Greener Economic Growth

February 13, 2015

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Green Growth Challenges and Opportunities in FYR Macedonia

World Bank in FYR Macedonia
Public investment choices on green actions can be guided by findings generated by macroeconomic
modelling. Analysis shows that the impact on GDP differs across climate action measures. Among
mitigation measures, those aimed at increasing energy efficiency have stronger positive effects driven
by savings on energy. Less energy use means more resources available for other sectors.
Lower energy demand translates into a decrease in energy commodity prices, which stimulates other
sectors to expand output over time. On the other hand, transport measures constitute a negative
impact on real GDP as they require not only higher initial expenditures than the baseline, but also
higher outlays on the maintenance.
In the short run, the effects of adaptation interventions are similar to those of mitigation measures, but
they start to bring benefits to the economy soon after their introduction through the expected value of
avoided losses.

In practical terms, some useful insights for policy and investment decision-making include: public
investments needed to prevent losses in agricultural production are significantly higher than those
needed for maintaining various infrastructure services. The investments in infrastructure resilience can
be interpreted as a type of insurance against the risk that a changing climate will disrupt the
infrastructure services and derail the countrys growth in future.
More specifically, the greatest investment potential in the water and agriculture sectors lies in
optimizing agronomic inputs, rehabilitating drainage infrastructure, expanding irrigation systems and
promoting hydropower. Moreover, from the viewpoint of cost efficiency and economic performance,
FYR Macedonia should focus on energy efficiency when it comes to reducing greenhouse gas
emissions.
Relative to the business-as-usual scenario (BAU), green measures enabling 40 to 70 % reduction in
emissions by 2030 costs about 1 to 2 % of GDP in incremental investment costs, while adaptation
measures in the water and agriculture sectors are profitable even at a high discount

rate. Implementation of green policies and investments will dampen GDP by 2.7 % in the short-term
but boost GDP by 1.5 %of GDP by 2050.
Greening and growing may seem at odds at first glance, but a closer study shows that smart decisions
today will better position FYR Macedonia to achieve both. The country should aim not merely to
survive going green. Rather, the country should aim at enhancing connections to global knowledge,
fostering local technological innovation and building green jobs, to better position itself for riding the
green wave.
The full text of the FYR Macedonia Green Growth Country Assessment can be foundhere.

http://www.worldbank.org/en/country/macedonia/brief/greener-economic-growth