Misalignments in government policy are acting as a major break on reform Green growth depends on strong, coherent signals that the costs of environmental degradation and unsustainable resource use will gradually increase. Regulatory action to gear existing sectoral and issue-specific policy towards supporting green growth is also essential. Current government policy is not consistent in helping to shift producer and consumer behaviour in support of green growth.
Glaring policy misalignments demonstrate broad scope to re-assess policy coherence for green growth
Governments globally continue to spend in the order of USD 640 billion per year on environmentally-harmful fossil fuels subsidies, in direct contradiction with green growth goals. Fossil fuels subsidies shore up the role of incumbent, polluting technologies; hold back investment in cleaner, emerging technologies; and act as a negative price on carbon. They serve as a major impediment to green growth.
The structure and level of taxes on energy use are not environmentally-coherent in many OECD countries. There are inconsistencies in the taxation of different forms, uses and users of energy when assessed against environmental and other social costs, for which the rationale is not obvious. For example, diesel fuel is taxed at lower rates than gasoline both in terms of energy and carbon content in 33 out of 34 OECD countries, despite the fact that on a per litre basis, diesel emits higher levels of harmful local air pollutants and CO 2. If policies within sectors are not coherent from an environmental perspective, the potential for inconsistency across policy areas is even greater. Recent work on policy alignment for the transition to a low-carbon economy supports this proposition. Climate policy interacts with policies in many areas, as almost all economic activities generate greenhouse-gas emissions. The result can be frictions, unintended consequences or conflicts in policy objectives. Several misalignments currently act as obstacles to the transition. This includes cross-cutting economic policy domains – investment, taxation, innovation and international trade – as well as policies governing specific areas that are critical to the low-carbon transition, such as electricity systems, urban mobility and rural land-use.
Governments should
re-invigorate efforts to eliminate fossil fuel subsidies, as a basic policy measure for green growth review the coherency of sectoral policy from a green growth perspective, both within and across sectors.
548
billion USD support for fossil fuel consumers in developing and emerging economies, 2013 (4 times renewable energy support)
•DEF OECD brochure English.indd 6
The OECD’s “Aligning Policies for the Transition to a Low Carbon Economy” project identifies policy misalignments that hamper low-carbon policies’ effectiveness and provides guidance on resolving them. It seeks to extend climate policy discussions to ministers and parts of government not typically involved in them, recognising that they can play a significant role in delivering emission reductions at least cost. www.oecd.org/mcm/MCM-2014-Statement-Climate-Change.pdf Similar work could be undertaken to assess policy alignment towards other green growth priorities, such as biodiversity conservation and sustainable use.
55-90 billion USD support for consumption and production of fossil fuels, OECD countries, 2005-2011
26.8 billion EUR fiscal cost per year due to favourable tax treatment of company cars; 116 EUR associated social costs
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