#DevTalks: Greening Economic Development/What Does it Take?

DISCLAIMER: This webinar transcript was loosely edited and there may be inaccuracies.

Ketan Ahuja: Thank you very much for coming and welcome to the Growth Lab's Development Talks. My name is Ketan Ahuja I'm a research fellow at the Growth Lab here at the Kennedy School, and I studied green growth. Its my great pleasure today to welcome Amir Lebdioui, Assistant Professor in the Political Economy of Development, SOAS University of London. His talk today Greening Economic Development: What Does it Take? Will address how governments can cope with the changing optimal pathways to economic development and address the type of joined up policy that's needed to use decarbonization as a lever to diversify economies, leave commodity dependent traps and increase macroeconomic resilience. Dr. Amir Lebdioui is an Algerian development economist and lecturer in political economy of development at the University of London. Before joining SOAS, Amir was based at the London School of Economics, where he led Canning House Research Forum, a research and policy engagement program on the future of trade in Latin America. His research has focused on the economic diversification of resource dependent nations, low carbon innovation, biodiversity-based innovation and industrialization in the context of climate change. Amir also regularly advises governments and international institutions on industrial policy. He serves on the Advisory Council of the Natural Resource Governance Institute as a member of the African Climate Foundation and is a nonresident fellow of the Africa Policy Research Institute. He holds an Mphil and PhD in development studies from the. University of Cambridge. Welcome to Dev talks professor Lebdioui.

Amir Lebdioui: Thanks for the introduction. It's a pleasure to present at the Growth Lab and at the Kennedy School, but also to be in the place that I'm sorry, I can only refer to us the other Cambridge as I have to stay loyal to my alma mater. So the talk today is about bringing some economic development in different pathways to achieve that goal. Essentially, it's about the intersection of these four dimensions of development, diversification, decarbonization and democratization, which reflects my own research journey. When I did mt PhD I was mostly working on the intersection of diversification, development and resource development resources that many countries then start to work on decarbonization and only recently started to address the democratization of those things because there is a lot of emphasis on climate change, but there are many other ecological goals, such as material pollution, plastic pollutions, degradation, which has an impact on human health and the survival of species. And those four dimensions are also quite important because very often we tend to focus on one or two, sometimes three, but they can sometimes lead to contradictory or opposite outcomes. So focusing on decarbonization sometimes can also increase the metal footprint and therefore have negative environmental effect. As a theory, degrowth movement is better than the rest of the democratization of material footprints. But actually fails as a development theory, and likewise, there is a lot of work on greening growth. But not really looking at structures. It's not just about deploying environmental technologies in developing countries without actually understanding the shift and structural changes needed for them to increase their resilience to climate and transition risks.

The main argument of this presentation, is that the conditions for economic development and macroeconomic resilience are dramatically changing as a result of both climate and transition risks. I won't go into too much details about the process under justice, because I assume that most of you are well aware of those and focus on what to do about it. By the way, the other thing here is about what you do, because here the intellectual argument is not sufficient. It is very nice to say that you need all these for at the same time. But actually, how do you get there? There are many governments that have uncountable number of governments that have a green growth vision. But you know what they say, too many visions can lead to hallucinations. And you can count on the finger like the actual countries that are embarking on a green transformation. Costa Rica is one of them, and not least due to the efforts of and the U.S. just recently.

Here the point I was going to focus on in terms of climate interest and risks is the production side of things which is often overlooked. Most of the developing world is dependent on the export of commodities. They're highly vulnerable to fluctuations. Think about coffee production in Colombia, Vietnam, cocoa production in Ghana. Fossil fuels at risk of stranded assets or minerals that are still at risk of technological disruption if we come up with technologies that use two. The other thing that is really important to highlight before going to the topic of today relates to the right to produce. There are all these transition risks, but I think it's very important to have nuance in the narrative because very often when you talk about these things, we send the idea that developing countries have to address climate change, right, and decarbonize, rise from a developing country point of view, having contributed to the most big stock of greenhouse gases. And to give you an example, today, Africa represents about 3% of global global greenhouse gas emissions. If the entire African continent was to extract all of its known natural gas reserves, in the ground, its share of global emissions would increase from 3% to a mere 3.5%, which is negligible. So when I'm talking about these things, it's important to recognize those needs to also address energy security needs, especially when seeing the reversal in anti-trans in Europe. But at the same time, understanding that there is this right to pollute. The argument that I want to make is that using that right to pollute can often lead to suboptimal growth pathways. Basically the model, the carbon intensive developing model that has been pursued by countries over the past century might not really be replicable or even desirable anymore. Which also leads us to question the relevance of industrialization as a development model. Industry accounts for a lot of global greenhouse gas emissions. But at same time, the point here is that industrialization actually matters as much as ever is a key ingredient of the transition to a low carbon future. But it needs to be different based on new principles of sustainability, revitalization, durability, right the way from the program of obsolescence. And there are a range of co-benefits and green windows of opportunities that arise from green legislation, mostly in terms of job creation, which are have much higher labor intensity than fossil fuel extraction, export market opportunities, but also innovation. The understanding that sustainability is the next innovation frontier. 

However, and this will be the first part of my presentation, those benefits that arise from global decarbonization are captured by a handful of economies in the industrialized world. Which has huge implications in terms of the UN central promise of leaving no one behind. If you look at the distribution of jobs in renewable energy and I apologize for my very poor graphic design skills, you see that a lot of them are generated in a handful of countries. China accounts for about half of them, but also the U.S., Brazil, Germany and India. But the other thing that we see with this map is that those are not the places that are more at risk of losing fiscal revenues and jobs out of, you know, decarbonization and phasing out of fossil fuels. In other words, the countries that desperately need the most, those green jobs. So this has a huge implication in terms of the ability of developing countries to benefit from global decarbonization. And we're not just talking about the quantity of jobs, but we're not even accounting for the differences in quality of jobs. The jobs are created in Brazil and India, they tend to be mostly low paid, low skilled, temporary jobs, but in construction and maintenance of renewable energy plants or sugar plantations, whereas the jobs created in the so-called global north and to be in manufacturing and innovation, so basically better jobs. 

Cool together, but across different types of renewable energy technologies you see slight differences. The highest concentration is with the solar and wind sector as well as the wind energy sector, whereas jobs in biofuels tend to be a bit more diffuse. That pattern is also replicated in the context of low carbon innovation where few countries account - three countries account for countries account for three quarters of our patents in renewable energy technologies. And this is also the case for hydrogen and fuel cells where historically China didn't really have a big role to play. But you can see over the past year that China's share in the kind of distribution of R&D budget inheritance increasing very fast. And talking about hydrogen I want to make a little parenthesis, because we often when we hear about hydrogen, we hear about how this is a great opportunity for developing countries, right? The countries that can produce green hydrogen the most competitively, these are countries in Latin America, North Africa, southern in Africa. However, when you look the global distribution and planet trade agreements, low carbon hydrogen, you see that this is very much geared towards reproducing patterns of commercial dependency. Basically producing green hydrogen in the global South and exporting it to feed into industries and green industries in the world, especially Germany. And this relates to a point that Ricardo Hausmann has made and assume that most of you have heard that about moving towards an energy flat world that now risky hydrogen means that countries that have the conditions to produce, it might be easier for them to actually use that hydrogen for domestic as domestic inputs into local industries. However, in terms of what we're seeing so far, we see that reproduction off of commodity depends. But by the way, this might not be a bad thing on long term because there's so many risks of this technological disruptions around hydrogen. But it's not really about things. As a country in the global north. It's taking more of the risks, at least in the short term, with the idea in the medium to long term that once the technology becomes competitive and globally deployed, there will be a chance of integrating higher segments of that value chain. In terms of export markets and manufacturing, there is a very similar story. Three countries accounts for how of global exports of low carbon technology products.

The rise of China is pretty impressive over the past 20 years. And you see this across a range of low carbon technologies, right, where a few countries really dominate the market apart from electric cars and wind energy equipment, where instead of China tends to be European countries, Germany, Belgium, Denmark. But by the way, this is just looking at exports research. Look at manufacturing capacity in China actually comes on top in every single low carbon technology is just because a lot of it, all of the production is domestically consumed and not exported. So this has huge implications about how we think about comparative advantage in low carbon technology products. And what we see clearly here is that a few countries already industrialized are the ones that are most poised to benefit from decarbonization as an industrial opportunity, which is why we really need to think about going beyond competitive advantage in a way. Think about the dynamic acquisition of of of competitive advantages in low carbon sectors. Thanks to the work of many government economists, we know that a lot of the existing competitive advantages are actually policy induced. There's nothing that makes Danish people better at producing wind turbines, than people in Africa, Latin America. So this goes for pacifying behavior. And that role of governments, right, in stimulating the acquisition of comparative advantages leads us to think about the role of the states for steering green economic transformations. So in a way, they would have to behave more than just referees setting the rules. But more as head coaches, especially in a global economy where countries are competing with one another for these markets. So behaving a bit more like Zidane, right? I'm a bit biased being Algerian. And by the way, I'm really into sports metaphors to talk about economics. If you're interested, I have a decent resource that many countries can learn from Kobe Bryant and Serena Williams. The comparison is of. But honestly, even governments behaving like head coaches.  Which also means I don't see playing the game, but they set up the strategy, the long term vision for players to succeed.

This requires long term vision and sacrifice, so they cannot be blindsided. And this is not to single out Joe Biden. This is this needs to happen across the world. But it just happened to be the person that was photographed in that extremely evocative gesture. And this leads to this whole discussion about the green renaissance of industrial policy and protectionism. I don't want to go too much into the industrial greenwash debate because I know that many of you are well versed in that discussion by now. But the interesting thing is really seeing how the climate agenda is providing this excuse to finally explicitly recognize the need for industrial policy. Even if it has, it hasn't disappeared, right? In countries like the US, where now it's an explicit acknowledgment, well historically. It was more of code, research and development, right? And so on. Once I met a policymaker from Chile, which, you know, there's a kind of ideological story behind it, but they had this kind of industrial cluster strategy, right, picking sectors. But they were still afraid of the terminology that he told me, No, no, we're not choosing sectors. We're making strategic bets on global market opportunities.

So trying to see that that a change in the narrative and across the globe, not just in the US, obviously, but China and the rise of green deals in Korea and other places. So the only thing that I really want to mention about the return of industrial policy is about what is different from standard industrial policy. And in many ways, it's not just about using the same industrial policy tools and just applying it to low carbon sectors. Right. Because the way productivity is attained is a bit different, not just about the logic of producing more to increase productivity and value addition. There is a high emphasis now on resource efficiency, but also so-called environmental grading as a way to add value right through product differentiation diversification as well through circular economy measures, which means that you can diversify to different industries. The challenge of not just decarbonization but also democratization, the carbon footprint does matter a lot, and sustainability is dynamic across time and space. So, for example, you know, you can reduce the marginal footprint by using more water to clean goods, but in water intensive water scarce areas. Obviously, that's not my sustainable. And the other thing is for green natural policy, there's a much higher level of coordination that is needed with other policy dimensions. And actors can purchase an industrial policy, particularly with a role off ministries of energy environment, which then industrial policy.

This was the realm of the powerful Ministry of International Trade and Industry, right from Japan to Korea and many other places. But nowadays, and you can see it in practice, some countries are trying to do industrial policy. You can't do that without aligning your agenda with the Ministry of Energy, right? With the Ministry of Environment and increasingly with the Ministry of Education and so on, because of the need for green skills. Which leads me to present this joined up market shaping. Green boxes. Just a mouthful. But the idea here is that industrial policy is really at the core of many other types of books, and that coordination is absolutely necessary for the success of industrial policy. And that includes coordination with fiscal policies, especially because green industries require long term investments and sometimes high risks energy policy, because obviously, you know, you can't really promote the green industries without ensuring that your energy matrix. Is green environmental policy, which is often also used as a demand side. As the means by Policy like environmental regulation, forcing firms or consumers to adopt different technologies and sometimes increasing providing opportunities to reexamine the scale. LG Lighting, for example, in Europe, right, where the phasing out of incandescent light bulbs enabled LG Lighting to finally become cost competitive. Skills are no small thing. This is the in line with the Gershman Cronin argument of the needs of skilled human capital into youth labor in factories as opposed to agriculture and the importance of green skills, but also labor market policies to ensure that the people that are most vulnerable because of global decarbonization can also benefit from reskilling programs to access green jobs.

The benefit of this joined up approach beyond just fostering being the physician is also the ability to address transversal challenges. The first one I just mentioned to the first one is the issue of the cost of capital for renewable energy in developing countries, which is still one of the biggest hurdle for industrialization, right? By extension, because if you can't really invest in renewables, then you basically can't really promote the decarbonization of manufacturing activities or services. And this is a bit of a paradox, right? Because developing countries that you have significant labor, land construction cost advantages. But, you know, the renewable energy projects cost more there than Europe or North America. And this has to do a lot with the fact that renewable energy projects require much more upfront capital. Than fossil fuels. And this is also related to the cost of debt, because a lot of these projects are financed by debt. And that means that developing countries where usually interest rates are much higher than, for example, in India, the cost in terms of debt stand at about 32% of the cost of future wind and solar PV projects. And this obviously the same across the African continent, leads to distortions and lock in into carbon intensive economic pathways. And by the way, just to illustrate this argument, last year was a record year for renewable energy investments worldwide.

But if you look at the data in terms of renewable energy investment per capita, you see that for North America, it's about $170 per capita. Guess what is the value for sub-Saharan Africa? Thank you, guys. It's actually $1, which is ridiculously low when you put those things into that figure. Right. So it's very clear there is a big hurdle for expanding renewables in the developing world. In terms of joint up both policy approach and trying to reduce IT policy tools to try to address solution that goes from fiscal incentives to lower the upfront costs of green products. Which have bearing cost competitiveness depending on local context. Capacity building provision of technical support. A streamlining of bureaucratic procedures to increase competitiveness. Risk sharing mechanisms to give investors a more stable and predictable revenue stream. But those three solutions still and the policy tools that they include. They still have limited effectiveness. If you don't address the cost of debt, especially in countries that rely on debt to finance projects, which is why a long term solution needs to be about reducing the cost of fixing or borrowing. This can be done in various ways. For example, in countries where a lot of the cost of capital derives from currency conversion risks, indexing renewable energy tariffs to foreign currency can eliminate those risks, those currency hedging costs, green bonds. But this is, again, another debate, right? Whether they're effective or not, whether there is an existing obstacle, Greenham, which is the green premium for green bonds. But across the board, this seems to be a green room, even though it has its size and scale of diverge and lending with concessional terms from multilateral development banks. But there really climate financing is currently not up to the task and needs to expand. So just to give you an example from data I recently heard about, and it really shocked me.

The share of the capital base of the World Bank, which donor countries have actually paid and that is available for lending to developing countries, is about 6% of what donor countries are supposed to give the World Bank. Right? So in those contexts, it's not just about expanding. There's more structural issues to address. The Bridgetown initiative put forward by Myanmar. That's something we can discuss afterwards, whether this can help address this issue in terms of climate finance contribution. Well, this country is the one that is paying its fair share. But of the $100 billion promised as part of the Copenhagen Cup, the US is currently missing about $40 billion in climate financing. The second challenge I wanted to address is ensuring that those green economic transformations also socially inclusive functions, because that might not be the case, which is why we can't really romanticize the impact that decarbonization can have on inequality, not only between countries, but also within within countries. And when industrial policy tools are not coordinated with social inclusion and education policies, economic transformation industries can exacerbate the inequalities.

And the case, of course, Erica, is is a case in point. And these are discussions that we also had with the Costa Rica has has had a very successful export sophistication, industrialization process leading to considerable development benefits. However, a lot of those jobs, one of the on of this process created jobs for already existing skilled labor. Right. Which means that the differential for wages between skilled labor and skilled labor actually increased. And even at the regional area. Right, a lot of jobs were created in the center of the country in some places. But in rural areas on the coast, they didn't really benefit from from this group. And similar things that can happen with green industries, which is why it's extreme point to coordinate industrial social skills and labor market policies to address those skill masters. And this is not just in terms of income levels. Also, the sexual dimension matters to make sure that the people that are at risk of losing their jobs can also benefit from green skills programs. And this is extremely important elsewhere to reduce the popular resistance to low carbon transitions. Right. And ensure that even if you move more slowly, then at least you ensure longevity of this process, but also across gender lines, right? We know that a lot more women are employed in renewables than fossil fuels, but that doesn't mean that this process will still be right, which means that interventions are key to reduce the gender gap. Another thing is adding a few further challenges for newcomers. It's important not to romanticize the extent to which everybody, every country can actually embark on this industrial industrialization path, even if they have the right policy tools. Because risks and challenges exist. The first one is when we talk about green policy, that evidence exists in the literature, the examples that are used very often, especially including in the developing world China, Brazil, India, where those three countries have a huge domestic market size and very often their industry policy relies heavily on demand side both.

But if you're Togo or Peru or Guatemala, I mean, you can't use all of these tools, right, because domestic markets cannot be replicated. There is also the issue of dependance of innovation. Even in developing world countries that really managed to develop very successful competitive green industries like Brazil, with the wind turbine sector, it's heavily reliant. And that's in Kitty. Kitty Hutchison's book heavily relied on preexisting capabilities in our space engineering because the technology for wind turbines is actually very similar to G-4 for helicopters and aerospace suggests links a bit to some of the work you might be doing here on the ground level. And even in China, in Malaysia, which are the two largest exporters of solar cells, is heavily reliant on preexisting electronics capabilities.

There are a lot of the green industries or green products or the extremely. There's a lot of competition, especially solar panels. And actually, if you look at green, the policy tools across the African continent, you see that there is a overreliance on local content requirements in solar and wind, right? This is arguably the worst industrial you could do, because not only you'll never be able to compete with China in terms of exporting those products, but also what happens very often is that it's just increasing the levelized cost of energy at the end, which means that the downstream industries that produce cheap energy, right, for more competitive decarbonized manufacturing services is becomes higher. And in terms of it relies on local content policy tools that were successfully using fossil fuels and reapplied. And this the book by Tony Addison Extractive Industries is quite, quite interesting. And as the technological instruments more than which standard industrialization, the pace of technological uncertainty is moving extremely fast. Right. And you see it even with concentrated solar power power, which was my market strategy to. Right now, technology is already obsolete. So keeping up to date is extremely difficult and need very strong technological force activities. I mean, that the technological disruption is something, you know, is well illustrated by Ben and his work in this area, showing that those things can move extremely, extremely fast. So because of all these risks, why not remain a consumer of low carbon technologies? They can certainly, given the risk associated with industrial policies, especially in countries that have very little related productive capabilities. And the thing to remember here is the risk of doing nothing right and keeping the status quo assured earlier is much higher than trying to integrate lock up in value chains. Right, Because you're essentially hitting straight all. And the other important thing to remember is that there are different ways in which nations can address and tackle green economic transformation plans based on their starting points and capabilities. Which leads me. To present a few research outputs and pursue projects that I have been doing to show that different pathways exist based on their different starting points. And that is not all about manufacturing. And I think this is something that we learn a lot from the work of Carlota Perez, who for decades have been really showing that a lot of the technological sophistication of grading can occur in resource sectors and outside of manufacturing. So before project, I wanted you to present, especially in the spirit of showing those different pathways during those different starting points. The first one is the difficult context of fossil fuel producers, where the work.

That I've been doing was a lot about repurposing existing capabilities and fossil fuel extraction. Towards hydrogen and renewable supply chains with a specific application to the context of Oman. Second one about by the four biodiverse nations. If you're a virus nation, you're going to destroy your biodiversity to put solar plants. That is not sustainable. I saying this a big issue for those nations because very often the way conservation and development have been, the interplay between the two has been either in favor of resource use and extraction or things like ecotourism, which don't really offer a really viable path to to long term upgrading. So health presents some work on biodiversity based innovation, especially the concept of biomimicry and how that can help some of this biodiversity nation leap towards innovation activities. The third one with this time is the concept of the altitude economy in Bhutan. This is a work done with three collaborators. Tony Addison. I will be like that where for the government we've done in the World Bank, we had to think of a new direction strategy. But this is a country that is small, landlocked, mountainous. So, you know, you can't really do the traditional stuff that you do in a country that is large and has a huge domestic market size. And lastly, for the Guatemala still goes bananas of this world. Countries that have a very small domestic market size isn't much. Think about regional supply chain coordination here presents the work I've been doing on the idea of a Latin American Green Deal, right. Fostering synergies and complementarities across the continent. So the first one on fossil fuel exporting countries. Very often when you think about transition from oil and gas to renewables, we think about the fiscal linkage, right? How oil and gas companies are a fossil fuel producers invest their money in renewable energy sector. But there's actually a wide range of transversal capabilities embedded in oil and gas production that could be repurposed right towards renewable energy supply chains and low carbon emissions. Hydrogen, including infrastructure products, knowledge, technology, organization skills. So this is basically about exploiting a dormant competitive advantage in fossil fuel strikes to seize green windows of opportunity and is also a way to promote macroeconomic resilience because suppliers that have those resources or capabilities can then seek market opportunities outside of oil and gas, especially when commodity prices go down. And this is something that suppliers in Malaysia, for example, have done. When commodity prices go down, right, they use those transferable skills in fluid engineering and so on to sell their services in other markets like railway engineering as. This study was based on the survey and was funded by the International Energy Agency, and we're about to get surveys of the major oil and gas companies as we're already transitioning and basically ask them what kind of skills were the repurposing from gas operations to renewables and what kind of skills they could repurpose. And they had to hire new profiles, right?

And what was their background? And interesting insights emerge, right, in terms of the great disparity of genes, versatility and capabilities, but chemical in temperature and fluids, engineering, a hydrogen resource. All right. It can really help you produce hydrogen so you don't start from scratch. But obviously, if you're in a drilling or drilling or subsurface engineer or if you do enhanced oil recovery, those skills are not really needed and the technology and skills are not really needed in renewable energy. And this has great implications when you think, again about a joint approach, because in terms of skills and then the application was done for the Sultan's of Oman, then the universities also have to adapt the kind of skills that they're promoting rather than just the this distance proposed. And interesting to mention that the fiscal level now doing exactly workshops for the central Bank of Oman to kind of have a more proactive role in terms of allocating more capital towards priority sectors and renewables. And that's also linked to macroeconomic resilience. Right? So this is a kind of link between monetary fiscal policies and industrial policies. And by the way, the role of sovereign wealth funds is also particularly important. Traditionally, they haven't had this role of supporting transition. But on the other hand, we also do work on sovereign wealth funds in Africa. Terms of how they can be a lever to promote industrial development, also resilience to transition in countries. The second project, and this is probably my favorite, is about innovation. So I'd like to ask you, what do you see in this bird in terms of what's its value.

For economic development? Perhaps some of you that have an engineering background might see it more than others. This is a kingfisher. What is special about this bird?

I think someone said it - the beak. Engineers amongst amongst you might appreciate the particular aerodynamic shape of the kingfishers beak. And this is actually was one way in which Japanese engineers might be solving the issue for Japanese bullet trains by mimicking the shape of this beach. And they were able to resolve an issue found when the bullet trains were coming out of its tunnels. And the examples are the vast, right? If we have 3 hours gone and talk about this process, then actually that is doing amazing things with artificial leaves, right by military development yesterday. But this is a fascinating field. Basically, in a nutshell, the idea there is that biodiversity besides the ecological value, which of course matters, also has his value as the source of information for innovation, and not just in terms of the traditional extraction of genetic materials or pharmaceuticals cosmetic, but also in terms of imitation of either processes, form or ecosystems.

This field is booming in terms of impacts on innovation, patents, research, and even in terms of estimates of job creation. And the interesting thing is that whereas the lion's share of biodiversity in the world, well, the remaining biodiversity is mostly in developing countries. But a lot of this value, which is currently partly exploited is actually generated in global north countries, where the Arctic system firms and skills to get this innovation value from biomimicry. And throughout my research, I met and tested researchers across Latin America doing amazing things from finding worms that secretes hydrogel that could count as stronger than glue when dry, so it could replace stitches in many other efforts. But there's still a limit to how much those things can be achieved and scaled up, mostly because of a lack of trade and the lack of nationally connected national innovation ecosystems around batteries. So this slide is in Spanish but the idea there is really to think about this process in a holistic way that involves different actors from the state universities Research centers, also local communities that are actually involved in maintaining that biodiversity. Because essentially they're maintaining a bank of ideas for innovation. And think about the joined up approach of course, all of those matter, but one example, particularly for biomimicry. Is the context and knowledge policy. Because if you want to do biomimicry, you cannot just have biological skills. It is strategic mix of biology, engineering, design and chemistry, which are not programs that the standard curriculum provides, which is why some countries are starting, especially in Europe and North America. My university points to this kind of bringing together these different disciplines at the same time.

The third one is the context of Bhutan, as I mentioned earlier. So small, landlocked, mountainous, high transaction cost economy, heavily dependent on hydropower. So here what we did with my colleagues is kind of looking at different criteria and kind of coming up with what kind of solutions are most viable in the Bhutanese context and come up with the idea of the altitude, the economy, and based on the ease of doing this projects and return on spillovers with the idea that for countries that we've done an emphasis on virtual tradable energy intensive services, which circumvents the high costs associated with traditional American exports, things like datacentre scaling services, if you want to go with a more ambitious, the high peak is kind of value added services and a larger green entrepreneurial ecosystem and more sustainability. So in a way, Bhutan could become the alternative greenhouse, more sustainable, more accessible, but foothills of low hanging fruit, which particularly with international payments, very durable services, because Bhutan is one of the first carbon negative countries in the world, but is doing the world a favor. Is not getting compensation for it. So this could be a low hanging fruit, although it requires coordination.

But it's real efforts in some and here the example I wanted to drive in terms of. During the policy process, labor market was in good time. A lot of the poverty and employment is for the youth. That low skill then suffers from alcoholism, amongst many other issues. So here we are making sure that this process is not excessive, exacerbating inequalities and is extremely important.

And the last project is the project of a Latin American Green Zone. Right. And here really the idea is that many Latin American countries cannot just, with the exception of Brazil, maybe cannot really embark on a serious green economic transformation if they do it on their own without regional coordination and integration. But there are complementary strengths from critical minerals abundance from Chile, Peru, Cuba and many other places. It's actually complementary minerals dispersed across the region to manufacturing capacity increases like Brazil and Costa Rica. Low cost renewable energy potential in Chile and Mexico, Paraguay. And proximity to important trade routes like in Panama. But all these strands could be faster towards the development of efficient regional industrial ecosystems around low carbon technologies. And one of the most shocking example is wind turbines, right? This is something where Latin America has all the minerals to do existing capacity in technology, to do it in Brazil and has the largest demand for wind turbines in the world. But a lot of these raw materials exported to most China as raw materials and reimported. And the cost of transporting and shipping wind turbines is extremely high. But economically and ecologically, because you have to ship this massive things across the globe. And by the way, 98% of balsa wood, which goes into the blades of wind turbines, is producing globally. So this really shows about the kind of things that could be achieved with regional coordination and missed opportunities by not collaborating. And the impact would be across different types of sectors. But it's not just about industrial development. It also includes agriculture, biodiversity protection, especially for assets that cut across borders like the Amazon. This is where there's been a lot of interesting efforts already, climate smart mining, but also kind of clean energy, right? If you have coordinated renewable energy deployment policies, which integrates regional grids and transmission systems and actually also enables greater energy supply security. Similarly to the Nordic model of the North Pole, where actually when you have less sun or less wind, you have alternative energy sources from other countries that pick up. By then you have a more stable grid. Obviously there are policy challenge challenges, right? Financial ones. But I don't think they're the most important because this things are in the investment. The most important ones are at the political level, the kind of coordination that you need to make that happen. An ideological divergences, rivalries, geopolitical positioning, those things have historically hindered market integration and can make consensus difficult to reach. But as Antonio Gramsci said, you need to have pessimism of the intellect, but optimism of the will and cooperation is already existing in some formats, especially on climate issues.

The new pink tide offer opportunities for alignments. There are still some challenges in the African context. There are also similar discussions about regional coordination of policy. There's another challenge which is which is the big disparity in capabilities amongst countries, which means that a lot of countries think that this kind of integration means that the South Africa, Egypt, Nigeria would really take off. And for the other ones, you won't really make a difference. So a few takeaways. Decarbonization brings about both challenges and opportunities for economic catch up rights. And so far there are huge implications for the central promise of the UN Sustainable Development Goals of leaving no one behind. There are different starting points and pathways, which also calls for creativity. So the process of mimicking what countries do in terms of development, industrial development and green development is not always, doesn't always, especially because of policy of composition. If everybody tries to do same thing and B, the strategy is not viable anymore, right? Because you can't have that. Everybody wants to be a regional hub for hydrogen, by the way. I mean, there's a limit to how many hubs they can be, by definition, technological constraints in terms of the coalition public opinion that is needed. And here is really important thing about those things in economic terms of job creation. And the interesting thing with the Biden Administration Inflation Reduction Act is that even though this is industrial policy, I don't think that ecological reasons are mentioned at all for this reason. This idea is really to get some some buy in from different communities that really want to see benefits in terms of jobs. And interestingly, at the political level of the states where investments are happening are states that interview dominated by the Republican Party. So this is also a way.

To link it with special promises, purposes. Lastly. There's a limit to what can be done without the real reform of the international financial and trade systems. You mentioned the financial system as it turns up, the terrible state of climate financing and even the type of governments climate financing is not the right one. Very often it's really about financing to deploy technologies produced in the global north. I have a friend in government in Latin American country saying that for hydrogen, all of the financing comes with active negotiation to keep the manufacturing and job in the global north. And the trade system as well. WTO is today in a very awkward position and shows that the rise of green industrial protection policy and protectionism so the system is not really fit for purpose in terms of achieving those goals. I want to end with this quote from Charles Darwin. It's not the most intellectual of the species that survive, which is perhaps a useful thing to say. Consider the best and brightest, if not the strongest that survive is the species that survive. The species that survives are the ones that is able to best adapt and adjust to the changing environment in which it finds itself. But that applies to economics. That also applies to economics in terms of adapting to the challenges that we face today in terms of promoting economic development, thank you all for your attention.