Green Growth: An OECD Perspective UNEP Workshop on SCP & GE 8-19 March 2010, Paris Helen Mountford Acting Deputy Director OECD Environment Directorate 1
A working understanding of green growth: “ Green growth can be seen as a way to pursue economic growth and development, while preventing environmental degradation, biodiversity loss, and unsustainable natural resource use.” It is making investing in the environment a driver for economic growth. It aims at maximising the chances of exploiting cleaner sources of growth, thereby leading to further “decoupling” between environmental and economic performance. x Not looking for a single definition x No clear end point “greener” growth 2
How does it differ from what we’ve done before? sustainable Green growth ≈ ≈ SCP development BUT other Ministries are taking ownership of green growth. Initial ideas on key elements of green growth: Internalising environmental externalities/ addressing market failures Incentivising eco-innovation (positive knowledge externalities) Focus on the transition (employment, distribution, sectoral) New growth accounting framework 3
OECD Green Growth Strategy Requested by Ministers of Finance, Economy & Trade, for mid-2011. 25 OECD Committees: delegates from Ministries of Agriculture, Economy, Environment, Development Co-operation, Industry, etc. A framework for understanding green growth and indicators for identifying gaps and measuring progress. A policy toolkit for OECD and partner countries with policy approaches and measures for: Overcoming policy barriers: e.g. reform of environmentally-harmful subsidies, i. removal of barriers to trade in green G&S. Enabling an efficient shift to green growth: e.g. taxes & MBIs, regulations, ii. R&D and green innovation policies, VAs, information-based approaches. Managing the transition: green job opportunities & new skills, industrial iii. restructuring, distributional aspects. International co-operation: financing global public goods (climate, biodiversity), addressing competitiveness effects, green 4 technology development and transfer, pro-poor GG.
Why now? Lessons from the crisis… Many countries used their stimulus packages to invest in: – Green infrastructure (public transport, energy efficiency in public buildings, renewable energy, smart grids, water & sanitation) – Green RD&D (including CCS) – Some put in place green tax reform But other measures may be environmentally harmful: – Support for auto industry – Road building – Car-scrapping schemes (scale effects vs. efficiency effects) Coming out of the crisis: – The opportunity cost for green investment is now low – Opportunity to reform costly & environmentally damaging policy measures (eg some subsidies to energy and agriculture) – Opportunity for revenue raising via environmental taxes or auctioned permits (offset reductions in labour taxes, fiscal consolidation, raise funds for international finance) – Need to manage employment impacts & develop skills 5
Removing fossil fuel subsidies is good for the economy & the environment → G20 Leaders Summit Impact of energy subsidy removal on GHG emissions in 2050 0 % deviation relative to Business as Usual -5 -10 -15 -20 -25 -30 -35 -40 -45 World China India Oil-exporting Russia Non-EU countries Eastern European countries Source : joint OECD-IEA analysis, cited in OECD (2009), Economics of Climate 6 6 Change Mitigation, based on IEA data on subsidies
…and for the economy (household income) → some win-win opportunities 2.5 2050 % deviation relative to the baseline 2.0 1.5 1.0 0.5 0.0 Russia China India countries ** Brazil the world Rest of producing Oil- Source : joint OECD-IEA analysis, cited in OECD (2009), Economics of Climate 7 Change Mitigation, based on IEA data on subsidies
Incentives for eco-innovation: a clear policy signal 12 Patenting activity in Annex 1 ratification countries (3-year moving average, indexed on 1990=1.0) 11 10 Wind power 9 Fuel cells 8 7 Lighting 6 5 Solar PV 4 Electric cars 3 2 All tech. sectors 1 0 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 1997- Kyoto Protocol 8 8 Source: OECD (2010), The Invention and Transfer of Environmental Technologies
A framework for indicators of green growth Economic activities (production, consumption, trade) Economic and social agents Policies, measures, Outputs: Production Inputs: instruments: process Goods, Labour, capital, Taxes, subsidies, services energy, materials, Recycling, regulations, environmental Consumers re-use, investments, services re-manufacturing, substitution innovation, Multi-factor education 5 productivity 2 1 4 Services, Public Pollutants, Natural resources amenities, per- waste (water, biomass, health & ceptions air, land, energy, safety aspects materials, …) 3 Natural capital stocks and environmental quality 1: Indicators of environmental efficiency of production and changes in production patterns 2: Indicators of environmental efficiency of consumption and changes in consumption patterns 3: Indicators of stocks of natural capital and environmental quality 9 9 4: Indicators of objective and subjective environmental quality of life 5: Indicators of responses by economic actors
Indicators: progress in decoupling selected emissions in OECD countries 160 GHG emissions SOx emissions 140 NOx emissions GDP relative decoupling 120 100 80 60 Absolute decoupling 40 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 10 10 Source: OECD Key Environmental Indicators
Indicators: progress in decoupling waste in OECD countries 160 DMC (1) Domestic material consumption 140 GDP Municipal waste 120 100 80 60 40 1990 1992 1994 1996 1998 2000 2002 2004 11 11 Source: OECD Key Environmental Indicators
2008 OECD Household Survey on Environmental Behaviour Scope: energy, organic, transport, waste, water Coverage: 10 countries (Australia, Canada, Czech Republic, France, Italy, Korea, Mexico, the Netherlands, Norway, Sweden) Method of data collection: Internet panel-based Survey Total sample size: 10 000 respondents (approx. 1000 per country) Data analysis: 9 expert teams coordinated by the OECD. Approach: Policy oriented (Survey questionnaire design, Advisory Committee) Next steps: publication of results (2010); new survey 2010-2011 with focus on eco-innovation and low-carbon economy. 12
Share of households who have water efficient appliances 70% 60% 50% 40% 30% No Charge 20% Variable Water Charge 10% 0% Water Efficient Low volume or Water flow washing dual flush toilets restrictor taps / machine low flow shower head 13
What would encourage you to reduce your car use most? 80% 70% 60% 50% 40% 30% 20% 10% 0% Increased cost of driving better public transport 14 cheaper public transport more and safer cycling paths
Green Growth – some emerging messages… Need a mix of policy instruments to tackle key environmental challenges. Importance of market-based approaches, but complemented by regulations & standards, R&D investment, labelling. Ensure coherence in policy design and implementation. Internalising environmental externalities is necessary for green growth, but insufficient need to ensure a smooth transition (sectoral shifts, employment, skills) and incentivise eco-innovation (internalising positive knowledge spill-overs). The green growth framework needs to be flexible will need to be applied differently in different counties. OECD country peer reviews (economic, environmental) to help tailor to countries. Green growth must be fundamentally integrated into economic growth accounting importance of green growth indicators for identifying gaps and measuring progress. 15
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