Climate change and escalating degradation of ecosystem services place the need for greening economic growth on the international policy agenda. To make growth greener and more inclusive, it is crucial to change the institutions and incentive structures in national sector reforms and to involve poor and vulnerable groups in decision making.

Twenty years ago, governments gathered for the United Nations Conference on Environment and Development in Rio de Janeiro. The “Rio Declaration” laid out several principles of sustainable development, including the central role of policy instruments. In this article, we take stock of where we stand today in implementing sound and effective environmental policy instruments throughout the world, particularly in developing and transitional economies.

Hopes for a climate deal were mercilessly shattered at Copenhagen and each of the successive COPs since then. One result is that “green growth” is promoted almost as if it were an alternative path. Obviously, green growth is in fact the goal, but the phrase is not a magic wand. The world economy will require tough policy instruments to become green — and it is naïve to think otherwise.