Without the backing of government policies and incentives, the transition to a green economy is impossible. Ministries of Finance, Development and Economic Affairs play a key role in facilitating changes in regulations and incentives, in an economy where nature is valued. Steps to encourage a green economy include:
An essential step in mobilizing green economy solutions is overhauling the current economic infrastructure where policies are implemented in synergy to ensure the sharing of both costs and benefits among stakeholders.
To stimulate change, a cross-sectoral economic policy package that favours sustainable practices and penalises businesses, (local) governments and communities that continue to pollute and degrade the environment.
Based on a range of economic policies, economic instruments can be designed and implemented to incentivise biodiversity-based industries and other green sectors (see solutions under A green economy for people's wellbeing) to secure important natural stocks. Incentives can be used to promote the use of heavily degraded land for palm oil development, while less degraded areas can be targeted for restoration or for expansion of protected areas. At the same time, conversion and poor management of healthy forest ecosystems can be discouraged.
These policies, which include enabling Payments for Ecosystem Services (PES) at scale, tax deductions and subsidies will incentivise local governments, business and communities.
While central to measuring sustainable growth, natural capital has not been explicitly quantified in economic models and accounting frameworks. Natural capital values need to be systematically integrated into national accounts and into macroeconomic indicators that monitor development progress and resource management.
This task can only be undertaken by Governments. Greater land tenure security— including greater clarity on forest carbon assets and rights—has positive economic implications. It reduces uncertainty and generates incentives to improve natural capital management by increasing the likelihood that communities will retain and enjoy the economic benefits of their labor and time in managing natural capital. Greater recognition of community forest management and ownership also significantly incentivizes sustainable management of natural capital.
This requires financing mechanisms based on natural capital indicators which di rect public funds towards targeted stakeholders based on performance in achieving measurable targets—emissions reduction, certification, poverty reduction targets, etc. Effective monitoring and verification capacities are additional essential elements.