Key indicators of economic performance for resource-rich developing economies are net national income and savings that are adjusted for natural capital depreciation. These indicators vary inversely with the reliance of developing countries on primary product exports, suggesting that highly resource-dependent economies are not expanding physical and human capital sufficiently to compensate for declining natural capital. Natural resource-based sovereign wealth funds can mitigate the impacts of natural capital depreciation on the economic performance of resource-dependent developing economies. But to do so, the overall management practices, governance and transparency of these funds must improve.

Although there is progress in developing green sectors in some countries, the key challenge facing the expansion of economy-wide green innovation and structural change is the absence of relevant policy follow-up to the green stimulus enacted during the Great Recession. The boost to green sectors provided by such measures is waning quickly, given that much of the green stimulus focused on energy efficiency. The biggest obstacles to sustaining green growth are major market disincentives, especially the underpricing of fossil fuels and market failures to spur green innovation. A three-part strategy to overcome these obstacles would involve, first, removing fossil fuel subsidies, second, employing market-based instruments to further reduce the social costs of fossil fuel use, and third, allocating any resulting revenue to public support for green innovation and investments. Such a strategy would ensure that green growth is not about promoting niche green sectors but instigating economy-wide innovation and structural transformation.

Recent efforts to establish a financial mechanism to reduce emissions from deforestation and forest degradation (REDD) have sparked hopes for the world’s first global payment system. REDD could help conserve forests in developing countries, lessen greenhouse gas emissions and ecological degradation, and overcome the chronic funding gap for tropical forest conservation. However, two incentives also work against any international agreement for a global payments scheme, such as REDD. First, given the high costs of forest conservation, some wealthy countries may try to forgo contributing to these costs in the hope that other developed countries will cover them fully. Second, any negotiated agreement involves substantial transaction costs for each signatory, including monitoring and verifying changes in deforestation rates and carbon emission in developing countries. The most likely outcome is an international payments scheme that is underwritten by only a handful of rich countries, but provides a level of global protection much lower than is needed. Alternatively, there will be no agreement. To overcome such outcomes, the international community needs to think more creatively as to how to agree, design, implement and verify international mechanisms for payment of ecosystem services.

This paper assesses the extent to which G20 green stimulus initiatives enacted during the 2008–9 recession have instigated a global ‘green recovery’, and how further green recovery policy initiatives by the G20 relate to concerns about chronic fiscal deficits and global imbalances. Implementing further green measures will require G20 economies to commit to increased public investments, new pricing policies, improving regulations, more aid disbursements and other policy changes. Although there may be concern that these additional initiatives could worsen the chronic fiscal deficits and structural imbalances, if properly enacted, such a green economic recovery strategy should help alleviate, rather than worsen, unstably large fiscal deficits, long-term real interest rate rises and inflation, and global imbalances.

The role of natural resources in fostering economic development is examined for key historical epochs, from the agricultural revolution in 8,000 BC to the present. Natural resource exploitation has been important to development for most of global history. Depending on which epoch is examined, resource-based development could be viewed as “successful” and sometimes not. Simply because a developing economy or region was endowed with abundant natural resources does not guarantee that its natural wealth is exploited efficiently and generates productive investments. Institutional factors also matter, and environmental conditions may also determine whether or not countries develop “good” institutions.