This paper reviews the literature for a project which seeks to develop a new Green Growth Diagnostics methodology and apply it to countries in Africa.
The original growth diagnostics methodology was developed by Haussmann, Rodrik and Velasco to identify the key constraints holding back economic growth from its full potential. Their approach was driven by the needs of policymakers facing the dilemma that most problems have multiple causes, but governments cannot tackle all of them at once, given limitations in their financial and executive capacity. This gave rise to the idea of concentrating these limited resources on the binding constraint, which would be identified going through a tool conceptualised as a decision tree. The proponents of the original growth diagnostics also realised that this binding constraint varies between countries and – we would argue – between sectors.
The central point of the original growth diagnostics method was that it offered researchers and policy makers a way of identifying priorities in analysis and policy; and finding solutions which take into account local conditions. The same rationale applies to our Green Growth Diagnostic project. We build on the original approach but adapt it in four ways: 1. Applying it to the energy sector; 2. Taking into account potential knock-on effects on the economy; 3. The political economy when going from diagnostics to therapeutics; and 4. Working out the distributional consequences. Since each step takes the project into un(der)explored territory, it is built around five research questions and corresponding methodologically distinct work packages.
Our five research questions are: 1. What are the binding constraints for investment in economically viable renewable energy?; 2.Which policies can more effectively target different binding constraints?; 3. Who obstructs/drives the adoption of specific sustainable energy policies?; 4. What would be the macroeconomic impacts of an increase in renewable energy investment/capacity, and the reforms needed to bring this increase about? and 5. Under what circumstances increased on-grid renewable energy capacity translates into increased access to and increased reliability of electricity supply in developing countries? This paper pulls together what we can learn from the international literature on these questions.