capitals model

• Manufactured Capital comprises material goods or fixed assets which contribute to the production process rather than being the output itself – e.g. tools, machines and buildings.
• Financial Capital plays an important role in our economy, enabling the other types of Capital to be owned and traded. But unlike the other types, it has no real value itself but is representative of natural, human, social or manufactured capital; e.g. shares, bonds or banknotes

Five Capitals Model

Five Capitals Model

• In this depiction natural capital is “...the overarching capital for the others due to its inherent pre-conditionality and underpinning of fundamental human existence
• Human capital is derived from natural capital as humans exist within a biosphere; humans
• then have the capacity and desire to collaborate forming social capital. Finally, natural, human
• and social capitals are combined to produce manufactured and financial capital.

�Features of a Green economy (sustainable society)�

Natural Capital

• In their extraction and use, substances taken from the earth do not exceed the environment's capacity to disperse, absorb, recycle or otherwise neutralize their harmful effects (to humans and/or the environment)
• In their manufacture and use, artificial substances do not exceed the environment's capacity to disperse, absorb, recycle or otherwise neutralize their harmful effects (to humans and/or the environment)
• The capacity of the environment to provide ecological system integrity, biological diversity and productivity

�Features of a Green economy (sustainable society)�

Human Capital

• At all ages, individuals enjoy a high standard of health (According to the latest WHO data published in 2020 life expectancy in Ghana is: Male 63.7, female 69.2 and total life expectancy is 66.3 which gives Ghana a World Life Expectancy ranking of 139)
• Healthy Life Expectancy (HALE) Average number of years that a person can expect to live in "full health" by taking into account years lived in less than full health due to disease and/or injury.
• Individuals are adept at relationships and social participation, and throughout life set and achieve high personal standards of their development and learning
• There is access to varied and satisfying opportunities for work, personal creativity, and recreation

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�Features of a Green economy (sustainable society)�

Social Capital

• There are trusted and accessible systems of governance and justice
• Communities and society at large share key positive values (caring, Integrity, honesty, responsibility, responsibility &social justice, restraint) and a sense of purpose (shared identity, connection with the environment and future)
• The structures and institutions of society promote stewardship of natural resources and development of people
• Homes, communities and society at large provide safe, supportive living and working environments

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�Features of a Green economy (sustainable society)�

Manufactured Capital

• All infrastructure, technologies and processes make minimum use of natural resources and maximum use of human innovation and skills

Financial Capital

• Financial capital accurately represents the value of natural, human, social and manufactured capital� 

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Nested depiction of economy, society, and environment

How to Handle Natural Capital in the Context of green economy

• Climate change is a reality of our time, and the question is not how to hold it back, instead the real question is how much we can hold it back.
• The recent reports from international organizations and national agencies are quite clear: if we do not take severe actions in the next years, the effects of global warming are going to be irreversible
• Our resource-intensive production model is the main reason behind global warming.
• The enormous amount of pollutants resultant from two centuries of industrial progress have increased exponentially the amount of CO₂ in the atmosphere with serious consequences for the environment
• This cost was not acknowledged previously, and the past generations have been using finite resources as an infinite. The low value given to natural capital is one of the explanations of this behavior

How to Handle Natural Capital in the Context of green economy

• Natural capital is a way of thinking about nature as a stock of renewable and non-renewable natural resources that combine (often with other capital) to yield a flow of benefits to people.
• The goods and services that natural capital provides, such as food, water and climate regulation, are called ecosystem services.
• Given the critical role that natural capital stocks and ecosystem services play in enabling economic growth, mainstreaming consideration of natural capital within national development planning will be key to achieving the United Nations (UN) Sustainable Development Goals (SDGs) by 2030
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How to Handle Natural Capital in the Context of green economy

• There are several actions implemented by policymakers to confront climate change and its consequences.
• The Sustainable Development Goals (SDGs) are an ambitious attempt to achieve 17 objectives by 2030 with the main aim of eradicating extreme poverty without putting the environment at risk for future generations.
• One of the most striking points from SDGs is related with climate policy.
• The problem is that global warming is correlated with our current model of economic growth and its intensive use of natural resources. The present measures of development are overwhelmingly dominated by gross domestic product (GDP).

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How to Handle Natural Capital in the Context of green economy

• It seems that GDP is out of the question or, at least, politicians and policymakers are not making the efforts to replace it .
• This GDP “dictatorship” makes the adoption of more sustainable measures through a cleaner and respectful model with our environment difficult.
• The right evaluation and measure of natural capital can be one of the solutions and tools to combine economic development with sustainability.
• In brief, our economic model (without political sign distinction) has abused the environment by consuming finite resources without any contemplation in intergenerational solidarity

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�Current measures including natural capital�

• Designed to quantify the monetary value of all goods and services entering into market exchange, GDP is often considered the “invention of the 20th century”
• However, there is a growing understanding that maximizing year on year growth in GDP is not a feasible target for the 21st century where “sustainable development” is the key to global survival .
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GDP flaws are quite acknowledged by the new welfare theory and environmental economics.

GDP measures are so incorporated in public debates and government policies that alternative measures have a long way to go to generate a consensus on the indicators after GDP.

Some sporadic and isolated initiatives have been trying to contemplate alternatives or environmentally friendly complements to GDP. The most used and standardized measures could be summarized in natural wealth with green accounting and Green Savings.

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��Natural wealth and green accounting�

• The concept of natural wealth has been broadening in the past 30 years.

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• Natural wealth is intrinsically linked to the stock of natural resources that a country or region has in a determined period (mainly years).
• the role of assets (wealth) has been excluded or overlooked in the economic theory, and this situation is even more notorious with natural capital.
• The System of National Accounts (hereafter, SNA) has been focused on the measure of outputs, giving a secondary role to capital stock, in its several variables (machinery and equipment, infrastructure, housing, etc.).

Natural wealth and green accounting

• The role of natural capital is one of the great absences in the national accounting measures. The inclusion of natural assets in the SNA has been slow, and a majority of countries do not have a standardized measure of natural wealth in their accounting.
• A recent effort by the World Bank (WAVES) has pointed out the national initiatives regarding natural capital accounting and how these measures could be included in global indicator.
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• How is natural capital measured in our times?
• It depends on the country and the institutions behind the valuation methodologies
• . Taking into account the last de-bates, the price on nature should be estimated with consideration to its economic

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