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OECD WORK ON GREEN GROWTH 2
OECD at a glance
Work on green growth
SPOTLIGHTâ€” Greening heavy and extractive industries
Green growth indicators
Green growth in country policy surveillance
Fiscal policy and green growth
Environmental policies and economic outcomes
Jobs, skills and distributional aspects
Spatial planning instruments and the environment (SPINE)
Behavioural insights for green growth
Towards a low carbon and climate-resilient economy
Green finance and investment
Trade and green growth
Innovation for green growth
Green growth of key sectors: energy, transport, agriculture
SPOTLIGHTâ€” Securing natural capital: Resiliance and risk management
Biodiversity, ecosystems and water
Greening regions, cities and communities
OECD at a glance 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 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.
Me mbe r countr ie s
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Work on green growth
lobal momentum toward sustainable development has been renewed by the success of the 2030 Sustainable Development Agenda and the Par is Agreement on climate change. At the same time, across the world people are concerned about lagg ing growth, inequality, jobs, and globalisation. Some fear that uneven environmental regulation in a globalised economy could further dr ive socioeconomic malaise. With the 2030 deadline for the SDGs on the hor izon, it has never been more important to modify the old narrative that sets environmental protection against economic prosper ity and social equity. Productivity growth, green growth and inclusive growth are three key aspects of the OECD efforts to help countries sustain economic growth and improve wellbeing in the context of sustainable development. In order to assess the overall sustainability of the current growth model, the linkages among these aspects are being re-examined during 2019-2020. Building on its Green Growth Strategy, the OECD work on green growth has delivered 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.
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Wellbeing Inclusive Growth
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 for all in inclusive ways.
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
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 development 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.
4 000 livestock
Current patterns of economic growth continue 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:
1 000 irrigation
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
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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
Rest of Europe & Asia South and South-East Asia
70 Sub Saharan Africa
Millions of people
2060, lower estimate
Evolution of GHG emissions by region: Baseline projection 2010 to 2060
60 Latin America 50 40 30
Source: OECD (2015) The Economic Consequences of Climate Change. Output from IMAGE/ ENV-Linkages. http://dx.doi.org/10.1787/888933275952
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Middle East & North Africa 0
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
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, tourism, skills and jobs, ecosystems and water management, rural and urban development. The framework of the OECD Green Growth Strategy provides a ‘green lens’ for looking at growth, development and human wellbeing. It aims to identify mutually reinforcing aspects of economic and environmental policy as well as synergies with the inclusiveness agenda. 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. Mainstreaming of green growth in social policies needs to aim to enhance equity and inclusiveness.
What progress have countries made in aligning economic and environmental priorities since then? Towards Green Growth? Tracking Progress (2015) evaluated the progress countries have made in aligning economic and environmental priorities since 2011. 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. In 2019-2020, a review of policy packages to address green growth and inclusive growth is carried out in order to gain a better understanding of synergies and trade-offs between environmental and social goals in the context of sustainable development.
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. © OECD 2019
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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.
Key Publications and website • Reconciling green and inclusive goals (forthcoming 2020) • Towards Green Growth? Tracking Progress: Four years of the Green Growth Strategy (2015 • Towards Green Growth? Tracking Progress: Key Findings and Recommendations (2015) • What we have learned from attempts to induce green growth policies? (2013) • owards Green Growth (2011) • Tools for Delivering Green Growth (2011) www.oecd.org/greengrowth
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.
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Contact for more information Kumi Kitamori Environment Directorate Email: Kumi.Kitamori@oecd.org
Enrico Botta Environment Directorate Email: Enrico.Botta@oecd.org
SPOTLIGHT— Greening heavy and extractive industries: Innovation and fiscal implicaions Efforts to shift to a low-carbon economy and meet the Sustainable Development Goals will require far-reaching transformations of the heavy and extractive industries. This will create challenges and opportunities for both industry and governments. For countries relying heavily on extractive sectors for fiscal revenues, the green transition highlights the need for economic diversification and risk of stranded assets. Countries that are not resource-rich could also face shrinking revenues from the traditional tax base represented by the use of fossil fuels. Coordinated national and regional policies are crucial to manage the possible structural adjustments in hydrocarbon-rich regions due to the decreasing demand of fossil fuels. Meanwhile, demand for certain metal and mineral inputs for alternative energy technologies such as solar panels and batteries is likely increase, reinforcing the need to ensure environment and social sustainability of related mining operations.
The 2019 Green Growth and Sustainable Development (GGSD) Forum on ‘Greening heavy and extractive industries: innovation and fiscal implications’ (26-27 November 2019) explores a greener low-carbon future for extractive and heavy industries. Focus themes include: fiscal implications for declining fossil fuel demand for producing and consuming countries; driving innovation for greening the heavy industry (e.g. steel, cement, chemicals); greening of the mining sector; the role of international trade to promote a circular economy; challenges and opportunities triggered by the low-carbon transition for mining regions; and new geopolitics of natural resource endowment and the low-carbon transition. Reflecting the multidisciplinary nature of the event, many OECD Committees, bodies and initiatives participate in and contribute work to the 2019 GGSD Forum, including: Committee on Fiscal Affairs (CFA) and its Joint Meetings of Tax and Environment Experts (JMTEE); Environment Policy Committee (EPOC)’s Working Party on Resource Productivity and Waste (WPRPW), Joint Working Party on Trade and Environment (JWPTE) and Working Party on Integrating Environmental and Economic Policies (WPIEEP); Steel Committee; Regional Development Policy Committee’s Working Party on Rural Policy; Investment Committee’s Working Party on Responsible Business Conduct; OECD Development Centre’s Policy Dialogue on Natural Resource-based Development (PD-NR); and International Energy Agency (IEA). Website www.oecd.org/greengrowth/ggsd2019
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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, multidisciplinary 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
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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 six headlines indicators has been identified to facilitate communication with policy makers, the media and citizens:
Carbon productivity Non-energy material productivity Environmentally-adjusted, whole-economy (multi-factor) productivity Natural resource index Land cover and use
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 integrated into OECD work, including country reviews and policy analysis. 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 peopleâ€™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). This is supported by OECD work on the implementation of the System of Environmental Economic Accounting (SEEA),carried out jointly by the OECD Environment Directorate and the OECD Statistics and Data Directorate. It includes work on air and greenhouse gas emission accounts, natural asset and material flow accounts, as well as work to improve data and accounts on environmental expenditure and tax revenue. The OECD work also draws on Earth observation and other geospatial data to fill gaps in environmental data and improve its information base.
Population exposure to air pollution (PM2.5)
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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.
Highest overall improvements towards green growth, 2000-2015
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Denmark Environmentally adjusted multifactor productivity Low land consumption Low air pollution exposure
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-stateresponse model. The indicators provide an important building block for monitoring progress towards several SDGs (www. oecd.org /sdd /measuring-distance-to-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 development and refinement of methodologies for global SDG indicators and to related global data collection. The OECD is an observer to the UN Inter-Agency and Expert Group on SDG indicators.
Environmentally related innovation Environmentally related taxation
GDP per capita
Low income inequality
CO2 productivity (production-based)
CO2 productivity (demand-based)
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 Green growth indicators framework
G R EEN G R O W TH 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
ECONOMIC OPPORTUNITIES AND POLICY RESPONSES
taxes subsidies labour
+ Recycling re-use, remanufacturing, substitution
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
water, land, biomass, air
NATURAL ASSET BASE
Icons from TheNounProject.com
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Key Publications and websites • Assessing Progress towards Green Growth in the EECCA Region (Forthcoming 2020) • Environment at a Glance (2019) • Land Cover Change and Conversions (2018)
… that the Green Growth Indicators Database brings DID together the data needed YOU for calculating the OECD’s KNOW? 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 2019
• Towards Global SEEA Air Emission Accounts (2018) • Green Growth Indicators (2017) • OECD Environment Statistics www.oecd.org/site/envind
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
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. Environmental Performance Review includes a chapter on green growth, which looks at the reviewed country’s policy mix for mainstreamingenvironmentconsiderationsintoeconomicandfiscal 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 has been released in 2019. Economic Surveys of OECD and partner countries systematically include a set of green growth indicators track progress and discuss selected policies to improve outcomes costeffectively. Green growth also features in every Survey’s key recommendations. Some recent Economic Surveys have also addressed an important green growth challenge in depth, such as air pollution in Mexico’s metropolitan areas, climate policy in Japan or sustainable water use in South Africa. Increasingly, Economic Surveys integrate environmental aspects in the discussion of other structural or macroeconomic policies. For example, the 2018 Economic Survey of Sweden and the 2019 Economic Survey of Luxembourg discuss the steps to better align financial flows with climate change mitigation. 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.
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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 Latvia, Turkey, Australia, Greece, Luxembourg, Argentina 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), Cambodia (2018) and Vietnam (2018) include a green growth focus.
Contact for more information Andrés Fuentes Hutfilter Nathalie Girouard Economics Department Environment Directorate E-mail: Andres.Fuentes@oecd.org E-mail: Nathalie.Girouard@oecd.org
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 Luxembourg (2019) on green finance and Mexico (2017) on climate policies.
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) El Salvador, Dominican Republic and Vietnam (2020 forthcoming) address green growth and natural capital.
Websites www.oecd.org/eco/surveys www.oecd.org/environment/country-reviews
Geraldine Ang Directorate for Financial and Enterprise Affairs E-mail: Geraldine.Ang@oecd.org © OECD 2019
Jan Rielaender Development Centre E-mail: Jan.Rielaender@oecd.org
www.oecd.org/sti/inno/oecdreviewsofinnovationpolicy.htm www.oecd.org/investment/countryreviews.htm www.oecd.org/development/mdcr/
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, the long-term revenue implications of a decarbonising economy, as well as phasing out support to the extraction or use of fossil fuels in OECD member and partner countries. In addition, OECD is helping countries embed climate and other environmental goals within national budgeting frameworks through the Paris Collaborative on Green Budgeting, which was launched at the One Planet Summit in December 2017. 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 countriesâ€™ 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 (2018) presents the most comprehensive analysis available today of the extent to which countries effectively price carbon. 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. ÂŠ OECD 2019
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The carbon pricing gap varies widely across countries: Carbon pricing gap in 2015
Source: OECD (2018) Effective Carbon Rates.
The “carbon pricing gap” measures by how much countries fall short of pricing emissions in line with a EUR 30 benchmark value (low-end estimate of carbon costs today). The current gap for 42 OECD and G20 countries as a group is 76.5%. In recent years, the has narrowed by only 1 percentage points a year. Across countries the gap varies from 27% to 100%. The gap exceeds 80% in the electricity, industry and the residential and commercial sectors. 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
© OECD 2019
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 not taxed at all. 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).
18 Large difference among average tax rates on different fuels Coal
Biofuels & waste
Tax rate (EUR per tCO2)
Source: OECD (2018) Taxing Energy Use 2018.
The transition to a low-carbon economy interacts with tax policy. Recent work by the OECD and the International Transport Forum shows that tax revenue from diesel and gasoline use in private cars could decline substantially in the coming decades as future verhicles rely less on fossil fuels. This would put stress on government budgets, particularly in countries where fuel tax revenues represent a large share of total revenue. Broader use of distance-based charges can contribute to help sustain tax revenues, while also improving environmental and mobility outcomes (see Van Dender, 2019 and OECD/ITF, 2019).
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.
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Key Publications and websites • Marten, M. and K. Van Dender (2019) “The use of revenues from carbon pricing”, OECD Taxation Working Papers, No. 43 • OECD/ITF, Tax Revenue Implications of Decarbonising Road
Contact for more information Kurt Van Dender Centre for Tax Policy and Administration E-mail: Kurt.Vandender@oecd.org
Transport: Scenarios for Slovenia (2019) • Van Dender, K, “Taxing vehicles, fuels, and road use: Opportunities for improving transport tax practice”, OECD Taxation Working Papers, No. 44
Nathalie Girouard Environment Directorate E-mail: Nathalie.Girouard@oecd.org
• OECD Companion to the Inventory of Support Measures for Fossil Fuels 2018 (2018) • Taxing Energy Use 2019: Companion to the Taxing Energy Use Database (2019)
Assia Elgouacem Environment Directorate E-mail: Assia.Elgouacem@oecd.org
• Effective Carbon Rates 2018: Pricing Carbon Emissions through Taxes and Emissions Trading (2018 and 2020 forthcoming) • www.oecd.org/tax/tax-policy/tax-and-environment.htm • Taxing Energy Use Country Profiles: http://oe.cd/TEU2018 • www.oecd.org/site/tadffss/data/
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Nils Axel Braathen Environment Directorate E-mail: Nils-axel.Braathen@oecd.org
Environmental policies and economic outcomes Ongoing empirical work sheds light on the economic effects of environmental policies 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. Joint work between the OECD Environment Directorate and the Economics Department on Environmental Policies and Productivity Growth has laid the ground for empirical analyses of the economic effects of environmental policies. It provided quantitative proxies measuring the stringency and competitionfriendliness of environmental policies. In particular, the newly-developed indicator of Environmental Policy Stringency (EPS) provided a comparable, cross-country and over-time measure of the aggregate stringency of selected environmental policy instruments. The new EPS indicator has progressively extended coverage and 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,
The stringency of environmental policies has been increasing across the OECD Indicator value - 2012 5
Indicator value - 1990/1995
OECD average - 2012
trade and competitiveness, investment and innovation at the macroeconomic, industry and firm levels. The work shows that environmental policies need not be bad for productivity and that in practice some aspects of their design can be made more friendly to entry and competition without compromising the stringency of the policy signal.
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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 (i.e. administrative burdens and discrimination between entrants and incumbents) 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.
The BEEP indicator and measures of environmental policy stringency OECD EPS (de jure, 2012) 5 DNK More stringent environmental policies
Further empirical analysis shows that more stringent environmental policies or higher energy prices are not key drivers of overall trade in in manufactured goods, but was associated with tilting the comparative advantage away from pollution intensive industries. At the same time a corresponding advantage in cleaner industries could be identified. Similarly, higher energy prices could indeed be associated with higher outwards FDI stock at the firm-level. However, the effects were small with respect to other drivers of DFI.
Green Growth Environment
CAN POL JPN
Policies more burdensome to entry and competition
Contact for more information
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Total BEEP indicator
Tomasz Kozluk Economics Department E-mail: Tomasz.Kozluk@oecd.org http://oe.cd/eps
Antoine Dechezlepretre Economics Department E-mail: Antoine.Dechezlepretre@oecd.org
Jobs, skills and distributional aspects Green policies can trigger job creation in a number of ‘green’ economic sectors, while job destruction could occur in ‘brown’ sectors. An effective transition to a low-carbon, resourceefficient 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 is 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 is crucial in achieving positive employment outcomes from green policies. Special attention should also be paid to regions with a high share of workers in ‘brown’ sectors.
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, circular and greener 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 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.
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However, energy affordability for poor households can be increased by well-designed 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 income-tested 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 householdsâ€™ budgets for the lowest decile of the population in several OECD countries.
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. 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-skilled 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. The results show 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. The analysis is being extended to policies for a resource-efficient and circular economy.
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#GGSD & #GGKP6 Forum
Inclusive solutions for the green transition
As many countries strive 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 properly addressing such concerns, countries cannot make sufficient progress on the transition to a greener, low-carbon and circular economy. Governments need to take their citizens along on this journey, in particular to prepare workers 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 focused on ‘Inclusive Solutions for the Green Transition: Competitiveness, Jobs and Social Dimensions.’ It addressed 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 It found that: • As workers are not as mobile as capital, more efforts are needed to create new job opportunities in the same regions where jobs are lost. More research is needed on the extent of spatial divergence of declining and growing industries. More focus on upscaling and reskilling communities is needed to ensure a just transition for workers. • Carbon pricing schemes, including the EU ETS, are not sufficiently ambitious today, thus we may be underestimating their future impacts on jobs. • Better evidence is needed on policy effectiveness and on how SMEs’ green transition can translate in job creation and inclusive growth. • Communication on the green transition has to be designed in a way that touches people’s everyday lives, by demonstrating connection between the policy and quality of life.
Key Publications • “Distributional and Labour Market Impacts of Environmental Polices”, OECD Environment Working Papers, (Forthcoming) • “A review of “Transition Management” strategies”, OECD Green Growth Papers, No. 2019/04 • “SMEs: Key drivers of green and inclusive growth”, OECD Green Growth Papers, No. 2019/03 • “The distributional aspects of environmental quality and environmental policies”, OECD Green Growth Papers, No. 2019/02 • “Impacts of Green Growth Policies on Labour Markets and Wage Income Distribution: A General Equilibrium Application to Climate and Energy Policies”, OECD Environment Working Papers, No. 137 • Employment Implications of Green Growth: Linking jobs, growth, and green policies: OECD report for the G7 Environment Ministers (2017) • Boosting Skills for Greener Jobs in Flanders, Belgium (2017) • “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, Green skills and Innovation for Inclusive Growth (2015)
• Better data is needed for a more comprehensive understanding of the patterns and drivers of environmental inequalities. It was 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, UNIDO and the World Bank.
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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.
Further, modelling and econometric approaches are being 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, videos and websites • The Environmental and Welfare Implications of Parking Policies, OECD Environment Working Paper, No. 145 (2019) • Rethinking Urban Sprawl: Moving Towards Sustainable Cities (2018) • Urban Sprawl and the Environment: Trends and Policy Implications (2017) • Causes and Consequences of Open Space in U.S. Urban Areas (2017) • Environmental Zoning and Urban Development: Natural Regional Parks in France (2016)
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 urban areas in the US urban areas. 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. © OECD 2019
http://www.oecd.org/environment/green-talks-live.htm • Multi-objective local environmental simulator (MOLES 1.0): Model specification, algorithm design and policy applications www.oecd.org/environment/tools-evaluation/spine-spatial-planninginstruments-and-the-environment.htm
Contact for more information Shardul Agrawala Environment Directorate E-mail: Shardul.Agrawala@oecd.org
Walid Oueslati Environment Directorate E-mail: Walid.Oeslati@oecd.org
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.
... that including estimates DID YOU KNOW?
of electric appliances’ lifetime operating costs in energy labels can help consumers purchase more energy efficient models
OECD 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. A meta-analysis of empirical studies evaluated the magnitude of the rebound effect in road transport and identified its determinants. More recent work focused on the evaluation of the effects of environmental policy on individuals’ travel behaviour, and impact of real-time information provision via smart meters on household electricity consumption.
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Key Publications, videos and websites • Leveraging the Smart Grid: The Effect of Real-Time Information on Consumer Decisions (2018) • Tackling Environmental Problems with the Help of Behavioural Insights (2017) http://www.oecd.org/environment/green-talks-live.htm • The Rebound Effect in Road Transport: A Meta-Analysis of Empirical Studies (2016)
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www.oecd.org/environment/consumption-innovation/ households.htm www.oecd.org/environment/tools-evaluation/behaviouralexperimental-economics-for-env-policy.htm
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. The 2015 report Aligning Policies for a Low-Carbon Economy identified areas where better alignments are needed 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) in order to support a more effective transition to a low-carbon economy. The 2017 report Investing in Climate, Investing in Growth provides an assessment of how low-carbon and climate-resilient development can be achieved without compromising economic growth, competitiveness or well-being across the G20 countries and beyond. Currently, the OECD is focusing efforts on embedding climate change action in broader sustainability goals across the economy. The 2019 report Accelerating Climate Action: Refocusing Policies through a Well-being Lens argues that efforts to mitigate
climate change are likely to be more successful when climate action and broader efforts towards human well-being and sustainable development are mutually supportive. On the one hand, action in non-climate policy areas should support and not undermine climate change mitigation goals. On the other hand, climate change mitigation will be more attractive if it also meets other societal goals such as clean air and improvements in health, public transport or energy access through distributed renewable energy generation. Rethinking policy objectives and the measures used for tracking progress and reframing decisions across the economy is key to achieving a two-way alignment. Adopting a well-being lese could lead to a change in perspective and different policy approaches to mitigation in key sectors (electricity, heavy industry, residential, surface transport and agriculture), which together represent over 60% of global GHG emissions. 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. Most OECD countries have developed national strategies and action plans for climate change adaptation. The OECD is examining how economic analysis can inform adaptation responses. Analysis of progress to date has emphasised the need to improve decision makersâ€™ ability to understand ÂŠ OECD 2019
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and use climate data to make decisions that are robust in the context of uncertainty about the future. Recent work examined 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. Climate-resilient infrastructure work addresses scaling up the use of naturebased solutions.
Key Publications and websites • Accelerating Climate Action: Refocusing Policies through a Wellbeing Lens (2019) • Responding to Rising Seas: OECD Country Approaches to Tackling Coastal Risks (2019) http://www.oecd.org/environment/green-talks-live.htm • Climate-Resilient Infrastructure, OECD Environment Policy Papers, No. 14 (2018) • Innovative Approaches to Building Resilient Coastal Infrastructure
Coastal regions are extremely vulnerable to the impacts of climate change, due to their exposure to the combined effects of sea level rise and intense storm events. Coastal risks are set to intensify in the future, with the potential to bring unprecedented costs to livelihoods and economies. The 2019 report Responding to Rising Seas: OECD Country Approaches to Tackling Coastal Risks takes stock of what countries are currently doing to prepare for coastal change and puts forward a policy framework for coastal adaptaion.
(2018) • Investing in Climate, Investing in Growth (2017) • Aligning Policies for a Low-carbon Economy (2015) • Climate Change Mitigation (2015) • The Economic Consequences of Climate Change (2015) • Climate Change Risks and Adaptation: Linking Policy and Economics (2015) • Climate Change Adaptation: Emerging Practices in Monitoring and Evaluation (2015) www.oecd.environment/cc
The OECD is also looking at the role of insurance, and other financial protection mechanisms in supporting the management of climate risks.
http://oe.cd/lowcarbon http://oe.cd/G20climate http://oe.cd/adaptation
Contact for more information Simon Buckle Environment Directorate E-mail: Simon.Buckle@oecd.org
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Michael Mullan Environment Directorate E-mail: Michael.Mullan@oecd.org
Green finance and investment Achieving the Sustainable Development Goals (SDGs) and longterm climate objectives requires substantial investment globally. Given limited public budget, leveraging private capital will be crucial for addressing climate change and broader sustainability challenges. The OECD Centre on Green Finance and Investment, launched in 2016, helps catalyse and support the transition to a green, low-emissions and climate-resilient economy through the development of effective policies, institutions and instruments for green finance and investment. The Centre provides cross-cutting analysis at the intersection of environment, sustainability and finance.
A forthcoming study will examine emerging sustainable finance taxonomies, identifying common practices, and considering possible gaps and implications for policy and markets. Scaling-up investment for the low-carbon transition will require mobilising both domestic and international private capital. The OECD Progress Update on Approaches to Mobilising Institutional Investment for Sustainable Infrastructure (2018) catalogues the tools and techniques available to public actors to attract institutional investors while Mapping Channels to Mobilise Institutional Investment in Sustainable Energy (2015) provides a detailed view of the various investment channels through which institutional investors can invest in sustainable energy assets. 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. As Mobilising Bond Markets for a Low-Carbon Transition (2017) shows, they have the potential to provide low-cost, long-term sources of debt capital needed by infrastructure projects. Green Investment Banks: Scaling up Private Investment in Low-carbon, Climate resilient Infrastructure (2016) explores the role of publicly capitalised green investment banks in leveraging private investment for the domestic low-carbon economy.
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Promoting Sustainable Investment and Rethinking Infrastructure Given the long life cycle of infrastructure assets and their central role in economic and social development, the OECD regularly analyses the finance and investment landscape for sustainable infrastructure. Developing Robust Project Pipelines for Low-Carbon Infrastructure (2018) considers project pipelines in the context of investments in support of long-term climate objectives, exploring what project pipelines mean for low- carbon investment and how they relate to governments’ wider investment policy frameworks. The Empirics of Enabling Investment and Innovation in Renewable Energy (2017) provides an empirical assessment of the impact of investment conditions on investment and innovation in renewable technologies while State-owned Enterprises and the Low-carbon Transition (2018) examines the influence of competition policy and state-owned enterprises on investment in renewable electricity. Infrastructure worldwide has suffered from chronic underinvestment for decades and currently makes up more than 60% of GHG emissions. A deep transformation of existing infrastructure systems is needed for both climate and development. The 2018 OECD-UNEP-World Bank report Financing Climate Futures: Rethinking Infrastructure outlines and agenda for a radical transformation of existing infrastructure and investment systems. It highlights six areas that are key to aligning financial flows with climate goals in the areas of planning, innovation, public budgeting, financial systems, development finance and cities.
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Six transformative areas to align financial flows with low-emission, resilient infrastructure
Disentangle public budgets from fossil fuel revenues
INNOVATE Unleash innova�on in technologies, ins�tu�ons and business models
Plan infrastructure for a low-emission and resilient future
Reset the ﬁnancial sytem in line with longterm climate risk and opportunites
Rethink development ﬁnance for climate
EMPOWER Build low-emission and resilient urban socie�es
32 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.
• “State-owned enterprises and the low-carbon transition”, OECD Environment Working papers, No. 129 (2018) • 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 (2017) • OECD (2016), Green Investment Banks: Scaling up Private
As part of its efforts to catalyse investment for the low-carbon transition, the OECD launched the Clean Energy Finance and Investment Mobilisation (CEFIM) Programme, with the aim to support five emerging economies in strengthening their clean energy policies and unlocking finance for renewables and energy efficiency solutions.
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 • OECD-G20 (2016), G20 Green Finance Study Group Document
Key Publications and websites • Financing Infrastructure for the Low-carbon Transition: Stocktaking of Institutional Investment (2020) • Emerging Taxonomies: Stocktake of Efforts to Develop Sustainable Finance Definitions (2020) • Financing Climate Futures: Rethinking Infrastructure (2018) • Developing Robust Project Pipelines for Low-carbon Infrastructure (2018) • Progress Update on Approaches to Mobilise Institutional Investment for Sustainable Infrastructure (2018)
Repository • OECD (2015), Policy Guidance for Investment in Clean Energy Infrastructure www.oecd.org/cgfi www.oecd.org/finance/lti www.oecd.org/greengrowth/green-investment-banks.htm
Contact for more information Robert Youngman Environment Directorate E-mail: Robert.Youngman@oecd.org © OECD 2019
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Green public procrurement Public procurement represents 12% of GDP and nearly 30% 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 sustainability goals. Green public procurement can be a major driver for innovation, providing industry with real incentives for developing green products and services, particularly in sectors where public purchasers represent a large share of the market (e.g. construction, health services, or transport). Public procurement could create lead markets for industrial and construction innovations beyond ongoing efforts to green public procurement.
Key Publications and website • Public Procurement for Innovation: Good Practices and Strategies, OECD Public Governance Reviews (2017) • “The Role of Public Procurement in Low-carbon Innovation (2016) • Going Green: Best Practices for Sustainable Procurement (2015) www.oecd.org/gov/public-procurement/green
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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 report investigates the effectiveness of environmental provisions in RTAs on environmental outcomes based on empirical analysis. 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.
In an effort to better understand the relationship between domestic environmental regulations and international trade policies, the OECD has recently engaged in the construction of a set of policy indicators on trade and environment. This set of indicators aims to shed light on topical debates regarding the interactions between trade and environmental policies. Issues covered include: carbon emissions embodied in trade; embodied raw materials in trade; the volume of trade in environmentallyrelated goods; tariffs on environmentally-related goods; support measures for fossil fuels; enabling policy and regulatory environment for renewable energy; the volume of trade in waste and scrap; and nutrient balances of exported grains. The OECD has also contributed to the area of trade and climate change, with a report that sheds light on how climate change ma affect international trade based on quantitative analyses and a literature review (2017). The OECD also initiated work on trade and circular economy and released a report on the interlinkages with international trade and the transition to a more resource efficient and circular economy. Three programmes of work on trade and environment are currently ongoing. The first one 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. The second one further
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develops the work stream on trade and circular economy on policy alignment and modelling work. The third one aims to explore the extent to which trade in environmental goods is a channel for cross-country clean technology diffusion
Key Publications and websites • “Trends in policy indicators on trade and environment”, OECD Trade and Environment Working Papers, No. 2019/01. • “International Trade and the Transition to a More Resource Efficient and Circular Economy”, OECD Trade and Environment Working Papers, No. 2018/03
Trade in environmental goods
• Assessing the Effectiveness of Environmental Provisions in Regional Trade Agreements, OECD Trade and Environment
Between 2003 and 2016 international trade in environmentally-related goods (EGs) more than doubled – from USD 531.10 billion to USD 1 261.24 billion – increasing its share in global trade from 7.2% to 8.1%. This robust growth was mostly driven by three categories of EGs: (i) components of renewable energy plants; (ii) equipment for wastewater management and treatment; and (iii) management of solid and hazardous waste and recycling systems. A growing body of literature suggests this growth is partly the result of environmental policies which create markets for environmental goods and services, and which in turn improve the competitiveness of local firms operating in these industries. For instance, the more stringent the regulation of the municipal solid waste management sector, the stronger the trade comparative advantage in related environmental goods, lending support to the argument that a demand for these goods is created as a result of stricter environmental standards. Trends in indicators on trade and environment developed at the OECD confirm these results, and suggests that a strong policy and regulatory environment for the deployment of renewable energy is associated with an increase in the net exports of equipment for renewable energy plants. Conversely, countries that spend a larger share of their GDP to support fossil fuels seem to harm the competitiveness of their domestic renewable industry. This effect is particularly strong in countries outside the OECD area. © OECD 2019
Working Papers, No. 2018/02 • “Assessing Implementation of Environmental Provisions in Regional Trade Agreements”, OECD Trade and Environment Working Papers, No. 2018/01 • “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 • “Multiplication of Environmental Labelling and Information Schemes (ELIS): Implications for Environment and Trade”, OECD Environment Working Papers, No. 106 • “Estimating CO2 Emissions Embodied in Final Demand and Trade Using the OECD ICIO 2015: Methodology and Results”, OECD Science, Technology and Industry Working Papers, No. 2016/05 www.oecd.org/environment/envtrade www.oecd.org/trade/topics/trade-and-the-environment/
Contact for more information Grégoire Garsous Trade and Agriculture Directorate E-mail: Gregoire.Garsous@oecd.org
Shunta Yamaguchi Environment Directorate E-mail: Shunta.Yamaguchi@oecd.org
Innovation for green growth The world faces growing environmental pressures. The next decades are critical to ensure a transition to a greener economy, and innovation – the creation and diffusion of new ideas, products, processes and methods – is fundamental to this transition. Innovation covers not only technological innovation but also innovation in business models, economic and social systems, and changes in lifestyles. A well-managed transition to a greener economy will create opportunities for businesses and workers. There are also barriers limiting the development and diffusion of environmental technologies, such as skills shortages, limited innovation capacity, lack of competition, lack of public acceptance of new technologies, infrastructure shortages, policy misalignments and uncertainty, and financial barriers. Many of the technologies needed for green growth already exist. Many more, such as Artificial Intelligence (AI), promise to advance low-emissions technologies even further, provided there are sufficient incentives for public and private investment in R&D. However, many existing solutions are not yet deployed at scale. Addressing barriers to their deployment and to new innovations thus represents a key policy priority.
The OECD has been a pioneer in measuring the pace of innovation and diffusion through environment-related patents. Patent data have been used to empirically assess how public policies foster innovation and diffusion, including the effect of policy design characteristics on innovation rates, the interplay between environmental policy and multilateral environmental agreements and international markets for innovation. This includes studies of the determinants of innovation in sectors such as energy and climate change mitigation. Work is underway which uses patent data to develop indicators of innovation relevant to the sustainable ocean economy.
Inventive activity in selected environment-related technologies (High-value inventions (PF2), 3-year moving average, world total, indexed on indexed on 1990=100)
Source: Hascic, Ivan and Migotto (2015) “Measuring Environmental Innovation Using Patent Data” OECD Environment Working Paper No. 89 © OECD 2019
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Rethinking Innovation for a Sustainable Ocean Economy (2019) outlines priority action areas to enhance the role of innovation in science and technology in order to reconcile the evergrowing use of marine resources with the need to safeguard and improve the health of ocean ecosystems. They include: 1) approaches for win-win outcomes for ocean business and the ocean environment across a range of marine and maritime applications; 2) the creation of ocean-economy innovation networks; and 3) pioneering initiatives to improve measurement of the ocean economy. Business Models for the Circular Economy (2019) assesses the scalability and environmental implications of business models that could support the transition to a more resource efficient and circular economy. Circular business models are becoming more sophisticated and are being adopted in a broader range of sectors. This is leading to the provision of goods and services and has links to ongoing work how digital technologies can increase the scale and diffusion of environmental technology. Innovation policies for sustainable development: Low-carbon energy and smart-city initiatives (2019) benchmarks innovation policies in selected OECD countries and the European Union. It covers low-carbon technologies in both natural resourcebased energy-rich countries (e.g. Canada, the United States) and energy-challenged countries (e.g. Germany and Japan). It reviews smart cities programmes in Australia, Austria, Finland and Sweden, as well as international programmes of ÂŠ OECD 2019
the European Commission and the Nordic Council. The report reviews their portfolio of instruments, budgets, and monitoring and evaluation, international co-operation strategies and identifies critical success factors. The use of agricultural feedstocks for fuel and chemicals, the so-called bioeconomy, is an area of great potential and need to integrate innovation with sustainability goals. Meeting Policy Challenges for a Sustainable Bioeconomy (2018) investigates: the use of biomass as feedstock; the design and building of biorefineries for the manufacture of fuels, chemicals and materials, and also for electricity generation; and the use of biotechnologies such as synthetic biology, metabolic engineering and gene editing. A major policy challenge remains the promotion of scale-up in better and more efficient bio-refining.
Contact for more information Antoine Dechezlepretre Economics Department E-mail: Antoine.Dechezlepretre@oecd.org James Philp Directorate for Science, Technology and Innovation E-mail: James.Philp@oecd.org Mario Cervantes Economics Department E-mail: Mario.Cervantes@oecd.org
Key Publications and website • Business Models for the Circular Economy (2019) • Trends in water-related technological innovation. Lessons from patent data. (2019). • Rethinking Innovation for a Sustainable Ocean Economy (2019) • Innovation policies for sustainable development: Low-carbon energy and smart-city initiatives (2019) • Meeting Policy Challenges for a Sustainable Bioeconomy (2018) • “Measuring environmental innovation using patent data”, OECD Environment Working Papers, No. 89 (2015) www.oecd.org/innovation http://oe.cd/2fA
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Green growth of key sectors: energy, transport, agriculture It is important to understand the implications of green growth for key sectors such as agriculture, 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 2019 2015
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. ÂŠ OECD 2019
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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. 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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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 (WP6) 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. Current WP6 work oincludes a study on shipbuilding capacity cuts and how to address them by notably moving into proenvironment activities such as the building of offshore wind turbines. Transport is responsible for around three quarters of tourismâ€™s estimated contribution of around 5% to global GHG emissions (UNWTO, 2017). Of this figure, aviation accounts for 40% and cars for around 32%. However, as one of the most promising drivers of growth for the world economy, tourism can play an important role in driving the transition to a green economy, and contributing to more sustainable and inclusive growth. Due to its cross-cutting nature and close connections to numerous sectors, even small improvements will have important impacts.
42 The recent 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.
A new project Decarboning Transport in Emerging Economy was launched in 2019, to help countries identify effective measures and pathways to reduce transport CO2 emissions. Focusing on Argentina, Azerbaijan, India, and Morocco, the initiative develops tailored quantitative assessment frameworks, enhances national capacity, and facilitates policy dialogues on the transport sector’s role in national CO2 reduction commitments.
The International Transport Forum (ITF) at the OECD is an intergovernmental organisation with 60 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. “Transport Connectivity for Regional Integration” was the theme for ITF’s 2019 annual summit. The 2020 Summit will focus on “Transport Innovation for Sustainable Developmenty”.
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Key Publications and websites • OECD-ITF, Decarbonising Maritime Transport: Pathways to zero-carbon shipping by 2035 (2018) • Promoting Clean Urban Public Transportation and Green Investment in Kazakhstan (2017) • “Environmental Policy and Technological Innovation in Shipbuilding”, OECD Science, Technology and Industry Policy Papers, No. 28 • The Cost of Air Pollution: Health Impacts of Road Transport, (2014) • “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 www.oecd.org/environment/greening-transport www.itf-oecd.org
DID YOU KNOW?
© OECD 2019
... that the social cost of air pollution is 4% GDP in OECD countries
Key Publications and website • Innovation, Productivity and Sustainability in Food and Agriculture
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) continuing the analytical work of the 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.
(2019) • “Evaluating the environmental impacts of agriculture policies”, Agriculture and Fisheries Papers, No. 130 (2019) • The role of agriculture in global GHG mitigation (2018) • Improving Energy Efficiency in the Agro-food Chain (2017) • Farm Management Practices to Foster Green Growth (2016) • Fostering Green Growth in Agriculture: The Role of Training, Advisory Services and Extension Initiatives (2015) • Fostering Green Growth in Agriculture: The Role of Training, Advisory Services and Extension Initiatives (2015) • Pathways to Reform Water Policies in Agriculture”, OECD Food, Agriculture and Fisheries Papers, No. 128 www.oecd.org/agriculture/agriculture
Contact for more information Dimitris Diakosavvas Trade and Agriculture Directorate E-mail: Dimitris.Diakosavvas@oecd.org
Guillaume Gruère Trade and Agriculture Directorate E-mail: Guillaume.Gruere@oecd.org
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Greening the Ocean Economy The ocean covers two-thirds of the planet and is vital for human wellbeing. The ocean is vital to the worldâ€™s economy, with more than 90% of trade using sea routes and as a source of jobs for millions of people. The ocean is the stage for a growing range of new ocean-related economic activities. It also provides invaluable ecosystem services and contributes to global food security. However, our ocean is under immense pressure from a wide range of human activities, and the environmental basis of many of these economic opportunities is threatened. The ocean economy is defined by the OECD as the sum of the economic activities of ocean-based industries, together with the assets, goods and services provided by marine ecosystems. The Ocean Economy in 2020 (2016) projects a marked acceleration in economic activity in the ocean by 2030, based on the rapidly expanding ocean industries combined with expectations of moderate growth in already large industries like maritime and coastal tourism, offshore oil and gas, shipbuilding and maritime equipment. Ocean-based industriesâ€™ gross value added could double in size by 2030, reaching around USD 3 trillion. To support government efforts to transition to a more sustainable ocean economy, the OECD is mobilising expertise across multiple policy fronts, covering environmental, economic, financial and social dimensions.
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Rethinking Innovation for a Sustainable Ocean Economy (2019) offers a forward-looking perspective on scientific and technological innovation across a range of marine and maritime applications. The report highlights that the development of economic activity in the ocean and sustainability of marine ecosystems can go hand in hand, if the right conditions are in place. It investigates new forms of collaboration in the ocean economy among public research communities, academia and private sector, and new approaches to measuring the ocean economy, notably via the use of satellites.
Ocean pollutions is growing from multiple sources, notably solid and liquid wastes from cities, fertiliser and manure runoff from farming, air emissions from shipping, and incorrect disposal of plastic from land- and sea-based sources. The OECD is supporting governments to address these challenges. The cumulative effects of ocean pollution can be devastating for human well-being and ecosystem health. The OECD provides policy insights on managing and preventing water pollution and marine plastic waste, and reducing the environmental impacts of shipping.
The is a growing recognition of the need for an integrated approach to ocean management. Several management strategies have been suggested to achieve this, including Integrated Coastal Zone Management (ICZM), Marine Spatial Planning (MSP) and Marine Protected Areas (MPAs).
The new OECD project â€œSustainable Ocean Economy for All: Harnessing the benefits of the sustainable ocean economy for developing countriesâ€? draws on OECD expertise in science, technology and innovation, and in environmental protection and biodiversity, development finance and international cooperation. It offers new evidence and a policy space for the urgent global challenge of developing sustainable ocean economies worldwide. As part of this work, the OECD is conducting a country diagnostics of the sustainable ocean economy of Indonesia and facilitating a regional dialogue in South East Asia.
MPAs help ensure the conservation and sustainable use of marine ecosystems. They can address pressures such as overfishing and habitat destruction, and can help protect rare and threatened species. MPAs can also help ensure the sustainable provision of other ecosystem services fundamental to human well-being, including for fisheries, coastal protection, tourism and recreation. Marine Protected Areas: Economics, Management and Effective Policy Mixes (2017) examines the costs and benefits of MPAs and presents good practice insights on how to enhance the environmental and cost effectiveness of MPAs, and to scale up finance. ÂŠ OECD 2019
One of the main challenges is over-exploitation of fish stocks. Green Growth in Fisheries and Aquaculture (2015) highlights that these sectors are at risk and do not reach their full potential. The report shows that improved regulation to deal with environmental externalities and space competition is key to unlocking future growth potential of aquaculture.
48 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. 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. 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’.
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The OECD is building a comprehensive database on the Sustainable Ocean Economy. Reliable and timely data on the sustainability of the ocean economy, the well-being and resilience of coastal communities and the health of marine ecosystems are scarce. This work will help meet the demands of the international community for a better evidence base to support decision making, including SDG 14.
Key Publications, websites and databases • Rethinking Innovation for a Sustainable Ocean Economy (2019) • Marine Protected Areas: Economics Management and Effective Policy Mixes (2017) • “Marine Spatial Planning: Assessing net benefits and improving effectiveness” Green Growth and Sustainable Development Issue Paper (2017) • OECD Review of Fisheries: Policies and Summary Statistics 2017 (2017)
The 2017 Green Growth and Sustainable Development (GGSD) Forum on ‘Greening the Ocean Economy’ focused on the investment, innovation and employment aspects of the fastgrowing 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.
Contact for more information Claire Jolly Science, Technology and Innovation Directorate Email: Claire.Jolly@oecd.org Katia Karousakis Environment Directorate Email: Katia.Karousakis@oecd.org
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Roger Martini Trade and Agriculture Directorate Email: Roger.Martini@oecd.org
• “Greening the Ocean Economy”, Summary report of the 2017 Green Growth and Sustainable Development Forum (2017) • Greening the Blue Economy in Pomerski, Poland (2017) • OECD Review of Fisheries: Policies and Summary Statistics 2017 (2017) • “Support to fisheries: Levels and impacts”, OECD Food, Agriculture and Fisheries Papers, No. 103 • Ocean Economy in 2030 (2016) • Green Growth in Fisheries and Aquaculture (2015) www.oecd.org/ocean http://oe.cd/fisheries-aquaculture http://oe.cd/fse-stats
SPOTLIGHT— Securing natural capital: Resilience and risk management The 2020 OECD GGSD the Forum will focus on “Securing natural capital: Resilience and risk management for green growth”. Under this overarching topic, the Forum in November 2019 discusses the risks posed by unmitigated biodiversity loss, environmental degradation and natural resource depletion, and how governments and firms can improve their resilience and risk management strategies. The Forum will also consider how the adoption of new technologies, novel insurance instruments and improved due diligence practices can help firms to reduce their environmental footprint and mitigate some of the environmental risks they are inherently exposed to.
Biodiversity and ecosystems Biodiversity underpins all life and provides vital benefits to our societies and economies. Yet, pressures from land use change, over-exploitation of natural resources, pollution and climate change are contributing to an alarming loss of living diversity. The need to mainstream biodiversity and ecosystem services more effectively into national and sectoral policies has recently gained renewed impetus on the global policy agenda. In line with the Convention on Biological Diversity (CBD) and the 2011-2020 Aichi Biodiversity Targets, the 2030 Agenda for Sustainable Development places strong emphasis on biodiversity for achieving these global goals. OECD analysis focuses on the economic aspects of biodiversity – enhancing understanding of how biodiversity and associated ecosystems can be valued, 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. 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. In line with the 2030 Agenda, the OECD supports the preparations for the CBD COP15 in October 2020. The OECD is working on the Post-2020 biodiversity framework including targets, indicators and measurability implications at global and national level. In the lead up to the CBD COP15, the OECD released Biodiversity: Finance and the economic and Business Case for Action (2019), which © OECD 2019
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was launched at the G7 Environment Ministersâ€™ Meeting in Metz, France in May 2019.
Recent OECD work has focused on the effective design and implementation of biodiversity offsets.
OECD work also focuses on tracking economic instruments and the finance they mobilise for biodiversity for biodiversity, in line with Aichi Target 3 on Incentives and Target 20 on resource mobilisation from OECD work on environmental expenditure and policy instruments. These include biodiversity-relevant taxes, fees and charges, positive subsidies and tradable permits. The OECD tracks policy instruments for the environment in its PINE database, including policy instruments for biodiversity.
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. Evaluating the effectiveness of policy instruments for biodiversity (2018) examined the use of impact evaluation studies, cost-effectiveness and other more commonly used approaches.
Sources of loss in mean species abundance (MSA) to 2050 MSA, (%) 100
Infr+encr+frag Climate change
Former land-use 70
2010 2030 2050
2010 2030 2050
2010 2030 2050
Bioenergy 2010 2030 2050
Source: OECD Environmental Outlook to 2050; output from IMAGE Note: 100% MSA implies an undisturbed state. Infr+encr+frag: Infrastructure + encrouchment + fragmentation
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Food crop Remaining MSA
The pressures on 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 decision-making processes across the economy. Mainstreaming Biodiversity for Sustainable Development (2018) supports the need to mainstream biodiversity into economic growth and development in support of the SDGs. It examines how biodiversity is being mainstreamed into national development plans and other strategies; across the agriculture, forestry and fisheries sectors; in development co-operation; and how the monitoring and evaluation of biodiversity mainstreaming could be improved.
52 Moreover, The Political Economy of Biodiversity Policy Reform (2017) how to overcome obstacles to reform, such as concertns about distributional issues and competitiveness. The report draws lessons learned from the literature on the political economy of environmental policy reform and four new case studies on reforms related to agriculture and fisheries.
Contact for more information Katia Karousakis Environment Directorate E-mail: Katia.Karousakis@oecd.org
Key Publications and websites • The Post-2020 Biodiversity Framework: Targets, indicators and measurability implications at global and national level (2020) • Biodiversity: Finance and the Economic and Business Case for Action (2019) • Climate, Land Use, Ecosystems and Food: Aligning policies in the land0use sector (2019) • Tracking Economic Instruments and Finance for Biodiversity (2018) • Biodiversity and Development: Mainstreaming and Managing for Results (2018) • The Political Economy of Biodiversity Policy Reform (2017) • Biodiversity Offsets: Effective Design and Implementation (2016) • OECD Environmental Outlook to 2050: The Consequences of Inaction http://oe.cd/biodiversity http://oe.cd/BLUE © OECD 2019
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Managing water for green growth The Sustainable Development Goals recognise the critical contribution of water to sustainable development. However, investment in waster security falls short of global needs and the impacts on communities, economies and the environment are still significant. The OECD Policy Perspectives on Water, Growth and Finance explains that this does not result from a shortage of finance, but from inadequate risk-return profiles of infrastructure projects in the water sector. In 2017, the OECD established the Roundtable on Financing Water to facilitate dialogues between the water and finance communities on how to overcome the global challenges of financing investments that contribute to water security and sustainable growth. Specifically, the Roundtable: i) tracks waterrelated financing needs and capacities in different regions of the world; ii) develops policy recommendations on leveraging existing sources of finance to mobilise private finance (e.g. through blending development finance with domestic commercial finance); and iii) analyses how to ensure that available finance goes to projects which are not merely bankable but beneficial, i.e. deliver tangible benefits in terms of water security and sustainable development. The Roundtable embarks on a series of regional meetings (covering North and Latin America and Asia in 2019, other regions in 2020) for more tailored discussions on issues and opportunities.
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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. The OECD supports ambitious water policy reforms in selected countries, on demand. These combine robust analyses of water economics and governance 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. 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.
54 Key Publications and websites • Making Blended Finance Work for Water and Sanitation: Unlocking Commercial Finance for SDG 6 (2019) • Navigating pathways to reform water policies in agriculture (2019) • Enhancing the Economic Regulatory System for Moldova’s Water Supply Sanitation (2019) • Policy Perspectives for the Irrigation Sector Reform in Tajikistan (2019) • Navigating pathways to reform water policies in agriculture (2019) • Managing the Water-Energy-Land-Food Nexus in Korea: Policies and Governance Options (2018) Reforming water policies in agriculture: lessons from past reforms (2018) • Policy Perspectives on Financing Water: Investing in sustainable growth (2018) • Strengthening Shardara Multi-Purpose Water Infrastructure in Kazakhstan (2018) • Facilitating the Reform of Economic Instruments for Water Management in Georgia (2018) • Water Charges in Brazil: The Ways Forward (2017) • Groundwater Allocation: Managing Growing Pressures on Quantity and Quality (2017) • Reforming Sanitation in Armenia: Towards a National Strategy (2017) • Enhancing Water Use Efficiency in Korea: Policy Issues and Recommendations (2017) • OECD (2017), “Financing water: Investing in sustainable growth” • Policy Perspectives www.oecd.org/water http://oe.cd/2fD
Contact for more information Xavier Leflaive Environment Directorate E-mail: Xavier.Leflaive@oecd.org
Aziza Akhmouch Centre for Entrepreneurship, SMEs, Regions and Cities E-mail: Aziza.Akmouch@oecd.org
Matthew Griffiths Environment Directorate E-mail: Matthew.Griffiths@oecd.org © OECD 2019
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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 examined policies and governance practices that encourage environmental sustainability and competitiveness in a rapidly expanding economy. 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.
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The project aimed 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 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. Within the framework of the OECD Champion Mayors for Inclusive Growth initiative, Inclusive Growth in Seoul, Korea (2018) 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.
56 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, focusig on emerging needs in the agro-food, construction and chemicals sectors. It provides recommendations for the development of green skills and occupational profiles at the organisational level, and the best method of assisting firms to transition to a green economy. Another study on the Western Cape Provide of South Africa 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
The Circular Economy in Cities and Regions programme supports cities and regions in their transition towards a circular economy, with the participation of 4 pilot cities. In July 2019, the OECD launched the 1st OECD Roundtable on the Circular Economy in Cities and Regions. The 2nd Roundtable will be planned in early 2020. “An Integrated Approach to the Paris Agreement: the Role of Regions and Cities” (2019) serves as a basis for developing a new programme to support the integrated approach across levels of government. Another new work stream “Unlocking the potential for energy efficiency in buildings in cities and regions” aims to assess the role of cities and regions in upscaling energy efficiency investments in buildings and to support place-based strategies that integrate local efforts and mobilise behavioural changes of property owners.
The new programme on territorial approaches to the SDGs seeks to support cities and regions in fostering a territorial approach to the SDGs project, with the participation of 9 pilot cities and regions in the world. The OECD will organised the 2nd OECD Roundtable on Cities and Regions for the SDGs (Bonn, 9 December 2019). The synthesis report will be launched at the 10th World Urban Forum in February, in Abu Dhabi.
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Mining regions and green growth
Key Publications • A Territorial Approach to SDGs (2020) • “An Integrated Approach to the Paris Agreement: the Role of Regions and Cities”, OECD Regional Development Working Paper
The OECD is implementing a project to develop recommendations for improving regional development outcomes for regions and cities specialised in mining and extractive industries, including in the context of the low-carbon transition of coal mining regions. A series of case studies deliver place-based recommendations and help regions and cities to implement better regional development policies. The project is also developing a global platform for mining regions and cities through events and peerreview that enables knowledge sharing, advocacy and dialogue between public/private sectors and local communities.
(2019) • Inclusive Growth in Seoul, Korea (2018) • “Boosting Skills for Greener Jobs in the Western Cape Province of South Africa”, OECD Green Growth Papers, No. 2018/01 • Green Growth in Cebu, Philippines (2017) • Green Growth in Iskandar Malaysia (2017) • Boosting Skills for Greener Jobs in Flanders, Belgium (2017) • Greening the Blue Economy in Pomorskie, Poland (2017) • Urban Green Growth in Dynamic Asia (2016) • Green Growth in Bandung, Indonesia (2016) • Green Growth in Hai Phong, Viet Nam (2016) http://oe.cd/2fE http://oe.cd/2fF
Contact for more information Tadashi Matsumoto Centre for Entrepreneurship, SMEs, Regions and Cities E-mail: Tadashi.Matsumoto@oecd.org
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Asia The current development of Asia is characterised by a rapid urbanisation on an unprecedented scale, along with a rising economic growth led in most places by the manufacturing industry, coupled with a rapidly increasing motorisation. The result has been escalating air pollutant and greenhouse gas emissions, sprawling urban development and local environmental impacts, as well as disparities in income, education levels and job opportunities. Indonesia is the world’s fourth most populated country, and the largest archipelago. Vibrant economic growth has lifted millions of people out of poverty. Economic success, however, has come at a high environmental cost. Green Growth Policy Review of Indonesia (2019) highlights that rapid land-use change and reliance on fossil energy make Indonesia one of the world’s largest greenhouse gas emitters. Deforestation and pollution are putting pressure on its megadiverse ecosystems. Environmental services such as water supply, sanitation and waste management need to be further expanded and improved. Advancing to a greener economy will require continued efforts to develop policies, strengthen institutions and secure sufficient resources. This is the first Green Growth Policy Review of Indonesia. It examines progress towards sustainable development and green growth, with a special emphasis on the nexus of land use, ecosystems and climate change.
China, Japan and Korea – like many other countries that underwent periods of rapid industrialisation – share a common story of high economic growth and intense pollution followed by progressive efforts to improve air quality. The critical impact of air pollution on human health in both developed and developing countries is well-known. The OECD projects that outdoor air pollution could cause between 6 and 9 million premature deaths a year by 2060 and cost 1% of global GDP – around USD 2.6 trillion annually. Building on the expertise of the OECD Environment Policy Committee and the Regulatory Policy Committee, the OECD brought together policy makers, academics and experts from China, Japan and Korea to discuss regulatory frameworks, enforcement and co-operation to address air pollution as well as international regulatory co-operation initiatives to address trans-boundary air pollution in Northeast Asia, North America, and Europe. The project highlighted the differences in the policy frameworks used in the three Asian countries to control air pollution but also the common challenges, such as broadening the application of pricing instruments. The Economic Outlook for Southeast Asia, China and India2019 Update: Responding to Environmental Hazards in Cities highlights that exposure to ambient air pollution is a serious challenge in Emerging Asian cities. Research has shown that high levels of fine particulate air pollution are correlated with other air pollutants and are linked to elevated risks of mortality and other health related issues. As urban areas are growing rapidly
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in the region, managing levels of air pollution is increasingly important. Policy makers need to co-ordinate across levels of government to reduce emissions in a targeted way and promote resilience against natural disaster risks. Progress can be made, among others, through the expansion and improvement of public transport systems, the reduction of power generation emissions occurring close to cities and by setting more stringent regulations for polluting industries to drive greener growth. As part of its efforts to catalyse investment for the low-carbon transition, the OECD launched in 2019 the Clean Energy Finance and Investment Mobilisation (CEFIM) Programme, with the aim to support five emerging economies including India, Indonesia, Vietnam and Thailand, to strengthen their clean energy policies and unlocking finance for renewables and energy efficiency solutions. In each country, the programme will review clean energy finance and investment policies, provide in-country technical assistance and convene high-impact domestic and international dialogues to highlight investment opportunities and address policy misalignments.
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, higherquality an 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 China- developed 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 • Enhancing Air Quality in Northeast Asia: Regulatory frameworks,
The rapid industrial expansion in China since the early 2000s has been associated with overinvestment and misallocation 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
enforcement and co-operation’ (2019) • Green Growth Performance Review of Indonesia (2019) • Economic Outlook for Southeast Asia, China and India 2019 – Update: Responding to Environmental Hazards in Cities, • Economic Outlook for Southeast Asia, China and India 2017: Addressing Energy Challenges (2017) • Industrial Upgrading for Green Growth in China (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
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, and (iv) strengthening water management for green growth. 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.
Contact for more information Krzysztof Michalak Environment Directorate E-mail: Krzysztof.Michalak@oecd.org Matthew Griffiths Environment Directorate E-mail: Matthew.Griffiths@oecd.org
Environment Directorate Email: Virginie.Marchal@oecd.org
Key Publications and websites • Sustainable Infrastructure for Low-carbon Development in Central Asia and the Caucasus: Hotspot analysis and needs assessment (2019) • Mining and Green Growth in the EECCA Region (2019) • Promoting Clean Urban Public Transportation in Kazakhstan, Kyrgyzstan and Moldova – Summary Report of Project Implementation 2016-2019 (2019) • Enhancing the Economic Regulatory System for Moldova’s Water Supply and Sanitation (2019) • Addressing Industrial Air Pollution in Kazakhstan – Reforming Environmental Payments Policy Guidelines (2019) • Enhancing the Economic Regulatory System for Moldova’s Water Supply Sanitation (2019) • Policy Perspectives for the Irrigation Sector Reform in Tajikistan (2019) • Inventory of Energy Subsidies in the EU’s Eastern Partnership Countries (2018) • Designing a Climate Related Public Investment Programme in Moldova (2018) • Towards a Kyrgyzstan’s Sustainable Finance System (2018) • Scaling Up Green Investments and Finance in Georgia (2018) • Strengthening Multi-Purpose Water Infrastructure in Shardara, Kazakhstan (2018) • Environmental Policy Toolkit for SME Greening in EU Eastern Partnership Countries (2018) • Facilitating the Reform of Economic Instruments for Water Management in Georgia (2018) • Promoting Clean Urban Public Transportation and Green Investment in Kazakhstan (2017) www.oecd.org/environment/outreach/eap-tf.htm http://oe.cd/2fD © OECD 2019
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 peopleâ€™s quality of life.
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. 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 peopleâ€™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 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.
ÂŠ OECD 2019
OECD WORK ON
Key Publications and website • Towards Green Growth in Emerging Economies: Evidence from Environmental Performance Reviews (2019) • Biodiversity Conservation and Sustainable Use in in Latin America: Evidence from Environmental Performance Reviews (2018) • Environmental Performance Review of Peru (2017) • Environmental Performance Review of Chile (2016) • Environmental Performance Review of Brazil (2015) • Environmental Performance Review of Colombia (2014) • Environmental Performance Review of Mexico (2013) • Monitoring Green Growth in the Latin America and the Caribbean (LAC) Region: Progress and Challenges OECD-CAF-UNIDO (2014) www.oecd.org/environment/country-reviews
© OECD 2019
The Green Growth Knowledge Partnership (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, the United Nations Industrial Development, 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
ÂŠ OECD 2019
ÂŠ OECD 2019
OECD WORK ON
More information on OECD work on green growth The Green Growth and Global Relations Division produces titles in English and French, with summaries of selected titles translated into other languages.
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OECD work on Green Growth www.oecd.org/greengrowth
OECD work on Green Growth highlights the activities, results and ongoing projects as outlined by the work programme.