Public trust is a central pillar for reform: governments must nurture it Direct pricing of environmentally harmful activity is indispensable to green growth, but political opposition is a fundamental challenge. Although it is more economically-efficient to tax externalities directly, opposition to such measures means that taxing the inputs or outputs of environmentallydamaging activities, such as motor vehicle fuels or electricity, remain far more prevalent than explicit pricing mechanisms. Country experience demonstrates that green growth is likely to continue to encounter political opposition without more concerted effort to tackle political challenges associated with reform. Further policy experimentation is needed, with rigorous ex post evaluation and rapid dissemination of results through, for instance, case studies. Experience in jurisdictions such as Ireland and the Canadian province of British Columbia show that leadership, consultation, incremental implementation and transparent analysis can contribute to the successful implementation of pricing mechanisms.
Greater focus is needed on political challenges associated with reform, including firm, labour market and household impacts
Where constituencies are strongly against tax increases or shifts, governments may need to consider policy mechanisms other than direct pricing. Implicit pricing and regulatory approaches may be more feasible to implement and help advance progress.
Potential distributional consequences, including labour market and household impacts, merit greater policy focus. Policy support for overall labour market mobility and skills development should be responsive to demand and training programmes should be continuously adjusted to changing employer demands. As more jobs require more green skills, existing labour and social policy systems should accommodate that shift, just as they adjusted to the demands of the rapid expansion of Information and Communications Technology. Ensuring an effective social safety net is particularly important in developing countries, where populations may be more vulnerable to impacts associated with reform, and transfer systems less developed or non-existent. In addition to helping to ease reform, such measures are essential to ensure that green growth policy does not exacerbate inequality, already on the rise in many countries.
Governments should
place greater emphasis on political challenges associated with green growth reform, particularly implementation of direct pricing mechanisms, drawing on country experience (e.g. ex post evaluation of policies; case studies) where constituencies are strongly against tax increases or shifts, consider more active pursuit of regulatory approaches advance understanding of how significant regressive effects of environmental policy are likely to be on households and identify emerging best practices from experience to date, including from a political economy perspective ensure that policy support for general labour market mobility and skills development is responsive to demand generated by green growth, and continuously adjust training programmes to changing employer demands. As more jobs require more green skills, existing labour and social policy systems should accommodate that shift.
40 10 17 %
of OECD country surveillance since 2011 makes recommendations on carbon pricing
•DEF OECD brochure English.indd 5
%
of country surveillance alone consider household implications
%
of country surveillance alone consider labour market impacts
28-05-15 16:41