OECD Work on Green Growth 2017-18

OECD WORK ON

GREEN GROWTH

2017-18

OECD WORK ON GREEN GROWTH 2

OECD at a glance

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Work on green growth

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SPOTLIGHT: Inclusive Solutions for the Green Transition

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Green growth indicators

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Green growth in country policy surveillance

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Fiscal policy and green growth

22

Environmental policies and economic outcomes

24

Jobs, skills and distributional aspects

27

Spatial planning instruments and the environment (SPINE)

28

Behavioural insights for green growth

28

Towards a low-carbon and climate-resilient economy

30

Green finance and investment

34

Trade and green growth

36

Innovation for green growth

38

Green public procurement

40

Green growth of key sectors: energy, transport, agriculture and fisheries

48

SPOTLIGHT: Greening the Ocean Economy

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Natural capital: biodiversity and water

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Greening regions, cities and communities

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OECD at a glance

W

hat is the OECD? The letters stand for Organisation for Economic Co-operation and Development. Those words, broadly speaking, sum up what the Organisation does.

For more than 50 years, the OECD has been providing a forum in which governments work together to seek solutions to common problems, share experiences and identify best practices to promote better policies for better lives.

The OECD has helped forge global standards, international conventions, agreements and recommendations in areas such as governance and the fight against bribery and corruption, corporate responsibility, development, international investment, taxes, environment, agriculture, to mention a few. The OECD also looks at issues that directly affect the lives of ordinary people, such as school and health systems and jobs. Co-operation, dialogue, consensus and peer review drive the OECD as it seeks to fulfil its vision of a stronger, cleaner, fairer world economy and society. The OECD is a source of advice on almost all areas of policy making and implementation, and one of the world’s largest and most trusted sources of comparable statistical data.

It carries out its mission thanks to over 200 committees and working groups of national experts and decision makers, and a high-quality permanent Secretariat.

The OECD currently includes 36 member countries and is in accession talks with Colombia and Costa Rica. Brazil, the People’s Republic of China, India, Indonesia and South Africa are OECD Key Partners. The OECD also collaborates with more than 100 other economies, many of which participate in its committees and adhere to its instruments.

Fast Facts Established: 1961 Secretariat staff: 2 500 Location: Paris, France Membership: 36 countries Official languages: English and French

www.oecd.org/about

© OECD 2018

OECD WORK ON

Green Growth

Work on green growth

G

lobal momentum toward sustainable development has been renewed by the success of the 2030 Sustainable Development Agenda and Paris Agreement on climate change. However a counter-trend has also developed, with some commentators calling for measures to increase national competitiveness, sometimes at the expense of environmental protection. Across the world people are concerned about lagging growth, inequality, jobs, and globalisation. Some fear that uneven environmental regulation in a globalised economy could further drive socioeconomic malaise. With the 2030 deadline for the SDGs on the horizon, it has never been more important to modify the old narrative that sets environmental protection against economic prosperity.

Productivity growth, green growth and inclusive growth are three key aspects of the OECD efforts to help countries sustain economic growth and improve wellbeing for all.

In order to assess the overall sustainability of the current growth model, the linkages among these aspects need to be examined.

Building on its Green Growth Strategy, the OECD work on green growth delivers an actionable policy framework which can be tailored to different national circumstances.

It reflects the horizontal, cross-cutting nature of the cooperation and consultation in over 20 OECD committees to ensure the implementation of the Green Growth Strategy.

Š OECD 2018

Productivity Growth

Inclusive Growth

Green Growth

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What is green growth and why do we need it?

Green growth means fostering economic growth and development, while ensuring that natural assets continue to provide the resources and environmental services on which our well-being relies. To do this, it must catalyse investment and innovation which will underpin sustained growth and give rise to new economic opportunities.

•

It is becoming increasingly costly to substitute physical capital for natural capital. For instance, if water becomes scarcer or more polluted, you need more infrastructure to transport and purify it.

•

Change does not necessarily follow a smooth, foreseeable trajectory. For example, some fish stocks could suddenly collapse after declining only slowly for years.

Global water demand: Baseline, 2000 and 2050 electricity

6 000

Km3

Long-term projections suggest that without policy changes, the continuation of “business-as-usual” growth will have serious impacts on the climate, natural resources and ecosystems on which economic activities rely. This highlights the need for countries to shift to a new growth path that is consistent with protection of the environment and sustainable use of natural resources, while still achieving sizeable gains in living standards and reducing poverty

manufacturing

5 000

4 000 livestock

3 000

We need green growth because risks to development are rising as growth continues to erode natural capital. If left unchecked, this would mean increased water scarcity, worsening resource bottlenecks, greater pollution, climate change, and unrecoverable biodiversity loss. These tensions may undermine future growth prospects for at least two reasons:

domestic

2 000

1 000 irrigation

0 2000

2050

OECD

2000

2050

BRIICS

2000

2050 RoW

2000

2050 World

Note: This graph only measures “blue water”demand and does not consider rainfed agriculture.

Source: OECD Environmental Outlook Baseline; output from IMAGE/ ENV-Linkages. http://dx.doi.org/10.1787/9789264122246-en

© OECD 2018

OECD WORK ON

To ensure that the progress in living standards achieved in the past 50 years does not grind to a halt, countries need to embrace more sustainable production and consumption patterns, and even redefining what we mean by progress and how we measure it.

Global premature deaths from exposure to particular matter and ozone: Baseline, 2010 to 2060 2060, higher estimate

2010, based on GBD

2000

Rest of Europe & Asia South and South-East Asia

70 Sub Saharan Africa

Millions of people

100

80

2060, lower estimate

2500

Evolution of GHG emmissions by region: Baseline projection 2010 to 2060

90

5

Green Growth

1500

1000

GtCO2e

60 Latin America 50 40 30

OECD Pacific

20

OECD Europe

10

OECD America

0

Source: OECD (2015) The Economic Consequences of Climate Change.

Output from IMAGE/ ENV-Linkages. http://dx.doi.org/10.1787/888933275952

Š OECD 2018

500

Middle East & North Africa 0

Russia

China

India

Japan

EU

Korea

USA

Note: Projected number of deaths caused by outdoor air pollution per year.

Source: OECD (2016), The Economic Consequences of Air Pollution.

Output from IMAGE/ ENV-Linkages. http://dx.doi.org/10.1787/888933357356

Canada

S. Africa

Brazil

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Mainstreaming the Green Growth Strategy Since the launch of the Green Growth Strategy in 2011, the OECD continues to support strategies for greener growth through its core advice in country-specific and multilateral surveillance. The main outcomes include a more systematic account of green growth issues in its Going for Growth flagship reports, Economic Surveys, Environmental Performance Reviews, Investment Policy Reviews, Innovation Policy Reviews and Multi-dimensional Country Reviews of OECD countries and emerging economies. Green growth is also integrated in the OECD’s sector and issue-specific work to cover key areas such as, taxation, innovation, investment, trade, greening industry, energy (with IEA), transport (with ITF), food and agriculture, skills and jobs, ecosystems and water management, rural and urban development.

The framework of the OECD Green Growth Strategy provides a lens for looking at growth and identifying mutually reinforcing aspects of economic and environmental policy. It recognises the full value of natural capital as a factor production along with other commodities and services. It focuses on cost-effective ways of reducing environmental pressures, to achieve a transition towards new patterns of growth that will avoid crossing critical local, regional and global environmental thresholds. The OECD sees green growth as a practical and flexible approach for accelerating progress in the economic and environmental pillars of sustainable development, while taking full account of the social consequences and inclusiveness.

While there is no “one-size-fits-all” prescription for implementing green growth, the OECD’s analytical work over the past years resulted in the ability to provide concrete targeted advice to member and partner countries in mainstreaming green growth into national and multilateral policies.

The 2011 Green Growth Strategy provided initial guidance to governments on how to achieve economic growth and development, while preventing costly environmental damage and inefficient resource use. What progress have countries made in aligning economic and environmental priorities since then?

Towards Green Growth? Tracking Progress (2015) evaluates the progress countries have made in aligning economic and environmental priorities since 2011. This assessment of progress highlights where there is broad scope to heighten the ambition and effectiveness of green growth policy. The report draws lessons from green growth mainstreaming across the OECD’s work programme, including on how governments can improve institutional settings to seize economic opportunities of the green transition, and considers ways to enrich the Green Growth Strategy.

© OECD 2018

OECD WORK ON

Green growth and the Sustainable Development Goals (SDGs) Green growth is a subset of sustainable development. It entails an operational policy agenda that can help achieve concrete, measurable progress at the interface of the economy and the environment. It fosters the necessary conditions for innovation, investment and competition that can give rise to new sources of economic growth that are consistent with resilient ecosystems.

Green growth strategies need to pay specific attention to the social issues and equity concerns that can arise as a direct result of greening the economy. This means that strategies should be implemented in parallel with initiatives focusing on the broader economic, social and environmental pillars of sustainable development.

The Agenda 2030 for Sustainable Development and the SDGs are today the norm for all countries, developed and developing alike. The OECD supports the United Nations in ensuring the success of the 2030 Agenda by bringing knowledge and expertise to inform policies through; data and evidence-based analysis, best practices identified through developing and developed countries’ own approaches, and guidance and lessons on innovative ways to implement green growth strategies.

© OECD 2018

Green Growth

Key Publications • OECD (2015), Towards Green Growth? Tracking Progress: Four years of the Green Growth Strategy • Towards Green Growth? Tracking Progress: Key Findings and Recommendations • OECD (2013), What we have learned from attempts to induce green growth policies?

• OECD (2011), Towards Green Growh • OECD (2011), Tools for Delivering Green Growth

Website www.oecd.org/greengrowth

Contact for more information Kumi Kitamori Environment Directorate Email: Kumi.Kitamori@oecd.org

Jaco Tavenier Environment Directorate Email: Jaco.Tavenier@oecd.org

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SPOTLIGHT: Inclusive Solutions for the Green Transition While many countries are striving to advance on the green transition, there still remains resistance to ambitious environmental policies in certain sectors, firms, segments of society, regions, and countries. This is due to their real or perceived negative impacts on competitiveness, jobs and household budgets. Without addressing head-on such concerns, countries cannot make sufficient progress on the transition to a greener, low-carbon and circular economy. Governments need to make sure to take their citizens along on this journey, in particular to prepare the people with the right skills to reap the employment benefits from the structural change and find socially inclusive solutions for those who need help.

The 2018 Green Growth and Sustainable Development (GGSD) Forum on ‘Inclusive Solutions for the Green Transition: Competitiveness, Jobs and Social Dimensions’ (27-29 November 2018) is being held in conjunction with the 6th Annual Conference of the Green Growth Knowledge Platform (GGKP), a joint platform of the OECD, Global Green Growth Institute, UN Environment and the World Bank.

2018 #GGSD Forum

&

#GGKP6

Annual Conference

OECD, Paris 27-29 November

The joint conference addresses the political economy of the green transition by identifying distributional impacts, and exploring inclusive solutions for workers, sectors and regions that may otherwise be hit hard to help them contribute to a greener future. The Forum sessions focus on competitiveness, employment/skills and distributional impacts of green policies.

The Forum is aimed at creating a new narrative around green growth and national competitiveness, and examining examples of successful “transition management strategies” that offer inclusive solutions for green growth. It will consist of panel discussions among policy makers, business, labour and civil society representatives and academia, as well as presentations of latest research contributed by the OECD, other GGKP partners and beyond.

Website www.oecd.org/greengrowth/ggsd-2018 © OECD 2018

OECD WORK ON

The Green Growth and Sustainable Development Forum (GGSD Forum)

Is an OECD initiative to provide a dedicated space for multi-disciplinary dialogue on green growth and sustainable development. The GGSD Forum brings together experts from different policy fields and disciplines, facilitates the exchange of knowledge and identifies potentials for cross-fertilisation. It is a valuable supplement for the work undertaken in individual government departments and ministries by addressing the horizontal, multi-disciplinary aspects of green growth and sustainable development.

The GGSD Forum operates as annual conferences, focusing each year on a different crosscutting issue related to sustainable development and green growth. The GGSD Forum is open to stakeholders and experts from OECD Committees, government ministries and agencies, academia, businesses civil society and other international organisations. It aims to identify knowledge gaps and promote new initiatives to effectively address them. The GGSD Forum is also a meeting point for policy makers and experts from OECD and partner countries to exchange experiences and identify policy tools and best practices that respond to their specific country circumstances.

Learn more on the past GGSD Forums at: www.oecd.org/greengrowth/ggsd-forum.htm

Š OECD 2018

Green Growth

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The Green Growth Knowledge Platform (GGKP)

Since its establishment in 2012, the GGKP has since expanded to include a large, diverse group of nearly 60 Knowledge Partners. It is a network of international organisations and experts that addresses major knowledge gaps in green growth theory and practice. The OECD is a founding partner of the GGKP, together with the Global Green Growth Institute, the UN Environment and the World Bank.

By encouraging collaboration and co-ordinated research, the GGKP seeks to increase the impact of its partners. Through its thematic expert working groups, the GGKP draws together policy makers, practitioners and academics to assess the state of knowledge and prioritise knowledge gaps around key green growth topics. To date, joint research themes have included; metrics and indicators, trade and competitiveness, fiscal instruments, technology and innovation, behavioural insights, inclusiveness, and natural capital.

The GGKP hosts a state-of-the-art web platform, providing easy access to policy guidance, good practices, tools and data through a searchable e-library with technical and policy resources as well as data for some 193 countries. Moreover, through its Annual Conferences and webinars, the GGKP harnesses in-person and virtual networks to foster information sharing and learning through the creation of a vibrant green growth community of practice.

Learn more at: www.greengrowthknowledge.org

Š OECD 2018

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Green growth indicators Moving towards green growth requires appropriate information and reliable indicators that support policy development and analysis while tracking progress. The OECD framework for monitoring progress towards green growth includes indicators in four areas: (1) the environmental and resource productivity of the economy; (2) the natural asset base; (3) the environmental dimension of quality of life; and (4) economic opportunities and policy responses. A small sub-set of headline indicators has been identified to facilitate communication with policy makers, the media and citizens.

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Green Growth

This is supported by OECD work on the implementation of the System of Environmental Economic Accounting (SEEA). Work is underway jointly with the OECD Statistics Directorate to develop accounts on air and greenhouse gas emissions, natural assets and material flows, and to improve data on environmental expenditure and taxes. The OECD work also draws on Earth observation and other geospatial data to improve its information base and indicators. Work is underway using data from monitoring land cover, natural resources and environmental sinks, and for assessing environmental risks.

Highest overall improvements towards green growth, 2000-2015

The proposed indicator set is neither exhaustive nor final, and has been kept flexible so that countries can adapt it to different national contexts. It is being integrated into OECD work, including country reviews and policy analysis.

Low land consumption Low air pollution exposure

Estonia

Denmark

Environmentally adjusted multifactor productivity

NO

D

CHA

NGE

DD

NO

CHA

NGE

PP

P

Environmentally related innovation

The OECD continues advancing the measurement of green growth indicators (definitions, calculation methods, underlying data). Currently, the focus is on measuring changes in land cover and people’s exposure to air pollution, greening the multifactor productivity measure, accounting for carbon emissions and raw materials embodied in trade, creating a natural resource index, as well as further development of indicators of economic opportunities and policy responses (such as environmentally related taxes and innovation). Š OECD 2018

Environmentally related taxation

United Kingdom

GDP per capita

Turkey

Low income inequality

P

CO2 productivity (production-based)

D

CO2 productivity (demand-based)

D

P

NO

CHA

NGE

D

NO

CHA

NGE

P

Material productivity

Note: Countries started at different levels in 2000. The base year chosen for monitoring progress also plays a role. The best improvement (relative to the leader) is located on the outer frontier of each axis, the worst improvement is located in the origin. The green line indicates no change; values below that level indicate deterioration.

Data and sources: http://doi.org/b8rw

12 As part of a regional programme, the OECD is also supporting the countries of Eastern Europe, Caucasus and Central Asia to identify national sets of green growth indicators and create an evidence-based system for monitoring progress towards green growth in the region.

The OECD designed the Green Growth Indicators to help countries assess and compare their progress. The measurement framework combines the main features of green growth with the basic principles of accounting and the pressure-state-response model.

The OECD measurement framework and indicators on green growth are an important building block for monitoring progress towards several SDGs (www.oecd.org/sdd/measuring-distanceto-the-sdgs-targets.htm). Green growth indicators are regularly used in OECD country reviews that help countries improve their policies and practices and share their experience. OECD experts contribute to the UN Inter-Agency and Expert Group on SDG indicators by leveraging on the OECD green growth indicators and core environmental indicators.

25 to 30 indicators were identified, under four main headings:

1

Environmental and resource productivity

2

The natural asset base

3

The environmental dimension of quality of life

4

Economic opportunities and policy responses Indicators that describe the socio-economic context and the characteristics of growth complete the picture.

Conceptual development of Green Growth Indicators continues, including for six headlines indicators:

Carbon productivity Non-energy material productivity Environmentally-adjusted, whole-economy (multi-factor) productivity Natural resource index Land cover and use Population exposure to air pollution (PM2.5)

Š OECD 2018

OECD WORK ON

Green Growth

Green growth indicators framework

G R EEN G R O WT H M E A S U R E M E N T FR A M E W OR K

SOCIO-ECONOMIC CONTEXT AND THE CHARACTERISTICS OF GROWTH

inputs

outputs

PRODUCTION

CONSUMPTION

ECONOMIC OPPORTUNITIES AND POLICY RESPONSES

taxes subsidies labour

income

regulations

+ Recycling re-use, remanufacturing, substitution

capital resources

ENVIRONMENTAL AND RESOURCE PRODUCTIVITY

INVESTMENTS goods & services residuals

ENVIRONMENTAL QUALITY OF LIFE

investment innovation trade education training jobs

energy and raw materials

pollution and waste

amenities, health

water, land, biomass, air

sink functions

resource functions

© OECD 2018

NATURAL ASSET BASE

service functions

Icons from TheNounProject.com

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DID YOU KNOW?

… that the Green Growth Indicators Database brings together the data needed for calculating the OECD’s green growth indicators and contains selected indicators to support economic and environmental policy analysis for monitoring progress towards green growth.

Countries like the Czech Republic, Denmark, Germany, Korea, the Netherlands, Slovenia and the Slovak Republic have already applied the OECD green growth measurement framework. Mexico produced a draft report and work is underway in LAC countries (Colombia, Costa Rica, Ecuador, Guatemala, Paraguay and Peru) and in Eastern Europe, the Caucasus and Central Asia (Azerbaijan, Moldova and Kazakhstan).

© OECD 2018

OECD WORK ON

Key Publications

Websites http://oe.cd/ggi

• OECD (2017), OECD Green Growth Indicators 2017

http://oe.cd/env-data

• OECD (2016), “Measuring the transformation of the economy: Green growth indicators in Eastern Europe, the Caucasus and Central Asia” Policy Perspectives • OECD (2015), Environment at a Glance 2015

Contact for more information Nathalie Girouard Environment Directorate E-mail: Nathalie.Girouard@oecd.org Myriam Linster Environment Directorate E-mail: Myriam.Linster@oecd.org Ivan Hascic Environment Directorate E-mail: Ivan.Hascic@oecd.org Peter Van De Ven Directorate for Science, Technology and Innovation E-mail: Peter.Vandeven@oecd.org

© OECD 2018

Green Growth

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Green growth in country policy surveillance Having the institutional and governance capacity to implement wide-ranging policy reform is an essential condition for greening growth and achieving sustainable development. Governments need to be able to integrate green growth objectives into broader economic policymaking and development planning.

The OECD is mainstreaming green growth in national policy surveillance exercise such as Economic Surveys, Environmental Performance Reviews, Innovation Reviews, Investment Policy Reviews and Multi-dimensional Country Reviews. This approach offers opportunities for an in-depth appraisal of the way in which policies are working together (or not) to drive green growth.

Experience gained through country reviews and general policy assessment leads to the development of better analytical tools to identify country-specific policy priorities based on cross-country analysis and an understanding of what is good practice.

As an example, every Environmental Performance Review includes a chapter on green growth, which looks at the reviewed country’s policy mix for mainstreaming environment considerations into economic and fiscal policies, as well as at the employment and distributional implications of the transition towards green growth. All OECD member countries have been reviewed, most of them for the third time.

Partner countries, such as South Africa, Colombia Brazil and Peru have been reviewed recently. A Green Growth Policy Review of Indonesia is ongoing in 2017-2019.

Economic Surveys of OECD and partner countries systematically include a set of green growth indicators to track progress. In the lead-up to the UN Climate Conference COP21, all Economic Surveys undertaken in 2014-2015 included assessment of country policy efforts to meet climate targets. More recent Economic Surveys also address other issues relevant to green growth such as water management in the United States and energy policy in Estonia more in depth.

Focusing primarily on non-OECD emerging economies, the Multidimensional Country Reviews (MDCRs) address socioeconomic issues of relevance to green growth. For example, the MDCRs of Kazakhstan (2017) and Thailand (2018) include chapters on environmental management.

Contact for more information Paul O’Brien Economics Department E-mail: Paul.Obrien@oecd.org

Nathalie Girouard Environment Directorate E-mail: Nathalie.Girouard@oecd.org

Geraldine Ang Directorate for Financial and Enterprise Affairs E-mail: Geraldine.Ang@oecd.org

Jan Rielaender Development Centre E-mail: Jan.Rielaender@oecd.org

© OECD 2018

OECD WORK ON

The OECD Environmental Performance Reviews examine how countries’ environmental policy frameworks can support green growth, including through pricing mechanisms and transition measures. Recent and ongoing reviews include Estonia, Canada, Korea, New Zealand, Switzerland, Hungary and Czech Republic and the first Green Growth Policy Review of Indonesia

The OECD Investment Policy Reviews seek to help countries improve domestic conditions for investment in support of green growth objectives.

Review of Lao PDR (2017) and Vietnam (2018) include a green growth focus.

The OECD Economic Surveys aim to encourage governments to focus on green growth issues, and periodically provide an in-depth assessment of how environmental and growth policy recommendations interact, in areas such as taxation, innovation, infrastructure, energy, agriculture and product market regulation.

Recent surveys covering green growth include Brazil (2018) on deforestation and Estonia (2017) on greening fiscal policy.

www.oecd.org/eco/surveys

www.oecd.org/investment/countryreviews.htm

www.oecd.org/environment/country-reviews

www.oecd.org/development/mdcr/

Š OECD 2018

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The Multi-dimensional Country Reviews aim to design policies and strategies that promote development in a holistic sense, identifying policies to remove constraints to sustainable development.

Reviews of Kazakhstan (2017) and Thailand (2018) address green growth.

Websites

www.oecd.org/sti/inno/oecdreviewsofinnovationpolicy.htm

Green Growth

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Fiscal policy and green growth The OECD helps governments to design and implement environmentally effective and economically efficient policies based on analytical and statistical expertise. Looking at the whole range of policy instruments, including taxes, tradable permits, regulation, and intergovernmental agreements, the OECD makes an important contribution to improving environmental outcomes, economic growth and inclusiveness.

The OECD is developing in-depth and detailed analyses of the taxation of energy use and the pricing of carbon emissions, as well as phasing out support to the extraction or use of fossil fuels in OECD member and partner countries Commitments made by Leaders in the G20, APEC, and the G7 to phase out fossil-fuel subsidies are indispensable. The OECD has been supporting countries in their efforts to reform inefficient subsidies and related support measures both through improving information on government support for fossil fuels in OECD countries and key partner countries and through its chairing of the G20 voluntary peer reviews of countries’ efforts to reform inefficient fossil-fuel subsidies. These reviews have provided a learning experience for the countries involved. The reviewed country subjects its policies to the scrutiny of peers and experts, who often provide fresh perspectives. And the reports

themselves, once published, can help governments win support domestically for persevering with difficult measures.

The OECD Inventory of Support Measures for Fossil Fuels (available at data portal www.OECD.Stat) provides estimates of government support by government unit (including many sub-national governments) and fuel, descriptions of the measures, and data sources. The OECD Companion to the Inventory (2018) reviews recent trends in support and in reform efforts.

Removing fossil fuel support is one essential step towards aligning prices of fossil fuels with their true social costs; making sure that prices reflect the climate costs of carbon emissions is another. Both reform processes form part of a broader dynamic of environmental fiscal reform.

The report on Effective Carbon Rates (2016) presents the first comprehensive analysis of the extent to which countries use carbon prices. Carbon pricing is generally considered to trigger the cheapest ways of cutting emissions, and is essential for transitioning to a carbon-neutral green growth path.

Without drastic cuts in carbon emissions, the world faces devastating impacts and delaying the transition will increase costs.

Š OECD 2018

OECD WORK ON

Green Growth

Distribution of Effective Carbon Rates (ECR) on CO2 emissions from energy use

All-energy

EUR 0

EUR 0-5

EUR 5-30

EUR>30

Non-road

Road

4% 10%

2%

15%

20%

46%

11%

48%

60% 10%

3%

70%

Source: OECD (2016) Effective Carbon Rates.

Effective carbon rates measure the price of carbon emissions resulting from taxes on energy and emissions trading systems in 41 OECD and G20 economies. Across all countries effective carbon rates are particularly low outside road transport, with 70% of emissions not priced at all. Only 4% are priced at least at EUR 30 per tonne of CO2, a conservative estimate of the damage to society from emitting a tonne of CO2.

Š OECD 2018

Taxes on energy use are the main component of effective carbon rates. The OECD report Taxing Energy Use 2018 describes patterns of energy taxation (excise and carbon taxes) in 42 OECD and G20 countries representing approximately 80% of global energy use by fuels and sectors over the 2012-2015 period. New data shows that energy taxes remain poorly aligned with the negative side effects of energy use. Energy taxes differ strongly between countries, sectors and fuels, but almost all taxes are too low. Despite its large environmental impact, coal is taxed at the lowest rates, or fully untaxed. Outside of road transport, rates are below a low-end estimate of climate costs for 97% of emissions. Road fuel taxes are higher, but too low to account for other external costs (e.g. air pollution, congestion).

19

20 Large difference among average tax rates on different fuels Coal

Biofuels & waste

Natural gas

Oil products

250

Tax rate (EUR per tCO2)

200

150

100

IDN

RUS

BRA

USA

IND

CHN

CAN

ZAF

CHL

EST

AUS

CZE

MEX

POL

LVA

ARG

JPN

KOR

SVK

FIN

TUR

HUN

NZL

DEU

BEL

AUT

ESP

SWE

PRT

GRC

DNK

NLD

IRL

SVN

FRA

ITA

ISR

ISL

GBR

LUX

CHE

0

NOR

50

Source: OECD (2018) Taxing Energy Use 2018.

Taxes on energy use continue to be the largest source of environmentally related tax revenue, exceeding those on motor vehicles and other taxes. In 2014, environmentally related tax revenues were at 2.0% of GDP on average among 34 OECD and 5 partner economies. Taxes on energy represented 70% of total environmentally related tax revenue among the 39 countries.

Analytical work is underway to compare corporate income tax provisions across OECD and G20 countries and evaluate their effects on investment incentives in carbon-intensive and carbon-neutral electricity generation technologies. The effects of the design of carbon pricing on low carbon investment also is being investigated.

Key Publications • OECD (2018), OECD Companion to the Inventory of Support Measures for Fossil Fuels 2018 • OECD (2018), Taxing Energy Use 2018: Companion to the Taxing Energy Use Database • OECD (2016), Effective Carbon Rates: Pricing CO2 through Taxes and Emissions Trading Systems

© OECD 2018

OECD WORK ON

Websites www.oecd.org/tax/tax-policy/tax-and-environment.htm Taxing Energy Country Profiles: http://oe.cd/TEU2018 www.oecd.org/site/tadffss/data/

Contact for more information Kurt van Dender Centre for Tax Policy and Administration E-mail: Kurt.Vandender@oecd.org Ronald Steenblik Trade and Agriculture Directorate E-mail: Ronald.Steenblik@oecd.org Nils Axel Braathen Environment Directorate E-mail: Nils-axel.Braathen@oecd.org

© OECD 2018

Green Growth

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Environmental policies and economic outcomes The effects of environmental policies on economic performance are a subject of heated debate. On the one hand, environmental policies have been argued to burden economic activity, as they raise costs without increasing output and restrict the set of production technologies and outputs. On the other hand, the Porter Hypothesis claims that well-designed environmental policies can encourage innovation, gains in efficiency and profitability, which can outweigh the costs of compliance.

The stringency of environmental policies has been increasing across the OECD Indicator value - 2012

Indicator value - 1990/1995

5

OECD average - 2012

More stringent

4

3

2

Joint work between the OECD Environment Directorate and the Economics Department on environmental policies and productivity growth carries out empirical analyses of the economic effects of environmental policies. It provides quantitative proxies measuring the stringency and competitionfriendliness of environmental policies. In particular, the indicator of Environmental Policy Stringency (EPS) provides a comparable, cross-country and over-time measure of the aggregate stringency of selected environmental policy instruments. It is progressively extended to include additional policy instruments, and it now covers most OECD countries and the BRIICS. The EPS indicator had been used in empirical analysis to gauge the effects on multifactor productivity growth, trade and competitiveness, investment and innovation at the macroeconomic, industry and firm levels. Effects of tightening environmental policies were found to be relatively short-lasting

1

0

with no evidence of harm Nevertheless, they have led economy.

to to

overall productivity growth. various effects within the

The most technologically advanced industries and firms have seen a small increase in productivity, possibly as they were in the best position to adapt. Least productive firms have seen their productivity fall further. Further empirical analysis shows that more stringent environmental policies or higher energy prices are not key drivers of offshoring. Š OECD 2018

OECD WORK ON

The BEEP indicator and measures of environmental policy stringency OECD EPS (de jure, 2012) 5 DNK NLD

More stringent environmental policies

4

NOR

CHE

AUT

SWE

DEU

CAN POL JPN

KOR 3

ESP

USA FRA

GBR

AUS BEL

2

IRL

HUN

PRT

GRC

ITA

1 0.5

1

1.5

2

2.5

3

3.5

Policies more burdensome to entry and competition

4

4.5

Total BEEP indicator

WEF EPS (perceived , 2012) 7

More stringent environmental policies

AUT

NLD

GBR 5 SVK

Greener growth requires stringent environmental policies that are flexible and that minimise barriers to entry and competition.

International evidence, as captured by the Burdens on the Economy due to Environmental Policies (BEEP) indicator, shows that the extent to which environmental policies create barriers to competition and the consideration given to their economic effects in their design vary notably across countries. Hence, stringent environmental policies can - and should - be designed in order to minimize barriers to entry and competition.

http://oe.cd/eps

ISL

www.oecd.org/environment/tools-evaluation

PRT SVN HUN

ISR

CHL

ESP

Contact for more information

ITA HRV

MEX

4

GRC

TUR

3 0.5

Š OECD 2018

Moreover, countries that implement stringent environmental policies do not lose export competitiveness when compared against countries with more moderate regulations. These new OECD analyses challenge the conventional wisdom that regulations to curb pollution, carbon emission and energy use hurt businesses by creating new costs and provide evidence that environmental policies are not the major driver of international trade patterns.

Websites

NZL

POL

ZAF KOR

SWE

JPN

NOR BEL AUS IRL EST USA CZE FRA CAN

23

DEU

DNK

CHE

6

Green Growth Environment

1

1.5

2

2.5

Policies more burdensome to entry and competition

3

3.5

4

4.5

Total BEEP indicator

Tomasz Kozluk Economics Department E-mail: Tomasz.Kozluk@oecd.org

Antoine Dechezlepretre Economics Department E-mail: Antoine.Dechezlepretre@oecd.org

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Jobs, skills and distributional aspects Green policies can achieve job creation in a number of ‘green’ economic sectors and through a transition of the economy towards more labour-intensive services sectors, while job destruction especially occurs in ‘brown’ sectors whose activities get replaced by green sectors. An effective transition to a lowcarbon, resource efficient and green economy will only be possible by ensuring that workers are able to adapt and transfer from areas of decreasing employment to other industries, and that human capital exists and is maximised to develop new industries.

The implementation of active labour market and skills policies will be required to help manage these structural adjustments and minimise skills bottlenecks. The use of government revenues from environmental tax reform for lowering labour taxes, mitigating undesirable distributional consequences and funding education and training programs can be crucial in achieving positive overall employment outcomes from green policies.

Special attention should also be paid to regions with a high share of workers in ‘brown’ sectors. Further research is required to quantify all employment dimensions of green policies, not least with respect to within-sector firm level effects, circular economy policies and the broad interactions with socioeconomic trends.

Education and training systems that prepare workers for future labour needs with the right skills, knowledge and competences are especially important to smooth the transition. At all levels in the workforce and in all sectors, skills will be needed in order to help the adaptation of products, services and processes. They encompass a whole range of professional/technical skills. The development of green skills needs to be supported as an integral part of the transition to a low-carbon economy.

Addressing the distributional consequences of environmental policies is also important for understanding the political economy of reforms. Some greening measures may have a disproportionate impact on poorer households. This may require adjustments to existing tax and welfare systems, at least as a transitional measure. New targeted support measures may be needed in emerging and developing markets, where social safety nets are less developed.

© OECD 2018

OECD WORK ON

OECD work has looked at the distributional effects of energy taxes as well as the potential distributional consequences related to the phasing out of fossil fuel subsidies. Carbon pricing reforms that cut CO2 emissions mean higher energy prices, which is a particular threat to poor households as they typically spend a large share of their income on energy bills. However, energy affordability for poor households can be increased by welldesigned carbon pricing reforms. The OECD report reveals that transferring a third of the additional revenues from an energy pricing reform to poor households, by means of an incometested cash transfer, would be sufficient to increase their ability to pay for their energy needs. Energy affordability is less often a problem in higher income countries, though the report finds that there is no apparent relationship between energy affordability and energy prices or taxes.

Ensuring access to safe water supply and sanitation for all requires significant investment in the water supply and sanitation sector globally. While most OECD countries do not face significant macro-affordability issues, an OECD survey on water pricing finds that the implementation of full cost recovery would make average representative bills at 3% (defined as the limit for water poverty) or more of households’ budgets for the lowest decile of the population in several OECD countries.

Š OECD 2018

Green Growth

Modelling labour skills and competences Based on the premise that workers are not perfectly interchangeable as they are trained for different jobs, the OECD has analysed labour markets impacts of climate and energy policies with a global computable general equilibrium model.

The analysis shows that workers in industries that are most exposed to climate change mitigation or energy efficiency policies, such as energy generation sectors and energy intensive industries, are the most vulnerable. While expansions and contractions in output and employment can be large at the sectoral level, they do not translate into a large overall reallocation of jobs, as the climate and energy policies only affect a small part of the economy. Countries where the economic structure is dominated by large fossil-fuel sectors can have larger job reallocations.

For most countries, the energy production sector is the main source of job destructions, albeit with different impacts across regions depending on the relative importance of this sector.

In OECD countries, job destructions in the energy sector account for half of total job losses; for transition and merging economies these could represent up to 90% of total losses. In most countries, the majority of job destructions and creations will affect low-level workers most. But under an energy efficiency scenario, for OECD countries there can also be a large turnover for higher-skilled workers.

Climate and energy policies also have impacts on income distribution. The analysis shows that CO2 tax favours wage earners over capital and natural-resource owners in all countries, while energy efficiency measures are beneficial for capital earners, at least in countries where primary sectors represent a low share of the total economy. In general, energy efficiency measures have larger labour income distributional impacts than CO2 tax policy because they change more deeply the economic structure. A main message is that effects of policies on the different categories of workers differ across regions, and as such call for country- and location-specific package of environmental and redistribution policy to offset the negative policy impacts.

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26 Key Publications • “Distributional and Labour Market Impacts of Environmental Polices”, OECD Environment Working Papers, (Forthcoming) • OECD (2017), Employment Implications of Green Growth: Linking jobs, growth, and green policies: OECD report for the G7 Environment Ministers • OECD (2017), Boosting Skills for Greener Jobs in Flanders, Belgium • “The Impact of Energy Taxes on the Affordability of Domestic Energy”, OECD Taxation Working Papers, No. 30 • “The Distributional Effects of Energy Taxes”, OECD Taxation Working Papers, No. 23 • “Modelling of distributional impacts of energy subsidy reform: an illustration with Indonesia”, OECD Environment Working Papers, No. 86 • CEDEFOP-OECD (2015), Green skills and Innovation for Inclusive Growth

© OECD 2018

OECD WORK ON

Spatial planning instruments and the environment (SPINE) Spatial planning instruments have long been used to organise and alter the distribution of human settlements and economic activity, and balance tensions between economic, social and environmental objectives. The SPINE project focuses on the evaluation of the effectiveness of spatial planning instruments in achieving environmental and economic objectives. This evaluation relies on the development of a cutting-edge modelling framework (MOLES), and the use of empirical methods and refined geospatial and georeferenced data.

Green Growth

used to analyse the effects of spatial planning and transport policy instruments, in the context of city case studies.

Modelling work is based on MOLES and simulates the effects of these policies on the environment (e.g. CO2 emissions, air pollution), economic welfare and housing affordability.

Empirical work focuses on the environmental and welfare effects of parking policies and the effects of urban morphology on residential energy consumption Key Publications

Website

• OECD (2018), Rethinking Urban Sprawl:

http://oe.cd/spine

Moving Towards Sustainable Cities • OECD (2017), Urban Sprawl and the Environment: Trends and Policy Implications • OECD (2017), Causes and Consequences of Open Space in U.S. Urban Areas

Recent empirical work in this area has explored the linkage between urban structure, air pollution and individual wellbeing. It has also analysed the economic effects of environmental zoning policies in France and the trade-offs between open space conservation and local public finance in US urban areas.

• OECD (2016), Environmental Zoning and

A quantitative mapping of the several dimensions of urban sprawl in OECD urban areas is being developed to empirically study the relationship between these urban form indicators and environmental and economic outcomes.

Further, modelling and econometric approaches are being

• OECD (2015), Exploring the Effect of Urban

Urban Development: Natural Regional Parks in France • OECD (2015), Air Pollution and Urban Structure Linkages: Evidence from European Cities

© OECD 2018

Structure on Individual Well-Being

Contact for more information Shardul Agrawala Environment Directorate E-mail: Shardul.Agrawala@oecd.org

Walid Oueslati Environment Directorate E-mail: Walid.Oeslati@oecd.org

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Behavioural insights for green growth Environmental policies need to help individuals take into account the environmental consequences of their activities.

OECD work in this area analyses how environmental policies affect individuals’ decisions in the real world. To this end, it relies on economic theory and insights from behavioural sciences, and on the use of state-of-the-art empirical methods. Insights from behavioural sciences can help policy makers better understand the mechanisms driving individual decision-making and eventually design more effective policies.

Recent research in this area includes an assessment of the impacts of payments for ecosystem services on landowners’ conservation efforts and an analysis of the attitude-behaviour gap in sustainable food consumption. OECD recent work also comprises a meta-analysis of empirical studies to evaluate the magnitude of the rebound effect in road transport and identify its determinants. Current work focuses on the evaluation of the effects of environmental policy on individuals’ travel behaviour and the application of insights from behavioural sciences to policy making.

Key Publications • OECD (2017), Tackling Environmental

Towards a low-carbon and climate-resilient economy There is a range of areas where policies could be aligned to facilitate the low-carbon transition. Deliberately or not, our regulatory and fiscal policies have been ‘wired’ around a fossil fuel world. Not only have our economies locked-in carbonintensive behaviours, they have also locked in carbon-friendly policies. The 2015 report Aligning Policies for a Low-Carbon Economy identified the misalignments between climate change objectives and policy and regulatory frameworks across a range of policy domains (investment, taxation, innovation and skills, trade, and adaptation) and activities at the heart of climate policy (electricity, urban mobility and rural land use). The report makes a diagnosis of these contradictions and points to means of solving them to support a more effective transition of all countries to a low-carbon economy. This work has led to several OECD initiatives and analyses, bringing together Financial Affairs and Environment on investment policy frameworks and the deployment of renewables. The inquiry into policy alignment was also pursued as part of the 2017 OECD report for the G20, Investing in Climate, Investing in Growth, with contributions from the Economics, Environment, Finance, Tax Policy, Trade, Agriculture, Transport, Development Co-operation OECD directorates.

Problems with the Help of Behavioural Insights

© OECD 2018

OECD WORK ON

Green Growth

The OECD is also assessing the economic costs and environmental benefits of climate policies and long-term climate stabilisation scenarios. Analysis focuses on least-cost policy mixes to reduce emissions, the benefits of linking carbon markets, phasing out fossil fuel subsidies, ensuring sufficient financing and how to address concerns about carbon leakage and competitiveness impacts of climate policies. The Environmental Outlook to 2050 makes projections of climate change, as well as environmental and economic impacts of climate policies. Equity considerations have gained prominence in the face of current economic and financial challenges. New work will examine the distributional consequences of carbon taxes by household types, sectors or regions.

The OECD is examining how economic analysis can inform adaptation responses. The majority of OECD countries have developed national strategies to prepare for climate change.

Analysis of progress to date has emphasised the need to improve decision makers’ ability to understand and use climate data to make decisions that are robust in the context of uncertainty about the future. Current work focuses on how governments might best support the development of climate-resilient infrastructure networks, through improved provision of information, alignment of policy frameworks and the development of standards. The OECD is also looking at the role of insurance, and other financial protection mechanisms in supporting the management of climate risks.

The OECD helps countries identify and implement effective and efficient policy mixes to meet their climate commitments through analyses of the broad policy mix (economic instruments, regulations, incentives for technological innovation) as well as advice on how to best implement policy reforms.

The OECD supports countries and development co-operation agencies to manage adaptation as part of development activities.

The report on National Climate Change Adaptation: Emerging Practices in Monitoring and Evaluation (2015) identifies four key tools that can be used to enhance learning and assess countries’ progress in adapting to climate change. Analysis of climate resilience in development planning shows how countries are taking concrete steps to build resilience to climate change. Two country case studies, Ethiopia and Colombia, are explored in detail.

Efforts to reduce GHG emissions need to be complemented with policies and incentives to adapt to the effects of a changing climate. The OECD is working to support governments in planning and implementing effective, efficient and equitable adaptation policies.

Š OECD 2018

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Green finance and investment

Key Publications • OECD (2017), Investing in Climate, Investing in Growth • “Climate Change Adaptation and Financial Protection: Synthesis of Key Findings from Colombia and Senegal”, OECD Environment Working Papers, No. 120 • OECD (2015), Aligning Policies for a Low-carbon Economy • OECD (2015), Climate Change Mitigation • OECD (2015), The Economic Consequences of Climate Change • OECD (2015), Climate Change Risks and Adaptation:

Green growth requires a shift in both public and private investments, with the limited public funds available targeted and accompanied by the right policy frameworks to help leverage private financing. Successfully tackling climate change also requires urgent action to scale-up and shift existing public and private investments towards low-carbon and climate-resilient (LCR) infrastructure. Choices made today on the types and location of critical infrastructure will lock in future emission levels and the resilience of our economies to a changing climate.

Linking Policy and Economics • OECD (2015), Climate Change Adaptation: Emerging Practices in Monitoring and Evaluation

Websites www.oecd.environment/cc

http://oe.cd/G20climate

http://oe.cd/lowcarbon

http://oe.cd/adaptation

Contact for more information Simon Buckle Environment Directorate E-mail: Simon.Buckle@oecd.org Michael Mullan Environment Directorate E-mail: Michael.Mullan@oecd.org

Jane Ellis Environment Directorate E-mail: Jane.Ellis@oecd.org

A broad range of policy interventions are needed. Given the current strains on public finance, mobilising investment in LCR infrastructure will require leveraging both domestic and international private investment, including institutional investors, who currently only allocate a small percentage of their assets to infrastructure.

The OECD’s Policy Guidance for Investment in Clean Energy Infrastructure (2015) is a non-prescriptive tool to help policy makers identify ways to mobilise private investment in clean energy infrastructure. This Policy Guidance framework has been applied in the OECD Clean Energy Investment Policy Review of Jordan (2017).

© OECD 2018

OECD WORK ON

Governments also need to pay attention to barriers to international investment, such as local content requirements, that may hinder low-carbon infrastructure investment. The OECD report Overcoming Barriers to International Investment in Clean Energy provides guidance to governments on the possible effects of such barriers on the growth of solar and wind energy, and how to avoid them in designing support policies for lowcarbon energy.

The recent OECD paper “The Empirics of Enabling Investment and Innovation in Renewable Energy” (2017) empirically assesses which investment conditions and climate policies are most critical in mobilising investment and innovation in renewable electricity in G20 and OECD countries. In addition, the paper on “State-owned enterprises and the low-carbon transition” (2018) examines the influence of competition policy and state-owned enterprises on investment in renewable electricity.

As traditional sources of low-carbon investments such as governments and banks face increasing constraints, alternative sources of capital such as institutional investors have to be mobilised. The OECD report Mapping Channels to Mobilise Institutional Investment in Sustainable Energy (2015) guides policy makers on the processes and channels through which institutional investors make low-carbon investments, and how to facilitate them.

Green Growth

Progress Report on Approaches to Mobilising Institutional Investment for Green Infrastructure (2016), as part of the OECD’s contribution to the G20 Green Finance Study Group, provides a stocktake of institutional investments in green infrastructure mobilised by the public sector intervention.

Key Elements of a Green Growth Policy Framework

1. Strategic goal setting and policy alignment 5. Promote green business and consumer behaviour

2. Enabling policies and incentives for LCR investment

4. Harness resources and build capacity for an LCR economy

3. Financial policies and instruments

Source: Corfee - Morlot, et al (2012), “Towards a Green Investment Policy Framework”

© OECD 2018

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32 The OECD also works on innovative financing tools and institutions such as green bonds and green investment banks.

Green bonds are debt instruments used to finance green projects that deliver environmental benefits. They have the potential to provide low cost, long-term sources of debt capital needed by infrastructure projects. The OECD’s new report Mobilising Bond Markets for a Low-Carbon Transition (2017) describes policy actions and options to promote further development and growth of the green bond market and will provide quantitative analysis of the potential contribution that bond markets can make to a low-carbon transition. Green investment banks are publicly capitalised banks created to leverage private investment in domestic low-carbon infrastructure. The OECD report Green Investment Banks: Scaling up Private Investment in Low-carbon, Climate-resilient Infrastructure (2016) provides the first comprehensive study of green investment banks, analysing the rationales, mandates and financing activities of this relatively new category of public financial institution.

Making pollution more costly

The OECD established the new Centre on Green Finance and Investment (CGFI) which helps to catalyse and support the transition to a green, low-emissions and climateresilient economy through the development of effective policies, institutions and instruments for green finance and investment.

Its Green Investment Financing Forum (GIFF) aims to promote dialogue and enhance understanding between a wide range of countries and institutions interested in mobilising private investment financing for low carbon and climate-resilient (LCR) infrastructure. The GIFF is an annual event of the CGFI and gathers senior policy makers and key actors in green finance and investment from across the world for a targeted discussion on key topics such as financial risks of climate change, institutional investors, green bonds, greening the traditional banking sector, the role of public financial institutions, local and retail green finance, and new and emerging actors in green finance.

Putting a price on pollution – through carbon taxes or emissions trading schemes – is a key policy for greener growth. Pricing mechanisms minimise the costs of achieving a given environmental objective and provide incentives for further efficiency gains and innovation, encouraging more sustainable production and consumption patterns.

Better pricing of environmental ‘bads’ can contribute to improved health outcomes through a cleaner environment, with positive repercussions for human capital, labour productivity and reduced health-related expenditures. Pricing instruments can also generate additional fiscal revenues to ease tight government budgets and help finance critical priorities such as health, education, or infrastructure development.

A number of countries have embarked on green tax reforms, often using the revenues raised to reduce taxes on labour which can boost employment and green growth.

© OECD 2018

OECD WORK ON

Green Growth

Key Publications • “State-owned enterprises and the low-carbon transition”, OECD Environment Working papers, No. 129 • OECD (2017), OECD Clean Energy Investment Policy Review of Jordan • OECD (2017), Mobilising Bond Markets for a Low-Carbon Transition • “The empirics of enabling investment and innovation in renewable energy”, OECD Environment Working Papers, No. 123 • OECD (2016), Green Investment Banks: Scaling up Private Investment in Low-carbon, Climate-resilient Infrastructure • OECD (2016), Progress Report on Approaches to Mobilising Institutional Investment for Green Infrastructure • OECD (2016), OECD Analytical Report on Investment Governance and the Integration of ESG Factors • OECD-ICMA (2016), Green Bonds: Country Experiences, Barriers and Options

Websites www.oecd.org/cgfi www.oecd.org/finance/lti www.oecd.org/greengrowth/green-investment-banks.htm

• OECD-G20 (2016), G20 Green Finance Study Group Document Repository • OECD (2015), Policy Guidance for Investment in Clean Energy Infrastructure

© OECD 2018

Contact for more information Robert Youngman Environment Directorate E-mail: Robert.Youngman@oecd.org

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Trade and green growth Achieving greener growth will require numerous goods and services to enable factories and buildings to use energy more efficiently, to reduce air and water pollution, to make the transition to more sustainable uses of energy, and to provide sanitation and clean drinking water. Many of these goods and services will be procured locally, but some will only be available, or become available more cheaply, from foreign suppliers.

Trade can help the environment both through achieving a more efficient use of resources and by serving as a conduit for the transfer of environmental technologies.

The OECD Environment Directorate works with the Trade and Agriculture Directorate to explore and promote the mutual compatibility of trade and environmental policies in practice.

One main focus has been on regional trade agreements (RTAs) and their relation to the environment. A recent report uses surveys and other sources to look at the implementation of environmental provisions in RTAs.

Another focus area has been on trade and climate change, with a report that sheds light on how climate change may affect international trade based on quantitative analyses and a literature review (2017). Other areas of interest include 2016 reports on environmental labelling and information schemes, which provide a review of how national policies and guidelines are applied to these schemes and how governments can respond to the multiplication of these schemes.

Current work focuses on the greening of RTAs, investigating how trade agreements can incorporate environmental objectives through chapters and articles that are not specific to the environment. In addition, work is underway to create a set of indicators that countries could use for monitoring their progress towards better aligned trade and environmental policies.

The OECD has also been at the forefront of international efforts to identify and analyse trade in environmental goods and services (EGS), looking recently at the effects that trade restrictions have on the supply of environmentally related services by foreign firms, and the policy implications of global value chains for EGS.

Š OECD 2018

OECD WORK ON

Green Growth

Key Publications

Measuring demand-based CO2 emissions embodied in trade

• “Assessing Implementation of Environmental Provisions in Regional Trade Agreements”, OECD Trade and Environment Working Papers, No. 2018/01

Typically, emissions statistics are compiled according to production-based or territorial emission accounting methods: measuring emissions occurring within sovereign borders.

However, these estimates do not account for global production chains i.e. the fact that emissions from many countries may be

• “Trade in services related to the environment”, OECD Trade and Environment Working Papers, No. 2017/02 • “Climate change and trade policy interaction: Implications of regionalism”, OECD Trade and Environment Working Papers, No. 2017/03

implicated in the production of final goods and services. The

• “Multiplication of Environmental Labelling and Information

OECD has published estimates of CO2 emissions embodied

Schemes (ELIS): Implications for Environment and Trade”,

in final demand since the early 1990s to contribute to a better understanding of how CO2 emissions around the world are

OECD Environment Working Papers, No. 106 • “Estimating CO2 Emissions Embodied in Final Demand and Trade

driven by global consumption patterns.

Using the OECD ICIO 2015: Methodology and Results”,

Using the 2015 edition of the OECD inter-country input-

OECD Science, Technology and Industry Working Papers,

output (ICIO) tables and detailed IEA CO2 emission data, the

No. 2016/05

methodology for estimating emissions embodied in final demand and in trade has been refined with higher industry and country resolution, a better matching of the IEA CO2 data to the ICIO industries, the reallocation of non-resident emissions from final demand to their country of residency, and a new and refined algorithm to allocate transport emissions across industries. The results show that most OECD countries remain net-importers of embodied CO2 emissions. However, both production-based and consumption-based CO2 emissions per capita are decreasing in a large number of OECD countries and for some countries, e.g. Germany, even in absolute terms. For non-OECD countries, emissions keep increasing. © OECD 2018

Website www.oecd.org/environment/envtrade

Contact for more information Ronald Steenblik Trade and Agriculture Directorate E-mail: Ronald.Steenblik@oecd.org

Shunta Yamaguchi Environment Directorate E-mail: Shunta.Yamaguchi@oecd.org

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Innovation for green growth Innovation, involving the creation, diffusion and application of new products, processes and technologies, can help achieve the decoupling of economic growth from environmental pressures, at the lowest possible cost. Innovation also leads to new ideas, new entrepreneurs and business models, contributing to the establishment of new markets and eventually to the creation of new jobs.

The drivers of green innovation differ across countries. Policy frameworks to foster green innovation should be adjusted to national circumstances, including the economic structure, existing capabilities to innovate, and the institutions in place. The development of a new set of indicators of green innovation developed by the OECD Environment Directorate will allow for improved understanding of trends and determinants of innovation in this area.

The use of agricultural feedstocks for fuel and chemicals the so-called bioeconomy is an area where there is great potential and need to integrate innovation with sustainability goals. Biobased production and green chemistry are central themes of bioeconomy strategies. One of the key tools for future innovation is synthetic biology, which could be used to develop better feedstocks and enzymes critical for breaking down biomass, which also may raise societal concerns. A major policy challenge remains the promotion of scale-up in better and more efficient bio-refining. Innovation here would help mitigate climate change,

improve energy security, reduce the depletion of non-renewable resources, and help alleviate the increasingly problematic issues of city waste generation and rural regeneration. All of this depends entirely on the sustainability of biomass growth, harvesting and utilisation.

The OECD has argued that, within the sphere of bioeconomy, more attention should be paid to the chemical sector than to fuels and electricity in bio-based production as a means for avoiding greenhouse-gas emissions. This sector is the largest industrial energy user, accounting for about 10% of global final energy use, and the third largest industrial source of emissions after the iron and steel and cement sectors. Energy costs on average account for 50–85% of the production costs of bulk chemicals.

This is particular pertinent to OECD countries as energy costs can be up to seven times higher in fuel importing nations than in fuel-exporting nations. Moreover, studies repeatedly find that job creation and value-added are greater for bio-based materials than for either biofuels or bioenergy. Many bio-based materials have been demonstrated to have lower life-cycle emissions of greenhouse gases than their petrochemical equivalents.

There are many overlapping policies that pertain to the bioeconomy, and this could lead to a degree of incoherence and inefficiency if not well co-ordinated. Around 50 countries have made the bioeconomy part of their economic and innovation strategy. Dedicated bioeconomy strategies are less common, but the number is growing. Š OECD 2018

OECD WORK ON

Inventive activity in selected environment-related technologies (High-value inventions (PF2), 3-year moving average, world total, indexed on indexed on 1990=100)

Green Growth

Key Publications • OECD (2016), “Innovation in the bioeconomy”, OECD Science, Technology and Innovation Outlook 2016 • OECD (2015), “Municipal waste utilisation in bio-based production: Issues paper” • OECD (2015), OECD Innovation Strategy 2015 • “Identifying and inducing breakthrough inventions: An application related to climate change mitigation”, OECD Science, Technology and Industry Working Papers, No. 2015/04 • “Measuring environmental innovation using patent data”, OECD Environment Working Papers, No. 89, • “The Use of Patent Statistics for International Comparisons and Analysis of Narrow Technological Fields”, OECD Science, Technology and Industry Working Papers, 2015/05 • “Invention and International Diffusion of Water Conservation and

Source: Hascic, Ivan and Migotto (2015) “Measuring Environmental Innovation Using Patent Data” OECD Environment Working Paper No. 89

Websites www.oecd.org/innovation http://oe.cd/2fA

© OECD 2018

Availability Technologies: Evidence from Patent Data”, OECD Environment Working Papers, No. 82

Contact for more information Ivan Hascic Environment Directorate E-mail: Ivan.Hascic@oecd.org

James Philp Directorate for Science, Technology and Innovation E-mail: James.Philp@oecd.org

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Green public procurement While efficiency and cost-effectiveness are among the primary objectives of public procurement, governments increasingly use their purchasing power as a policy lever to support secondary objectives such as green growth, the development of SMEs and innovation. Public procurement represents 12% of GDP and 29% of total government expenditures on average across OECD countries. This is a clear sign of public procurement’s potential to support broader policy objectives including that of green growth.

By using their purchasing power to choose goods, services and works with a reduced environmental impact, governments can make an important contribution towards local, regional, national and international sustainability goals. Green public procurement can be a major driver for innovation, providing industry with real incentives for developing green products and services. This is particularly true in sectors where public purchasers represent a large share of the market (e.g. construction, health services, or transport).

The OECD report Going Green: Best Practices for Sustainable Procurement analyses country efforts to implement green public procurement, and provides a comprehensive view of what may constitute good approaches to successful implementation of green public procurement. In addition, the OECD’s Round Table on Sustainable Development has addressed how public procurement could be used to trigger low-carbon innovations, in particular in the construction value chain. This is a strategic element of the low-carbon transition as it can engage heavy industry activities for which decarbonisation is technically and commercially challenging. Public procurement could create lead markets for industrial and construction innovations over and beyond ongoing efforts to green public procurement.

The report Public Procurement for Innovation: Good Practices and Strategies collects existing government procurement strategies and practices for innovation, highlights important conditions for their implementation and offers a framework for action that countries can use to support the strategic use of public procurement for innovation.

Š OECD 2018

OECD WORK ON

Key Publications • OECD (2017), Public Procurement for Innovation: Good Practices and Strategies, OECD Public Governance Reviews,

Websites www.oecd.org/governance/procurement/toolbox www.oecd.org/gov/public-procurement/green

• OECD (2016), “The Role of Public Procurement in Low-carbon Innovation”, Background paper for the 33rd Round Table on Sustainable Development • OECD (2015), Going Green: Best Practices for Sustainable Procurement

Contact for more information Paulo Magina Public Governance Directorate E-mail: Paulo.Magina@oecd.org

© OECD 2018 2015

Green Growth

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Green growth of key sectors: energy, transport, agriculture and fisheries It is important to understand the implications of green growth for key sectors and themes such as agriculture, food, water, energy, and transport. The main message arising from OECD sector-specific work to date is that, over the longer term, greening

these sectors can reinforce environmental sustainability, economic growth and social well-being. Indeed, green growth is essential to meet the energy, food and nutrition, and water as well as sanitation requirements for future generations.

Priority areas where coherent action is required • Increasing productivity in a sustainable way. If resources are used more efficiently throughout the supply chain, production can be increased to meet the demands of an expanding population with changing dietary and consumption habits while natural resources are used sustainably and natural capital is conserved. Higher priority needs to be given to research, development, innovation, education and information..

• Ensuring that well-functioning markets provide the right signals. Prices that reflect the scarcity value of natural resources will contribute to greater efficiency. Economically inefficient and environmentally harmful subsidies should be phased-out. The Polluter Pays Principle needs to be enforced through charges and regulations. Incentives should be provided for maintaining biodiversity and environmental services.

• Establishing and enforcing well-defined property rights. Over-exploitation can result when marine resources, land and forests lack clearly defined rights and ownership.

• Addressing the political economy of reform. Ensuring involvement by all relevant stakeholders and phasing-in policy reforms will be important for successful implementation. Addressing the distributional and competitiveness aspects of policy reform to meet green growth objectives is essential. A multi-level approach integrating international, national and local decision-makers and stakeholders can help identify challenges and formulate coherent policy responses. © OECD 2018

OECD WORK ON

Energy

Website www.iea.org

Energy is a fundamental input to economic activity. However, a major transformation is required in the way we produce, deliver and consume it. The current energy system is largely dependent on fossil fuels, which pollute the air, and contribute significantly to carbon emissions. Improving the environmental performance of energy transformation and consumption is a cornerstone of any attempt to promote green growth.

Due to its size, complexity, path dependency and reliance on longlived assets, the energy sector presents particular challenges to achieving green growth. Relevant policies for the energy sector can achieve important outcomes including better resource management, innovation and productivity gains, creating new markets and industries, and reducing environmental damage. Broadly, the key policies that are required to set the framework for the transformation of the energy sector include: pricing externalities; eliminating fossil-fuel subsidies; radically improving energy efficiency; and fostering green innovation.

Public support is often needed to stimulate investments in energy-efficiency projects. The OECD is also working with the countries of Eastern Europe, Caucasus and Central Asia to help strengthen the capacity of their administrations to design, cost and implement, in line with good international practices, public investment programmes focused on energy efficiency in both the residential and corporate sector. Š OECD 2018

Green Growth

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Transport Transport underpins economic and social development, allowing more efficient allocation of resources and increased mobility for people. Yet, there are challenges related to the environmental impacts of transport and globalisation. A recent study indicates that the cost to society of air pollution caused by road transport in OECD countries could be in the order of USD 0.9 trillion per year.

These costs are being increased by an ongoing shift from petrol to diesel vehicles, encouraged in many countries by taxing diesel at a lower rate than petrol (OECD, 2014). In recent years, some countries began closing the gap between diesel and petrol taxation diminishing the environmental harmful tax preference for diesel (OECD, 2016). Another OECD study examined income tax treatment of the benefits to employees of having a companyowned car at their disposal and analyse their fiscal and social costs.

Maritime transport accounts for about 2.5% of global greenhouse gas emissions.

The International Maritime Organization implemented in 2011 the Energy Efficiency Design Index (EEDI), setting mandatory energy standards for new ships being built. Despite these efforts, there is still scope for improving the environmental performance of ships. The OECD Council Working Party on Shipbuilding developed recommendations to promote the construction and operation of greener ships, which led to the publication of a study examining five specific policies that governments could implement to complement existing and planned international regulation and industry initiatives. Another paper focused on the relationship between environmental policy and “green” innovation in shipbuilding (OECD, 2016). Current work on green ships focuses on assessing the impact of EEDI regulation notably on CO2 emissions abatement and the role played by national and regional policies in promoting greener ships.

Transport is the second largest contributor to global greenhouse gas emissions. To avoid lock-in into carbon-intensive and climate-vulnerable transport infrastructure, there is a need to shift investment towards sustainable transport infrastructure.

The OECD is applying the Green Investment Policy Framework to the transport sector.

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The latest work by the International Transport Forum at the OECD examines what would be needed to achieve zero CO2 emissions from international maritime transport by 2035. It demonstrates that deployment of all currently known technologies (alternative fuels, technological measures, and operational improvements) could make it possible to almost completely decarbonise maritime shipping by 2035.

Green Growth

Four different decarbonisation pathways examined for the study would reduce international shipping’s CO2 emissions between 82% and 95% below the level currently projected for 2035. This reduction equals the annual emissions of 185 coal-fired power plants. The report recommends to: (i) set a clear, ambitious emissions-reduction target to drive decarbonisation of maritime transport; (ii) support the realisation of emissions-reduction targets with a comprehensive set of policy measures; and (iii) provide smart financial incentives to advance decarbonisation of maritime shipping

The International Transport Forum (ITF) at the OECD is an intergovernmental organisation with 59 member countries. It acts as a think tank for transport policy and organises the Annual Summit of transport ministers. ITF is the only global body that covers all transport modes. Its mission is to foster a deeper understanding of the role of transport in economic growth, environmental sustainability and social inclusion and to raise the public profile of transport policy.

The ITF organises the global dialogue for better transport acting as a platform for discussion and pre-negotiation of policy issues across all transport modes. “Governance of Transport” is the theme for ITF’s 2017 annual summit. The ITF’s 2017 Summit explored the trends shaping transport governance and identify the most pressing challenges in the transport sector, focusing on infrastructure, global connectivity, the right regulation for innovation, and urban access and mobility. The 2018 Summit on “Transport Safety and Security” will address issues ranging from road safety to extreme weather disruption, including the risks and benefits of automated driving. Enhancing transport safety and security is also an essential element in the implementation of two major international agreements, the UN Sustainable Development Goals (SDGs) and the Paris Climate Agreement.

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44 Key Publications • OECD-ITF (2018), Decarbonising Maritime Transport: Pathways to zero-carbon shipping by 2035 • OECD (2017), Promoting Clean Urban Public Transportation and Green Investment in Kazakhstan • “Environmental Policy and Technological Innovation in Shipbuilding”, OECD Science, Technology and Industry Policy Papers, No. 28 • OECD (2016), Tax Policy Reforms in the OECD 2016 • OECD (2014), The Cost of Air Pollution: Health Impacts of Road Transport • “The Diesel Differential: Differences in the Tax Treatment of Gasoline and Diesel for Road Use”, OECD Taxation Working Papers, No. 21 • “Personal Tax Treatment of Company Cars and Commuting Expenses: Estimating the Fiscal and Environmental Costs”, OECD Taxation Working Papers, No. 20 • “Environmental and Related Social Costs of the Tax Treatment of Company Cars and Commuting Expenses”, OECD Environment Working Papers, No. 70

Websites www.oecd.org/environment/greening-transport www.itf-oecd.org

DID YOU KNOW?

... that the social cost of air pollution is 4% GDP in OECD countries

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Agriculture

Green Growth

Key Publications • OECD (2017), Improving Energy Efficiency in the Agro-food Chain

The Trade and Agriculture Directorate leads work to strengthen policies to reduce the negative impacts of agriculture on the environment, to reinforce the positive impacts, and to develop and collect agri-environmental indicators.

Current work focuses on improving sustainability in food and agriculture, including: i) deepening the framework for analysing policies for innovation, productivity and sustainability in the food system by strengthening policy coherence; ii) analysing the environmental effects of agriculture policies; iii) setting up a network on agricultural total factor productivity and the environment; iv) updating the OECD agri-environmental indicators; and v) examining new policy challenges from emerging technologies in agriculture, including the implications of bioeconomy for the sustainability of the food system. The OECD will also continue looking at responses to the climate change and water challenges for the sector, analysing the economic effects of climate mitigation strategies in agriculture, and investigating political reform pathways to improve agriculture water use.

Website www.oecd.org/agriculture/sustainable-agriculture

© OECD 2018

• OECD (2017), Water Risk Hotspots for Agriculture • OECD (2016), Farm Management Practices to Foster Green Growth • OECD (2016), Mitigating Droughts and Floods in Agriculture: Policy Lessons and Approaches • “Alternative Payment Approaches for Biodiversity Conservation in Agriculture”, OECD Food, Agriculture and Fisheries Papers, No. 93 • OECD (2015), Drying Wells, Rising Stakes: Towards Sustainable Agricultural Groundwater Use • OECD (2015), Fostering Green Growth in Agriculture: The Role of Training, Advisory Services and Extension Initiatives

Contact for more information Dimitris Diakosavvas Trade and Agriculture Directorate E-mail: Dimitris.Diakosavvas@oecd.org

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Fisheries Our oceans are under severe pressure from over-exploitation of fish and other marine resources. FAO estimates that in 2016 31% of fish stocks were overfished. At the same time, governments spent more than USD 13 billion to support fishing activities, much of this encouraging greater fishing effort.

The 2015 report Green Growth in Fisheries and Aquaculture examines the current situation in fisheries and aquaculture, observing that in many parts of the world these sectors are at risk and do not reach their full potential. The report emphasises the need for a strong, science-based approach to stock management for resource sustainability, combined with a transparent and reactive policy development cycle to ensure that fisheries deliver maximum possible benefits. The report shows that improved regulation to deal with environmental externalities and space competition is key to unlocking future growth potential of aquaculture.

Governments’ objectives for sustainable fishing and aquaculture are often undermined by policies that aim to support incomes or increase production, which ultimately encourage unsustainable harvest and production methods while producing excessive pressure on resources. Reform can be difficult to achieve in practice due to vested interests, lack of trust, poor information and policy incoherence. Insufficient resources for research, monitoring and enforcement is also often an issue, especially in developing countries. This is why countries have been setting objectives for WTO negotiations and as part of the SDGs (14.6) to improve the performance of policies and eliminate those that are harmful. The OECD helps to identify and promote practical ways to bring about change that puts fisheries and aquaculture on a sustainable footing. For example, the OECD is at the forefront of improving global understanding of the scale and impact of support to fisheries, helping to identify not only those that are harmful but also better, more sustainable, alternatives.

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OECD WORK ON

The OECD’s Fisheries Support Estimate (FSE) database contributes by improving the evidence base. The OECD is the only international organisation that measures and reports policy effort in the fisheries sector on an annual basis. Work will also be undertaken to better understand the impacts of support to fisheries on overfishing and overcapacity, the two overarching concerns of global action on fisheries subsidies.

The OECD uniquely contributes to objectively and transparently tracking how policies change over time, in terms of support, but also with regards to regulation and implementation of recognised best policies and practices to deter illegal, unreported, unregulated (IUU) fishing.

This is critical to identify the regulatory loopholes and policy gaps that need most attention in the future. The OECD is examining key determinants of IUU fishing and collects data on the current regulatory and institutional situation in OECD and other countries. The OECD monitors progress towards meeting SDG 14 targets associated with ending IUU fishing. The fight against IUU fishing also has strong links with SDG 1 ‘No poverty’, SDG 2 ‘No hunger’ and SDG 16 dedicated to the promotion of ‘Peace, justice and strong institutions’.

Key Publications • OECD (2017), OECD Review of Fisheries: Policies and Summary Statistics 2017 • “Support to fisheries: Levels and impacts”, OECD Food, Agriculture and Fisheries Papers, No. 103 • OECD (2015), Green Growth in Fisheries and Aquaculture

Websites http://oe.cd/fse-stats www.oecd.org/agriculture/fisheries

© OECD 2018

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Contact for more information Roger Martini Trade and Agriculture Directorate E-mail: Roger.Martini@oecd.org

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SPOTLIGHT: Greening the Ocean Economy The 2017 Green Growth and Sustainable Development (GGSD) Forum on ‘Greening the Ocean Economy’ (21-22 November 2017) focused on the investment, innovation and employment aspects of the fast-growing ocean-based industries, together with policies to protect and sustainably use marine and ocean resources and ecosystems. It explored how the economic development and conservation needs can be balanced successfully through innovations in established and emerging ocean industries, as well as marine spatial planning instruments.

Issues such as national and international capacity for ocean industry oversight, the role of science and technology, responsible business conduct and waste management were addressed.

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Green Growth

The main findings from the Forum include: •

Technologies are key to drive innovations in greening the ocean economy;

•

Policies outside the core ocean policies (such as trade and agriculture) need to be better aligned;

•

Further considerations are needed on ways to address environmental externalities of the maritime transport sector, e.g. through carbon pricing;

•

Further work is needed to address ocean plastics (design, disposal, recycling and transport);

•

Knowledge frontiers need to be extended on the use of economic valuation of ocean-related activities;

•

Better monitoring is needed of human activities impacting oceans (monitoring progress of the SDG 14 implementation)

The outcomes of the 2017 GGSD Forum on the ocean economy is being fed back into the work of relevant OECD Committees, such as the Committee on Scientific and Technological Policy, Committee on Fisheries, Environment Policy Committee’s Working Party on Biodiversity, Water and Ecosystems, the Council Working Party on Shipbuilding, the Investment Committee and its Working Party on Responsible Business Conduct, the Development Assistance Committee (DAC), the International Transport Forum and the International Energy Agency.

Website www.oecd.org/greengrowth/ggsd-2017

© OECD 2018

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Natural capital: biodiversity and water Biodiversity and ecosystems OECD analysis focuses on the economic aspects of biodiversity – examining the benefits provided by biodiversity and ecosystems, and how these values can be captured through policy instruments and incentives to support biodiversity conservation and sustainable use. The objective is to promote policies that are environmentally effective, economically efficient and distributionally equitable. OECD work on biodiversity also supports the work of the UN Convention on Biological Diversity.

Sources of loss in mean species abundance (MSA) to 2050 MSA, (%) 100

Infr+encr+frag

Recent OECD work has focused on the effective design and implementation of biodiversity offsets, and on the effective design and implementation of marine protected areas. Earlier work has examined, inter alia, how to scale up financing mechanisms for biodiversity, including how to better engage the private sector. It covers lessons learned from payments for ecosystem services (PES), environmental fiscal reform, and markets for green products, and provides good practice insights.

Climate change

90

Nitrogen

80

Former land-use 70

Forestry Pasture

60

2010 2030 2050

2010 2030 2050

2010 2030 2050

Bioenergy 2010 2030 2050

0-50

Given on-going and projected trends in biodiversity loss and degradation, there is an urgent need for: greater and more ambitious use of policies including economic instruments, more cost-effective use of existing finance for biodiversity, and mainstreaming of biodiversity in other sectors of the economy.

OECD

BRIICS

RoW

World

Source: OECD Environmental Outlook to 2050; output from IMAGE Note: 100% MSA implies an undisturbed state.

Infr+encr+frag: Infrastructure + encrouchment + fragmentation

Food crop Remaining MSA

A key challenge in efficiently allocating biodiversity finance is the need to ensure appropriate design and implementation of biodiversity instruments so as to best achieve their intended goals. This includes the need to develop appropriate indicators for biodiversity instruments, and ensuring robust monitoring and reporting frameworks. Indicators, for example, are critical to assess trends, establish business-as-usual baselines, quantify benefits, target biodiversity expenditures and enable the assessment of policy interventions over time. Recent work examined how to derive policy response indicators

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for biodiversity, for Aichi Target 3 on Incentives and for Aichi Target 20 on resource mobilisation from OECD work on environmental expenditure and policy instruments.

The OECD tracks policy instruments for the environment in its PINE database, including policy instruments for biodiversity.

These include biodiversity-relevant taxes, charges and fees; tradable permits; and others.

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case studies on reforms related to agriculture and fisheries.

Current OECD work is focusing on how to enhance synergies and address trade-offs between biodiversity and development policy, at national and sector level (e.g. agriculture, forestry, fisheries), and is also examining the role of development co-operation in mainstreaming biodiversity and development.

Key Publications • OECD (2018), Biodiversity and Development: Mainstreaming and

The OECD also monitors external development finance targeting biodiversity objectives through its Creditor Reporting System using the biodiversity “Rio marker”. In 2014-15, total bilateral biodiversity-related aid commitments by members of the OECD Development Assistance Committee totalled about USD 8.7 billion on average per year, representing 6% of total bilateral official development assistance.

Managing for Results • OECD (2017), Marine Protected Areas: Economics, Management and Effective Policy Mixes • OECD (2017), The Political Economy of Biodiversity Policy Reform • OECD (2016), Biodiversity Offsets: Effective Design and Implementation • “Biodiversity Policy Response Indicators”, OECD Environment Working Papers, No. 90

The drivers of biodiversity loss and degradation often stem from policies in other sectors and areas such as agriculture, fisheries, forestry, and climate change. Linkages between biodiversity and other national and sectoral policies are complex and greater efforts are needed to mainstream biodiversity into decisionmaking processes across the economy. Recent work on The Political Economy of Biodiversity Policy Reform highlights the types of barriers that are encountered along the policy reform process, and the factors that contribute to overcoming these.

The report draws lessons learned from the literature on the political economy of environmental policy reform and four new © OECD 2018

• “The Role of National Ecosystem Assessments in Influencing Policy Making”, OECD Environment Working Papers, No. 60 • OECD (2013), Scaling-up Finance Mechanisms for Biodiversity • OECD (2012), OECD Environmental Outlook to 2050: The Consequences of Inaction

Websites http://oe.cd/biodiversity http://oe.cd/BLUE

Contact for more information Katia Karousakis Environment Directorate E-mail: Katia.Karousakis@oecd.org

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Managing water for green growth The OECD work on sustainable management of water is undertaken by the Environment Policy Committee, in partnership with the Agriculture, Regional Development Policy, Regulatory Policy and Development Assistance Committees. Work in 201718 aims at the implementation of the Recommendation on water, which was adopted by the OECD Council in December 2016. The OECD will i) seek adherence of non-member countries; ii) develop a toolkit that can facilitate implementation in Adherents; and iii) set up a mechanism to report back to Council on implementation within the next 3 years.

The Global Dialogue on Water Security and Sustainable Growth, a joint initiative by the OECD and the Global Water Partnership, emphasises the importance of water security for growth. The report Securing Water, Sustaining Growth (Sadoff et al., 2015) demonstrates how investment in water security drives growth.

It highlights stylised development pathways that countries can follow, based on their water resources endowment and on their investments in water infrastructures and institutions.

A follow-up stream of work focuses on how investments in water security can materialise. The Roundtable on Water Finance aims to facilitate the financing of investments that contribute to water security and sustainable growth. It will explore: i) financiers’ expectations when considering investment in water security; ii) risks and potential returns associated with investment in water

security, and options for their allocation; iii) pathways that contribute most to water security and sustainable development; and iv) how to blend public and private funding to make investments more viable for the private sector.. The Roundtable provides a global public–private platform for knowledge exchange and effective engagement, collaboration, and action across governments and regulators in developed, emerging and developing economies, institutional investors, the private sector, international organisations, philanthropies, academia and civil society organisations.

The OECD Water Governance Initiative was set up as an international multi-stakeholder network where delegates from public, private and not-for-profit sectors share good practices in support of governance in the water sector. It has led to the development of the OECD Principles on Water Governance, which have been welcomed by 42 countries and 100+ stakeholders.

The OECD supports ambitious water policy reforms in selected countries, on demand. The OECD contributes robust analyses of water economics and governance combined with insights from international practitioners, in the framework of national policy dialogues on water. Water Policy Dialogues have so far been undertaken in Mexico, the Netherlands, Brazil and Korea. They have helped to inform the water policy reform agenda.

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OECD WORK ON

The OECD also provides support to the transition economies of Eastern Europe, the Caucasus and Central Asia to improve their environmental and water policies, integrate environmental considerations into the processes of economic, social and political reform and gradually shift to a green growth and sustainable development model. As a key implementing partner of the European Union Water Initiative (EUWI), OECD work on policy reforms in this region are aimed at the economic and financial dimensions of sustainable water resources management, the reform of water supply and sanitation systems, and enhanced transboundary co-operation in water basins.

Green Growth

Key Publications • OECD (2018), Implementing the OECD Principles on Water Governance: Indicator Framework and Evolving Practices • OECD (2018), Strengthening Shardara Multi-Purpose Water Infrastructure in Kazakhstan • OECD (2018), Facilitating the Reform of Economic Instruments for Water Management in Georgia • OECD (2017), Water Charges in Brazil: The Ways Forward • OECD (2017), Groundwater Allocation: Managing Growing Pressures on Quantity and Quality • OECD (2017), Reforming Sanitation in Armenia: Towards a National Strategy • OECD (2017), Enhancing Water Use Efficiency in Korea: Policy Issues and Recommendations • OECD (2017), Diffuse Pollution, Degraded Waters: Emerging Policy Solutions • OECD (2017), “Financing water: Investing in sustaibable growth” Policy Perspectives

Websites www.oecd.org/water

http://oe.cd/2fD

Contact for more information Xavier Leflaive Environment Directorate E-mail: Xavier.Leflaive@oecd.org

© OECD 2018

Matthew Griffiths Environment Directorate E-mail: Matthew.Griffiths@oecd.org

Aziza Akhmouch Centre for Entrepreneurship, SMEs, Regions and Cities E-mail: Aziza.Akmouch@oecd.org

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Greening regions, cities and communities The OECD provides concrete and targeted advice to countries as they design and implement economic, environmental, investment and innovation policies. When tailoring green growth strategies to the context of developing countries, the work of the OECD include assessing the links between green growth and poverty reduction, as well as identifying the changes needed in sectors such as agriculture and infrastructure to make these more supportive of sustainable development.

Inclusive green growth in cities and regions More than half the people in the world live in or near cities today.

By the middle of the century, urban areas will be home to over two-thirds of the global population and a large share of economic activity. The OECD work on urban and regional development finds that appropriate local policies can help generate growth and jobs while becoming greener.

The Urban Green Growth in Dynamic Asia project examines policies and governance practices that encourage environmental sustainability and competitiveness in a rapidly expanding economy. The current development of Asia is characterised by a rapid urbanisation of its population on an unprecedented scale (52% increase in urban population between 2000 and 2015), along with a rising economic growth (6.5% real GDP growth in 2016) led in most places by the manufacturing industry, coupled with a rapidly increasing motorisation (from 7 million vehicles in 2005 to 139 million in 2015 in Southeast Asia).

The result has been escalating greenhouse gas emissions, sprawling urban development and local environmental impacts, as well as disparities in income, education levels and job opportunities in the urban population.

The project aims to assist Southeast Asian cities to decouple economic growth from environmental stress and to promote a long-term trajectory of sustained growth, based on case studies of five cities; Bandung (Indonesia), Bangkok (Thailand), Cebu (Philippines), Hai Phong (Viet Nam) and Iskandar Malaysia (Malaysia). The project builds on previous green growth case studies and presents the results of analysis along with practical policy recommendations, reflecting the local contexts of each case study. The project has identified that despite a range of economic, environmental and social challenges, ongoing rapid urbanisation in Asia offers opportunities to shift towards a greener growth model. However, such “windows of opportunities� are fast closing, and cities need immediate action. The concept of urban green growth is a powerful vector for sustainable development

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as it emphasises the existence and potential of co-benefits among economic, social and environmental performance.

Several key strategies are also identified, including mixed land use, integrated urban transport, 3Rs, energy and resource efficiency standards, use of pricing mechanism, etc.

Within the framework of the OECD Champion Mayors for Inclusive Growth initiative, recent OECD report assesses inclusive growth trends and challenges in the Seoul metropolitan area. The analysis goes beyond income to assess the barriers faced by specific groups - non-regular workers, youth, women, the elderly and migrants - across four dimensions: education, labour market, housing and the urban environment, and infrastructure and public services. The study analyses the city’s efforts to ensure that strategies to address climate change also protect and benefit the most vulnerable populations, notably through the Promise of Seoul, which puts citizen welfare and social inclusion at the heart of the city’s efforts to tackle climate change.

The OECD’s Local Economic and Employment Development (LEED) programme carried out a project examining how to boost skills ecosystems for green jobs in specific regions. For example, a study focusing on Flanders, Belgium, analysed the skills dimension of the transition to a green economy at the local level, with specific reference to emerging needs in the agro-food, construction and chemicals sectors. It also provides

© OECD 2018

Green Growth

recommendations for the development of green skills and occupational profiles at the organisational level, while advising policy makers on the best method of assisting firms to transition to a green economy. Another study on the Western Cape Provide of South Africa specifically considers the aquaculture sector.

While this sector is still relatively small in the Western Cape, it presents important new opportunities for the region’s labour market through business growth, innovation, increasing food production, addressing environmental challenges and job creation. Aquaculture has been identified as a priority sector, but does not yet fully benefit from the mechanisms to foster green growth.

55

56 Key Publications • OECD (2018), Inclusive Growth in Seoul, Korea • “Boosting Skills for Greener Jobs in the Western Cape Province of South Africa”, OECD Green Growth Papers, No. 2018/01 • OECD (2017), Green Growth in Cebu, Philippines • OECD (2017), Green Growth in Iskandar Malaysia • OECD (2017), Boosting Skills for Greener Jobs in Flanders, Belgium • OECD (2017), Greening the Blue Economy in Pomorskie, Poland • OECD (2016), Urban Green Growth in Dynamic Asia • OECD (2016), Green Growth in Bandung, Indonesia • OECD (2016), Green Growth in Hai Phong, Viet Nam

Websites

Contact for more information

http://oe.cd/2fE http://oe.cd/2fF

Tadashi Matsumoto Centre for Entrepreneurship, SMEs, Regions and Cities E-mail: Tadashi.Matsumoto@oecd.org

© OECD 2018

OECD WORK ON

Asia The 2017 edition of the OECD Economic Outlook for Southeast Asia, China and India focused addressed the energy challenges and renewable energy development in the region. Long‑term projections show that a large increase in energy consumption is to be expected in Emerging Asia as a result of a variety of socio‑economic factors, including increasing population, sustained economic growth, and increasing access to electricity.

Much of the region has adopted specific targets for the implementation of renewable energy capacities, as well as policy mechanisms to foster the development of renewables that are not yet competitive with conventional energy sources.

Due to their size, China and India are making very large contributions to global investment in renewable energy. Viet Nam, Thailand, Malaysia and Lao PDR are leading investment among ASEAN countries, with particularly large investments in hydropower. FDI will be an important channel for investment in renewables that also enables the transfer of capital, technology and expertise. FDI is also helping to support the expansion of green jobs. Setting the right conditions for the development of renewable energy in Emerging Asia will require solutions to challenges in grid access, administrative barriers and energy pricing mechanisms.

of resources, and has also generated enormous pressure on the environment. The Chinese government has taken many steps to promote the transformation of industry, encourage structural adjustments and initiatives aimed at boosting efficiency and performance. Efforts have been made to assist heavy industry sectors, particularly those plagued by excess capacity, through improved policy settings which encourage the closure of less productive plants, the facilitation of mergers and reorganisation, as well as to continue strengthening the binding force of environmental policy. In the meantime, the reinforcement of the “ecological civilisation” concept and the emphasis on innovation in the heart of the 13th Five-Year Plan mark an important milestone in China’s transition to a more balanced, higher-quality and greener growth path. A joint project by the OECD and the Development Research Centre of the State Council of China -Industrial Upgrading for Green Growth in Chinadeveloped recommendations for China to better reallocate resources to more productive segments of the economy in order to achieve the dual objectives of sustained economic growth and a progressive reduction of pollution that has been impacting the life of those living close to clusters of heavy industry.

Key Publications • OECD (2017), Economic Outlook for Southeast Asia, China and India 2017: Addressing Energy Challenges

The rapid industrial expansion in China since the early 2000s has been associated with overinvestment and misallocation © OECD 2018

Green Growth

• Industrial Upgrading for Green Growth in China: Thematic focus on environment (2017)

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Eastern Europe, the Caucasus and Central Asia Since the 1990s, the OECD has supported countries of Eastern Europe, Caucasus and Central Asia (EECCA)— i.e. Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, the Kyrgyz Republic, Moldova, Tajikistan, Turkmenistan, Ukraine and Uzbekistan - to reconcile their environment and economic goals thus addressing the heavy environmental legacy of the Soviet model of development. This support has been provided within the framework of the Task Force for the Implementation of the Environmental Action Programme (the EAP Task Force).

Ministers attending the 8th “Environment for Europe” Ministerial Conference (Batumi, Georgia, June 2016) decided to change its name to the GREEN Action Task Force and invited the OECD to continue facilitate policy reforms in the EECCA region.

Despite the increase in GDP growth and investment levels, the EECCA countries are still facing significant environmental challenges, partly inherited from the Soviet Union and partly newly acquired as a result of modern consumption patterns.

These countries have some of the most energy and carbon intensive economies in the world. They need significant investments and policy reforms to move onto a greener path of economic development.

Energy intensity in EECCA countries (1990-2013) toe per thousand 2005 USD

Total primary energy supply / GDP

4.5 4 3.5 3 2.5 1990

2

2013

1.5

OECD 1990

1

OECD 2013

0.5 0

Source: IEA (2016), “World Indicators”, IEA World Energy Statistics and Balances (database). http://dx.doi.org/10.1787/data-00514-en

The mission of the GREEN Action Task Force is to “guide improvement of environmental policies in transition economies of the EECCA region by promoting the integration of environmental considerations into the processes of economic, social and political reform”. The current work of the Task Force focus on four areas: (i) national green economy dialogues and strategies, (ii) green finance and investment, (iii) integrating

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environmental, economic and sectoral policies, strengthening water management for green growth.

and

(iv)

Green Growth

Key Publications • OECD (2018), Inventory of Energy Subsidies in the EU’s Eastern Partnership Countries

Part of the work in the context of the GREEN Action Task Force is carried out in co-operation with other international organisations such as the UNECE, UNEP and UNIDO as implementing partners of the European Union’s Eastern Partnership Programme and the EU Water Initiative.

• OECD (2018), Designing a Climate Related Public Investment Programme in Moldova • OECD (2018), Towards a Kyrgyzstan’s Sustainable Finance System • OECD (2018), Scaling Up Green Investments and Finance in Georgia • OECD (2018), Strengthening Multi-Purpose Water Infrastructure in Shardara, Kazakhstan • OECD (2018), Environmental Policy Toolkit for SME Greening in EU Eastern Partnership Countries

Websites www.oecd.org/environment/outreach/eap-tf.htm http://oe.cd/2fD

• OECD (2018), Facilitating the Reform of Economic Instruments for Water Management in Georgia • OECD (2018), Promoting Clean Urban Public Transportation and Green Investment in Kazakhstan • OECD (2017), Improving Domestic Financial Support Mechanisms in Moldova’s Water and Sanitation Sector

Contact for more information Krzysztof Michalak Environment Directorate E-mail: Krzysztof.Michalak@oecd.org Matthew Griffiths Environment Directorate E-mail: Matthew.Griffiths@oecd.org

© OECD 2018

• OECD (2017), Measuring the Performance of Green Economic Development in the Republic of Moldova: National Report based on the OECD Set of Green Growth Indicators

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Latin America and Caribbean Natural assets have underpinned the economic development in Latin America and Caribbean, with strong ties to social aspects of growth. Rising population that has increasingly been exposed to the consequences of environmental degradation has escalated the green growth debate in the region. Green growth is one response the OECD has pioneered to nudge the development path onto a different trajectory that would integrate environmental considerations in the economic development, while improving people’s quality of life.

Concrete steps have been taken in Latin America and Caribbean to develop environmental strategies. In general, their alignment with other policies across ministries and disciplines is often still needed to redirect investment and catalyse innovations towards low-carbon and resource efficient systems.

The results show that countries that have relied the most on natural capital to generate growth will need to consider how they will be able to sustain their current growth rates if natural capital becomes scarce. Similarly, the real growth performance of countries that have relied heavily on polluting technologies is called into question and urges countries to scrutinise the full costs of environmental degradation weighing on people’s quality of life.

The OECD is continuously supporting the national efforts in the LAC region to deliver on these objectives through the Economic Surveys and the Environmental Performance Reviews (EPRs). Key findings on biodiversity conservation and sustainable use from the EPRs of Brazil, Chile, Colombia, Mexico and Peru between 2013 and 2017 are synthesised to review common challenges, the strategies being used to tackle them, the gaps that remain and how these can be addressed.

In co-operation with the Latin America Development Bank, the Latin American and the Caribbean Economic System and the United Nations Industrial Development Organization, the set of OECD green growth indicators was applied to countries of this region.

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Key Publications • OECD (forthcoming), Biodiversity in Latin America • OECD, (forthcoming), Green Growth in Emerging Economies: Evidence from EPRs • OECD (2017), Environmental Performance Review of Peru • OECD (2016), Environmental Performance Review of Chile • OECD (2015), Environmental Performance Review of Brazil • OECD (2014), Environmental Performance Review of Colombia • OECD (2013), Environmental Performance Review of Mexico • OECD-CAF-UNIDO (2014), Monitoring Green Growth in the Latin America and the Caribbean (LAC) Region: Progress and Challenges

Website www.oecd.org/environment/country-reviews

© OECD 2018

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OECD work on Green Growth www.oecd.org/greengrowth

February 2015

July 2018