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No 312 Q4 2017


Climate: Investment’s new wind

©David Rooney

Economic outlook What Hans Rosling taught us OECD Observer crossword

CONTENTS No 312 Q4 2017 55th anniversary edition


International co-operation is the surest means of building better policies for better lives Angel Gurría, Secretary-General of the OECD


Expat migrants; AI shouldn’t get fuzzy; Twitterings


Well-being divides exposed – ; – but life expectancy rises; World economy improves; Soundbites; Economy; Country roundup; Mexican President Enrique Peña Nieto; Other stories; Plus ça change



21 Blending finance for climate and poverty Naeeda Crishna Morgado and Jens Sedemund, OECD Development Co-operation Directorate 23 Climate change: Is shipping finally on board? Olaf Merk, International Transport Forum 24 The long flight towards clean aviation Vincent Benezech, International Transport Forum 26 Rising sea levels: Will we adapt or drown? Lisa Danielson and Michael Mullan, OECD Environment Directorate 28 Water and climate: From risk management to investment opportunity Xavier Leflaive and Kathleen Dominique, OECD Environment Directorate 30 Rice and risks in the Mekong Delta Robert Akam and Guillaume Gruere, OECD Trade and Agriculture Directorate



The policy challenge: Catalyse the private sector for stronger and more inclusive growth Catherine Mann, OECD Chief Economist 10 Paradise lost: The imminent fall of tax havens Clara Young, OECD Observer


32 Managing earth: The land-water-energy nexus Rob Dellink, OECD Environment Directorate, and Olivier Durand-Lasserve, OECD Economics Department 33 “Oceanfills”: Yet another dumping ground Dulika Rathnayake, OECD Environment Directorate

BOOKS 49 Reviews: Food’s other takeout; Finding best practices in trust 50 New publications 51 Focus on climate change 52 Review: An uncertain climate

DATABANK 53 Trust in parliament; Phase them out! 54 Main economic indicators 56 Israel’s spatial planning divide; Crossword


12 Men are from Mars; women are poorly paid Clara Young, OECD Observer

SPOTLIGHT ON CLIMATE CHANGE 14 Climate action: Time for implementation Angel Gurría, Secretary-General of the OECD 15 Investment in renewable energy: What policymakers must do to make it happen Geraldine Ang, OECD Environment Directorate 17 Carbon prices are still far too low to prevent climate change Kurt Van Dender, OECD Centre for Tax Policy and Administration 18 Roundtable: Making our climate objectives work Carl Pope, Marcelo Allain, Hugh Wheelan, Naoko Ishii, Sir Roger Gifford, Penny Herbst 20 Tracking climate finance: Progress and challenges Nicolina Lamhauge, OECD Development Co-operation Directorate, and Raphael Jachnik, OECD Environment Directorate

36 People, trust and government: Getting the measure Lara Fleischer, OECD Statistics Directorate 38 What is a systems approach? Daniel Catalan, OECD Observer

“Oceanfills”: Yet another dumping ground, pages 33-34

DEVELOPMENT 40 Development: Some facts Hans Rosling taught us Charlotte Petri Gornitzka, Chair, OECD Development Assistance Committee (DAC) 41 Eurasia: Investing for the future Andreas Schaal, Director, OECD Global Relations Secretariat

OECD.ORG 44 Evidence, persuasion and power: Diplomats in international organisations Aleksander Surdej, Ambassador of Poland to the OECD

Published in English and French by the OECD EDITOR-IN-CHIEF: Rory J. Clarke EDITORS: Janine Treves, Clara Young www.oecdobserver.org 55th EDITORIAL ASSISTANT, WRITER: Balázs Gyimesi www.oecdinsights.org anniversary EDITORIAL INTERNS: Robin Davis, Tomer Michelzon ©OECD December 2017 edition LAYOUT: Design Factory, Ireland ISSN 0029-7054 ILLUSTRATIONS: David Rooney, Sylvie Serprix, Tel.: +33 (0) 1 45 24 9112 André Faber Fax: +33 (0) 1 45 24 82 10 sales@oecd.org ADVERTISING MANAGER: Aleksandra Sawicka Founded in 1962. The magazine of the Organisation PRINTERS: SIEP, France; Chain of Custody certified. for Economic Co-operation and Development Applications for permission to reproduce or translate all or parts OECD Publications 2 rue André Pascal 75775 Paris cedex 16, France observer@oecd.org www.oecd.org

46 AI: Intelligent Machines, Smart Policies; Screenagers; OECD Forum on Green Finance and Investment 2017; International Day of the Girl 2017 at the OECD 47 Recent speeches by Angel Gurría; List of OECD Ambassadors 48 Calendar; Frankie

of articles from the OECD Observer, should be addressed to: The Editor, OECD Observer, 2 rue André Pascal, 75775 Paris, cedex 16, France.

What Hans Rosling taught us, page 40

All signed articles in the OECD Observer express the opinions of the authors and do not necessarily represent the official views of the OECD or its member countries. Reprinted and translated articles should carry the credit line “Reprinted from the OECD Observer”, plus date of issue. Signed articles reprinted must bear the author’s name. Two voucher copies should be sent to the Editor. All correspondence should be addressed to the Editor. The Organisation cannot be responsible for returning unsolicited manuscripts. The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law. This document, as well as any data and map included herein, are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.


International co-operation is the surest means of building better policies for better lives In a divided world, we all lose

Angel Gurría Secretary-General of the OECD

We live in challenging times for international co-operation. Against a background in which the voices of protectionism and nationalism seem to be gaining strength, at the OECD we are standing firm in our support for openness and collaboration as the surest means of building better policies for better lives. Otherwise we risk undoing many of the achievements we have accomplished together as an international community since the OECD was formed 55 years ago. Of course, there is much to fix in a system that for many people is not delivering and whose benefits need to be more equally shared. But the reality is that in a divided world, we all lose. No country can resolve global challenges by acting alone. We know this to be true within our countries, our regions and our cities; it is also true of our “global village”. Violent economic shocks, like hurricanes, do not respect borders, and pulling up the drawbridge offers fake protection. To find sustainable, effective solutions to the very real issues people face, our countries must pull together. When the world’s countries forged the UN Sustainable Development Goals and the Paris Climate Change Agreement in 2015, we saw how effective multilateral co-operation could be in forging collective action to tackle some of our planet’s most pressing challenges. There have been so many achievements like these over the years, in trade, investment, tax, fisheries, food, health, energy, science and more, based on multilateral agreements, which countries contribute to and benefit from as well. Just last year for instance, some €85 billion were recouped for citizens around the world as a result of voluntary disclosure under the first automatic exchanges of tax information (AEOI). A similar breakthrough that has also changed policies for the


better has happened in the quest to make multinationals pay their fair share, with more than 70 countries and jurisdictions signing up to the OECD’s Base Erosion and Profit Shifting (BEPS) project. Such initiatives bring tangible improvements to people’s lives, and illustrate the power of the international community. Despite this, there is widespread disgruntlement with multilateral institutions, that their “experts” are out of touch with everyday concerns and that they serve powerful elites. Many citizens, especially those more vulnerable, feel left out and no longer believe multilateral approaches work for them. At the OECD, we believe that the global economy cannot act as a force for all without international co-operation, and that no country can afford to turn away. However, we also realise that multilateral institutions such as ours must improve their game. We must reshape multilateral action boldly when it fails to deliver. One critical component in this endeavour, especially for an organisation like the OECD whose ultimate credibility lies in its expertise, consists of bringing the power of our research and our data to centre stage. But as well as defending the facts, we must passionately defend our values, so that we can chart a new course for globalisation, based on people and planet. We must be ready to embrace new concepts of growth, equitability, wellbeing and sustainability, and work harder to ensure that through our standards and codes we do a better job of safeguarding the integrity, aspirations and rights of people everywhere. This state of mind drives our New Approaches to Economic Challenges initiative, and spurs our efforts to address multiple challenges, such as fostering inclusive, green and smart growth, empowering women and defeating corruption. Today’s tectonic shifts in geopolitics, the speed and unpredictability of technological change, and the complexity of cross-border challenges are concerning and compel us to work side by side. As the great Scottish scientist, Alexander Fleming, recognised, “the more complex the world becomes, the more difficult it is to complete something without the co-operation of others”. Only by co-operating across borders and among regions can we enable citizens to move forward together, so that winners no longer take all and that no one is left behind. By working together multilaterally we can address the issues that people care about, wherever they live. We have several opportunities to show this in the months ahead, with a busy schedule of ministerial meetings and policy forums. OECD member and partner countries will examine how policy can harness small and medium enterprises for inclusive growth and jobs when they gather for the SME Ministerial Meeting in Mexico in February; in March in Paris our

Readers’ views Global Anti-Corruption and Integrity Forum will focus on improving behaviour in business and politics; and in May ministers will meet in Canada to discuss how to improve our social policies. Then comes the 2018 OECD Ministerial Council Meeting, which with the OECD Forum forms the high point of our annual calendar. We are honoured to be working closely with France, our chair, and our vice-chairs, Latvia and New Zealand, in an ambitious programme that should show us new ways to advance effective multilateralism. We are also intensifying our support to the G20 and G7, and scaling up our work with APEC, ASEAN and the Pacific Alliance. These offer golden opportunities to show that multilateral action can deliver results for all. We live in a complex world and only together can we shape a prosperous, peaceful future. This is what 2018 asks of us. In the Chinese Year of the Dog, we must be dogged in our determination to show that we can, and will, make a difference. That together, we can design, develop and deliver better policies for better lives. @A_Gurria www.oecdobserver.org/angelgurria www.oecd.org/about/secretary-general

Twitterings Ioana Marinescu @mioana OECD ranking of labor market success: there does not have to be a trade-off between the quantity and quality of #jobs. Iceland, Sweden, Norway and Denmark have very high employment rates but rank well on the OECD’s other metrics too. Via @AGarnero Richard Farmer @richardlfarmer The OECD reports how coal, accounting for almost half of carbon emissions, goes largely untaxed everywhere http://politicalowl. blogspot.com/2018/02/the-oecd-reports-howcoal-accounting.html?spref=tw … Crocs McKeithen @rouge_io Replying to @giorgio_montana Working-age population growth in OECD +

We welcome your feedback. Send your letters to observer@oecd.org or post your comments at www.oecdobserver.org or www.oecdinsights.org Expat migrants I assume the term “migrants” doesn’t include expats, does it? Otherwise nations like the United Arab Emirates (UAE) would be placed way ahead of countries like Luxembourg or Switzerland. I know, the UAE are not part of the OECD–anyway, it would be interesting to compare it to OECD countries. As far as I know, the migrant population of Dubai or Abu Dhabi is about 85 to 90% of the total population.

Jan-Bernd Meyer, commenting on “Share of women in overall migration flows to OECD countries, 2010-15” chart on the OECD’s Facebook page ___

AI shouldn’t get fuzzy As an economist, I have learned not to trust economic models. Not because they fail (they do), but because they are simplifying reality to the point where they must fail. Reality is so complex that it is a classic example of too many variables or not enough equations. On the other hand, fuzzy human logic, while being better at understanding complex reality, is also inadequate for understanding reality fully. Note how often you misunderstand your partner or your closest friends, and that’s just China + Russia is flat/declining. None of this should be surprising. Sara Vergo @SaraVergo Interesting analysis. What happened to the reputation and status of the civil service? According to the OECD, Denmark has some of the most well-educated and effective civil servants. And Denmark is on top of the world’s most non-corrupt countries https://twitter.com/berlingske/ status/946668380500586496 … @djoef #ttps://t. co/EQI96fR8XY Dan Sobovitz @sobd Replying to @happeningo @DJakovljevic and 7 others I thought the same but I think it’s changing. I keep discovering major brands who are stuck in the past. Meanwhile orgs like @esa

communication. If humans could understand reality perfectly, there would be no traffic accidents. You can equip computers with fuzzy logic, but it comes at the risk of fuzzy decisions. At some point, inserting more human traits into computer algorithms may bring computers close to, but not quite at, the level of human decision-making. What’s the point of machines that are no better than humans? A simple hammer would be a better tool than an almost human machine. At least, the hammer can do what a fist cannot do. My investor instinct says it is better to manage the risk of failure by diversification. Let humans sail by their emotions and fuzzy logic and let machines handle looking at details and their consequences, which humans overlook easily. Let machines calculate, let humans overrule if they wish. Machine or human decision should not be either/or, but a co-operation of sophisticated tools and interested humans.

Peter Kraneveld, commenting on “Humans don’t trust AI predictions: Here’s how to fix it” on the OECD Forum Network at https://www.oecd-forum.org/channels/747trust/posts/29988-humans-don-t-trust-artificialintelligence-predictions-here-s-how-to-fix-it @Europarl_EN @OECD and a new generation of politicians are rocking on social media. So in the end there’s good & bad in both sectors. Patrick Meschenmoser @MeshandMoser Radiation #emergency responders can learn a lot from non-radiological events! @OECD_NEA offers an interesting insight in its #allhazards and transboundary approach to emergency preparedness and response via a webinar on JAN 12: http://www.oecd-nea.org/ rp/epr/2018/webinar/ … Follow us on Twitter @OECDObserver Comments and letters may be edited for publishing. Send your letters to observer@oecd. org or post your comments at these portals: www.oecdobserver.org, www.oecdinsights.org, or at the other OECD portals on this page.

OECD Observer No 312 Q4 2017


News brief Well-being divides exposed – New well-being data expose deep divisions in our society along fault lines of age, wealth, gender and education. The OECD’s How’s Life? 2017 report shows that not enough people are benefitting from the modest recovery that is under way in many OECD countries. Average annual earnings have risen by a cumulative 7% in OECD countries since 2005 but this is roughly half the growth rate observed in the decade prior to 2005. Average life expectancy has gone up by nearly two years over the past decade and in most

OECD countries more people now have jobs than in 2005. But long-term unemployment remains higher than in 2005 in over half of OECD countries and job insecurity has risen by a third since it was first measured in 2007. Voter turnout has decreased, and the share of people who feel supported by friends and family has fallen by 3 percentage points. These and other indicators show that the scars of the 2008 crisis have not fully healed. See www.oecd.org/social/

Economy Real GDP growth in the OECD area slowed to 0.6% in the third quarter of 2017, compared with 0.8% in the previous quarter, according to provisional estimates. GDP growth slowed markedly in Japan to 0.3%, compared with 0.6% in the previous quarter and, albeit marginally, in the US, to 0.7%, and in France, to 0.5%. On the other hand, growth picked up in Germany, to 0.8%, in Italy, to 0.5%, and marginally in the UK, to 0.4%, up from 0.3%. Year-on-year GDP growth for the OECD area accelerated to 2.6% in the third quarter, compared with 2.4% in the previous quarter.


French President Emmanuel Macron, quoted in Les Echos 17 July 2017

Education is a patient investment in an impatient world. An impatience that is sometimes reinforced by new technologies. Julia Gillard, Chair of the Board of Directors of the Global Partnership for Education, quoted in Le Monde, 19 January 2018

When we talk about global climate change it’s not just that we are worried about what’s happening in the future, but we are worried about what is happening today.

World economy improves The world economy has strengthened, with monetary and fiscal stimulus underpinning a broad-based improvement in growth across most countries, according to the OECD’s latest Economic Outlook (see also page 8). But a long period of sub-par growth has hurt investment, trade and productivity in the private sector, while better employment rates have yet to produce solid gains in real wages. Household and corporate debt is high, raising questions about the sustainability of the recovery.

©Bryan Thomas/The New York Times-REDUX-REA

See www.oecd.org/health/

It’s a revolution, but we aren’t afraid of revolutions as long as they are carried out peacefully, and built to last.

Arnold Schwarzenegger, 38th Governor of California and Founder, R20, at the One Planet Summit in Paris, 12 December 2017

– but life expectancy rises Healthier lifestyles, higher incomes, better education and better healthcare have all contributed to boost life expectancy, which has increased by over 10 years since 1970 to reach an average of 80.6 years, according to Health at a Glance 2017. A 10% increase in health spending per capita in real terms would, on average, boost life expectancy by 3.5 months. How financial resources are used also makes a difference in life expectancy.


See www.oecd.org/economy/

The OECD’s composite leading indicators continue to point to stable growth momentum in the OECD area as a whole. By using data from the likes of order books, building permits and long-term interest rates, these leading indicators help anticipate trends and turning points in the economic cycle. In Germany and Italy, growth is expected to gain momentum. However, in the UK, the outlook has continued to deteriorate. OECD-area inflation slowed to 2.2% in October 2017, compared with 2.3% in September 2017. This slight decrease in the annual rate of inflation was driven by

energy and food prices. Excluding food and energy, inflation increased slightly to 1.9%, compared with 1.8% in September. The OECD unemployment rate fell by 0.1 percentage point in October 2017, to 5.6%, returning to its April 2008 pre-crisis rate. However, at 35.1 million, the total number of unemployed people remains 2.5 million above April 2008 levels. Within the euro area, the unemployment rate decreased by 0.1 percentage point, to 8.8% in October. Outside Europe, the unemployment rate fell marginally in the US to 4.1%, and in Korea to 3.6%. It was stable in Japan with 2.8% and in Mexico with 3.4%. The


Country roundup

Canada must quickly reduce the carbon intensity of its energy industry, particularly in oil sands, and green its transport sector in order to reach 2030 emissions goals. www.oecd.org/canada/ Chile must make further progress on key recommendations of the OECD Working Group on Bribery in International Business Transactions. Draft legislative reforms to address recommendations on criminal sanctions and bank secrecy are currently under discussion in Chile. www.oecd.org/chile/ Costa Rica enjoys relatively high life satisfaction levels but should do more to develop a more inclusive and sustainable economy. www.oecd.org/countries/costarica/ Finland has a good track record of providing aid yet 2016 saw sharp cuts to Finnish aid flows. Setting a clear timeline to restore its foreign aid budget will be key. www.oecd.org/finland/ Full and effective implementation of Italy’s Jobs Act and Good Schools reform will improve people’s skills, ensure their more effective use across the country and boost growth. www.oecd.org/italy/ Lithuania has toughened legislation on foreign bribery but needs to better enforce it by imposing sanctions on corporate liability and foreign bribery. www.oecd.org/countries/lithuania/

unemployment rate rose by 0.1 percentage point in Canada, to 6.3%. International merchandise trade among G20 countries, seasonally adjusted and expressed in current US dollars, accelerated strongly in the third quarter of 2017, with both imports and exports rising by 4.3%, the highest rate of growth since the first half of 2011.

Mexican President Enrique Peña Nieto visited the OECD on 11 December, where he met with Secretary-General Angel Gurría and gave a keynote address to OECD ambassadors and staff on Mexico’s progress in implementing structural reforms.

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Australia should toughen enforcement of foreign bribery in view of the level of exports and outward investment by Australian companies in corruption-prone jurisdictions and sectors. www.oecd.org/australia/

A generous aid provider, Luxembourg should nonetheless factor in new risks of instability in fragile countries and ensure no vulnerable groups are overlooked. www.oecd.org/luxembourg/ The Norwegian economy is performing well despite low oil prices but needs to diversify, improve public spending efficiency and ensure that today’s high levels of income, well-being and equality are passed on to future generations. www. oecd.org/norway/ The OECD Working Group on Bribery is concerned about Russia’s continued failure to implement key legislative reforms in order to effectively investigate, prosecute and sanction foreign bribery. www.oecd.org/russia/ The Swiss economy has shown considerable resilience to shocks but economic growth remains slow. Further reforms are needed to restore productivity growth and boost incomes. www.oecd.org/switzerland/ The UK economy has weakened in the aftermath of the decision to leave the European Union. Maintaining close ties with the EU and implementing policies to boost productivity will be crucial for maintaining future living standards. www.oecd.org/unitedkingdom/

Consumer prices, selected areas

October 2017, % change on the same month of the previous year

% OECD total 6.0


5.0 All items

4.0 3.0 2.0 1.0 0.0






Other stories Further pensions reforms are needed across the OECD to mitigate the impact of population ageing, increasing inequality among the elderly and the changing nature of work. Although public spending on pensions for the OECD as a whole has risen by about 1.5% of GDP since 2000, the pace of spending growth is projected to slow substantially. See www.oecd.org/ els/public-pensions/ Girls are much better than boys at working together to solve problems, according to the first OECD PISA assessment of collaborative problem solving. Some 125,000 15-year-olds in 52 countries and economies took part in the test, which analyses for the first time how well students work together as a group and the influence of factors such as gender, afterschool activities and social background. See www.oecd.org/pisa/ Personal income taxes are playing an increasingly significant role in the tax mix as revenues from social security contributions and consumption taxes fall, and corporate tax collections remain low, according to Revenue Statistics 2017. See www.oecd.org/tax/

Plus ça change… “Whatever steps are taken by individual countries, international co-operation will be necessary to endure that no nation is placed at a competitive disadvantage because it takes effective measures of control nor rewarded for contributing unduly to the total environmental pollution of the planet.” “The major source of air pollution”, in Issue No 48, October 1970

All items non-food, non-energy

OECD Observer No 312 Q4 2017



BlogServer the next years. However, the unemployment rate remains above the OECD and EU average and a large share of the unemployed have been out of work for more than 12 months. This suggests that many skills in France are not being used, and are therefore at risk of depreciation and even obsolescence. From OECD Skills and Work. More here: http://oe.cd/2bD

Zombie firms and weak productivity: What role for policy? Dan Andrews, Müge Adalet McGowan and Valentine Millot, OECD Economics Department

Weak productivity growth is a major problem afflicting our societies. It curbs growth in incomes and endangers the sustainability of our social security systems. An important but often ignored source of the productivity slowdown is the increasing prevalence of weakly productive firms and, among them, firms that would typically exit or be forced to restructure in a competitive market, also known as “zombie firms”. From OECD Ecoscope. More here: http://oe.cd/2bE

Educating our youth to care about each other and the world Moving forward on climate: Looking beyond narrow interests Anthony Cox, Director, OECD Environment Directorate

The Paris Agreement gives us an international legal instrument that measures up to the scale and urgency of the climate challenge, with mechanisms that can increase the ambition of action over time. Each country must do its part by implementing their existing climate change plans using the range of policy levers available to address climate change. From OECD Insights. More here: http://oe.cd/2bA

Urgent action on air pollution in India makes economic sense Elisa Lanzi and Rob Dellink, OECD Environment Directorate

Air pollution in Delhi has been so bad this past November that the Indian Medical Association declared a public health emergency. Strong policy action must be taken. According to projections by the OECD the population-weighted average concentrations of PM2.5– the most harmful particles–are projected to increase threefold by 2060 if ambitious action is not taken.

Andreas Schleicher, Director, Directorate for Education and Skills

In 2015, 193 countries committed to achieving the 17 Sustainable Development Goals (SDGs) of the United Nations, a shared vision of humanity that provides the missing piece of the globalisation puzzle. The extent to which that vision becomes a reality will in no small way depend on what is happening in today’s classrooms. From OECD Education & Skills Today. More here: http://oe.cd/2bG

With great data comes great responsibility Charlotte Petri Gornitzka, Chair, Development Assistance Committee, and Jorge Moreira da Silva, Director, Development Co-operation Directorate, OECD

If US$142.6 billion falls in the forest of development and no one hears it, does it matter? That depends on who you are. While mothers in Afghanistan and South Sudan can tell you how their families’ lives have been transformed by effective development programmes every single day, strong data are needed to communicate how these billions of dollars improve the human condition and create more stable societies for all.

From OECD Insights. More here: http://oe.cd/2bB

From OECD Development Matters platform. More here: http://oe.cd/25a

The politics of Islam in Mali: Can religion be part of the answer?

Different, not disabled: Neurodiversity in education

Cynthia Ohayon, West Africa analyst, International Crisis Group

Mali’s collapse in 2012 calls for serious rebuilding of the state, which the country has so far failed to engage. Defining the place of religion in society and politics is a delicate challenge, but one that must be faced up to in this endeavour. The need to better regulate religion’s role should be balanced against heavy-handed government involvement as this could backfire. From OECD Insights. More here: http://oe.cd/2bC

Tracey Burns, Directorate for Education and Skills

Feeling out of place. Too big, too short, too wise, too ignorant–these are all situations Gulliver experiences in Jonathan Swift’s classic of English literature. Gulliver’s Travels give us an idea of how important our environment is when it comes to defining ourselves. It also gives us a 19th century look into the very modern concept of diversity. From OECD Education & Skills Today. More here: http://oe.cd/2bM

Getting skills right in France Marieke Vandeweyer

France’s economy has been recovering gradually from the global financial crisis, and economic growth is projected to strengthen in


These extracts from blogs appeared in Q4 2017 and courtesy of OECD Insights, OECD Education & Skills Today, OECD Ecoscope, Wikigender, Wikiprogress and other content and social media platforms managed by the OECD.

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The policy challenge: Catalyse the private sector for stronger and more inclusive growth


Catherine Mann, OECD Chief Economist

Global economic growth is strengthening, with incoming data surprisingly on the upside. We project global GDP growth to be between 3.5 and 3.75% through the projection horizon, closer to longrun averages. Will this synchronised momentum finally propel the global economy to gather enough speed to raise productivity, real wages, and living standards for all? More robust and higher quality private sector investment, including in intangibles and skills, is key for long-term productivity and real wage growth. There are positive signs: surveys indicate that businesses intend to invest, particularly in technology-embodied capital; and the now synchronous global upturn signals demand for investment, particularly given the erosion of the capital stock. But projected investment rates remain too low to sustain the acceleration of activity. As a result, our projection for global GDP for 2019 shows a tempering of growth rather than continued strengthening. A myriad of obstacles (different across countries) stand in the way of the more robust investment crucial for productivity growth to meet the public’s expectations for higher living standards, and to fulfil the longer-term commitments of governments to provide solid career paths for the young and adequate pensions for the old. For example, services restrictions create hurdles to invest, particularly for smaller firms; judicial delays hinder the


clean-up of balance sheets and capture resources in poorly performing firms; housing policies can make it difficult to hire workers with the right skills, undermining investment by both workers and firms.

low even as the probability of sharp corrections is high, equity prices are high relative to expected growth rates and

Some people think that the per capita income growth enjoyed in previous decades is out of reach, and that those expectations are unrealistic or even inappropriate, given demographic and environmental considerations. On the former, OECD research shows that changes in pension policies to promote longer working careers and increased participation of women can offset much of the demographic drag on potential output. On the latter, the OECD report Investing in Climate, Investing in Growth shows a path to better wellbeing consistent with climate change commitments. More robust productivity growth is needed to raise wage prospects in advanced economies and higher investment–in social, public, human, and physical capital (with different combinations for different countries)– is needed for emerging economies to sustain catch-up in living standards. Vulnerabilities appear through a number of channels: volatility measures are

Those countries that step up policy efforts will create a better environment for their firms and public discount rates, credit spreads are narrow relative to risks, bond yields are low relative to probable outcomes of fiscal and monetary policies, and historically high duration exposes bond holders to interest rate normalisation. Current global growth rates, and fiscal and monetary space are too limited to weather a financial downdraft. This puts an even greater premium on structural policy efforts. Policymakers need to trigger deeper changes to their policies to catalyse investment, productivity and real wage growth and make growth more inclusive. The OECD’s Going for Growth exercise documents that many countries have focused and made progress on policies that enhance labour market fluidity and participation by redesigning benefits and “making work pay”, and by improving childcare so as to enhance labour force inclusion of women. These reforms have paid off with higher employment rates,

Outlook summary

OECD area, % change, unless otherwise indicated 2016


Real GDP growth World OECD US Euro area Japan Non-OECD China Output gap, % of potential GDP Unemployment rate, % of labour force Inflation Fiscal balance, % of GDP World real trade growth Source: OECD Economic Outlook No 102 database



3.7 2.4 2.5 2.1 1.2 4.9 6.6 0.2 5.5 2.1 -2.4 4.1

3.6 2.1 2.1 1.9 1.0 4.8 6.4 0.6 5.3 2.2 -2.2 4.0

% 3.1 1.8 1.5 1.8 1.0 4.1 6.7 -1.2 6.3 1.1 -3.0 2.6

3.6 2.4 2.2 2.4 1.5 4.6 6.8 -0.5 5.8 1.9 -2.6 4.8



particularly among groups that typically have been more weakly attached to the labour market. However, for these reforms to be reflected in high productivity and real wage growth, opportunities for rightskilling need to improve and productivity gains need to diffuse from the frontier to all firms. Further, competition in markets enhances competition for workers, making for better skill matching and higher real wages. Policymakers’ efforts on product market reforms have been less ambitious, in particular on antitrust/competition policy action and on trade and investment policies; indeed, threats to roll back openness permeate the policy landscape. Although progress has been made on financial market repair, zombie firms still capture too much labour and capital, taking a toll on business dynamism, productivity and real wage growth. The financial crisis prompted structural reform and new regulation of parts of the financial system, but private-sector

debt remains high. The past decade has seen a growing reliance by firms on bond financing at attractive rates, with deteriorating credit quality and use of international issuance, as set out in Chapter 2 of this Economic Outlook on “Resilience in a time of high debt”. While credit is needed to support economic activity and innovation, it can increase risks, lower growth and raise inequality. An integrated policy approach is needed to enhance the financial resilience of economies to shocks and to minimise the risks of sub-par growth in the medium term. Financial regulation should not focus only on risk, but also on growth. Policy fatigue and sluggish growth in the past decade have curbed reform ambitions. And some might suggest that the global upturn means that no more policy effort is needed. In fact, the rapid pace of technological change–digitalisation, robotics, artificial intelligence, cloud computing–demands

deeper and more extensive reforms, not complacency. Attention to the local challenges of global and technological changes has to ensure that opportunities will be shared. Those countries that step up policy efforts will create a better environment for their firms and public. With the global upturn putting wind under the wings of policy, now is the time to redouble the effort. Editorial of the OECD Economic Outlook, Volume 2017 Issue 2, November 2017. References and links OECD (2017), OECD Economic Outlook, Volume 2017 Issue 2, OECD Publishing, Paris, http://dx.doi.org/10.1787/eco_outlook-v2017-2-en OECD (2017), Investing in Climate, Investing in Growth, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264273528-en Visit www.oecd.org/oecdeconomicoutlook

Power of prognosis The OECD Economic Outlook

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OECD Observer No 312 Q4 2017



Paradise lost: The imminent fall of tax havens Clara Young, OECD Observer

them has recovered significant tax revenue: more than 500,000 taxpayers have disclosed offshore assets over the past eight years with close to €85 billion identified as a result of voluntary compliance mechanisms and offshore investigations. While the automatic exchange of information tackles the problem of secret bank accounts belonging to individuals, the cross-border shifting of taxable profits by multinational corporations to lower or eliminate taxation requires other solutions. This is where the BEPS project comes in, comprising 15 measures to tackle tax avoidance.

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The Inclusive Framework on BEPS (which groups 106 members) is in charge of implementing the BEPS measures, articulated around four minimum standards that are closely monitored, with jurisdictions assessing each other’s implementation through a peer review process. The four key elements of the BEPS Project address harmful tax practices, treaty abuse, country-by-country reporting and dispute resolution mechanisms, two of which form part of the “BEPS multilateral instrument”. Also known as the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent

With the latest slew of financial scandals revealed in the Paradise Papers, people may think it is business as usual for tax avoiders and evaders. Not so, said OECD Secretary-General Angel Gurría, who told the press that these tax practices are “a legacy that is fast being dismantled.” “It all started 10 years ago in February 2008 with the Liechtenstein leaks,” says OECD’s tax chief Pascal Saint-Amans. “Because of that and the financial crisis we were able to draw political attention to our work on transparency and cracking down on tax avoidance addressed through the Base Erosion and Profit Shifting Project (BEPS).” The first thing the OECD did, in 2009, was focus on transparency, Mr Saint-Amans says. The outcome of that was to marshal the countries and jurisdictions who are members of the Global Forum on Transparency and Exchange of Information for Tax Purposes (which has 147 members) into consenting to Exchange of Information on Request. This meant that the tax authorities in Mexico, for example, could request information on your bank account in Switzerland and obtain it. “But,” says Mr Saint-Amans, “they had to find you first.” Tax authorities had to know where a person was operating to know which country to request information from. Now this system is being complemented by a mechanism that allows for automatic exchange of information (AEoI). As many as 102 countries and jurisdictions have publicly committed to implementing automatic exchange of information, with 49 having started exchanges in September 2017 and a further 53 taking up exchanges in September 2018. From now on, if you have a bank account in another country, this financial information will be reported automatically and annually to your country of residence. You may be able to place your money where you like, but will no longer be able to “hide” it, and certainly not in tax havens. Even before automatic exchanges were activated, the mere threat of


BEPS multilateral instrument will close loopholes in thousands of tax treaties worldwide BEPS, it was signed in June 2017 and now covers 71 countries. Mr Saint-Amans notes that it will modify most of the existing 3,500 bilateral treaties once it is ratified domestically, a process that is now under way. This will close loopholes in thousands of tax treaties worldwide, thus reinforcing them against abuse while providing better certainty for both tax administrators and taxpayers. Revenue losses from BEPS are conservatively estimated at US$100-240 billion annually, or the equivalent of 4-10% of global corporate income tax revenues. As state pension reserves, tax credits for education and other such public services are being jeopardised by the prospect of tax shortfalls in almost every country in the world, recouping some of this money will bring relief, and more importantly, fairness to taxpayers and citizens. These leaks have once again shone a light on the role that intermediaries, such as certain corporate and trust service providers, play in promoting aggressive tax schemes. Countries must continue to co-operate on tax issues in order to close loopholes and tackle abusive tax situations. With the OECD’s work on BEPS and exchange of information we may be finally saying good-bye to lost taxes. And for tax dodgers, lost paradises, too. Share article at: http://oe.cd/28Q References and links Read about the Inclusive Framework on BEPS at: www.oecd.org/tax/beps/beps-about.htm Read more about BEPS at: www.oecd.org/tax/beps/beps-actions.htm Read about the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS at: http://oe.cd/mli Saint-Amans, Pascal (2016), “Global tax and transparency: We have the tools, now we must make them work”, OECD Observer, http://oe.cd/26Z

How do you measure

a Better Life? For nearly a decade, the OECD has been working to identify societal progress – ways that move us beyond GDP to examine the issues that impact people’s lives. The OECD’s Better Life Index is an interactive tool that invites the public to share their thoughts on what factors contribute to a better life and to compare well-being across different countries on a range of topics such as clean air, education, income and health. Over five million visitors from around the world have used the Better Life Index and more than 90 000 people have created and shared their personal Better Life Index with the OECD. This feedback has allowed us to identify life satisfaction, education and health as top well-being priorities. What is most important to you?

Create and share your Better Life Index with us at: www.oecdbetterlifeindex.org

Men are from Mars; women are poorly paid


Clara Young, OECD Observer

“Employment rates for women have grown faster and are above where they were in 2008, but employment rates for men have not even gotten back to where they were.” This remark was made by the OECD chief economist, Catherine Mann, after delivering an update on the global economic outlook in late September. Speaking to the BBC, Ms Mann added, “Women are paid less than men. You’ve got more women employed, as compared to men, so the algebra works out to be a downward pressure on wage growth.” That downward pressure is exerting itself at the uppermost echelon of the jobs pyramid. According to the International Labour Organization’s (ILO) 2016 report Women at Work, most jobs created in the last 15 years have been of the high-skilled


variety, particularly in high-income countries where women comprise just under half of highly paid managers, professionals and technicians. Yet, the average full-time female worker still earns almost 15% less than her male counterpart in OECD countries. The wide wage gap remains despite a laundry list of prescriptions that includes wage transparency in firms, equal pay legislation, encouraging girls to pursue the typically more lucrative STEM disciplines, and structural reforms to the workplace, like parental leave, flexible hours, and affordable childcare. In The Pursuit of Gender Equality: An Uphill Battle, 17 out of 35 OECD countries responding to a questionnaire listed women being paid less than men for the

same work as being a priority issue. But another way to look at wage disparity between men and women is not so much the difference between how much men and women are paid for the same or similar jobs, but the difference between “men’s jobs” and “women’s jobs”. This is called occupational or industrial segregation. The numbers show that women gravitate towards certain kinds of jobs and men to others. According to The Pursuit of Gender Equality, women are overrepresented in the service industry, for example. Eighty-four percent of employed women work in services as opposed to 60.7% of employed men. More specifically, over 20% of working women work in wholesale and retail trade, accommodation and food, and


17.3% in lower-skilled health jobs and social work. And though the larger share of low-skilled jobs has gone to men in the US, the opposite is true in Japan and Europe. Across the EU, women tend to work as sales clerks, cleaners, secretaries, personal care workers, and pre-primary and primary school teachers. Incidentally, the latter was shown in the OECD’s Education at a Glance 2017 as earning between 78% and 85% of what full-time workers with the same education level make. When we include more developing countries in the analysis, the picture is roughly the same. According to the ILO’s Women at Work, women’s employment in the service industry has increased from 41.1% to 61.5% since 1995. In their analysis of 142 countries, the ILO shows that women are concentrated in the two lowest paid sectors, that is clerical, service and sales, and “elementary occupations”. This latter category covers everything from selling goods in public places and property watching to collecting garbage and delivering goods. In developed economies, women make up 60% of the clerical, service and sales sector, and 50% of elementary occupations. All of this supports the finding in The Pursuit of Gender Equality that male-dominated sectors and occupations pay higher wages: 11% of the gender gap in monthly earnings is due to industrial segregation. The studies and speculations on why women gravitate to low-paying jobs have yielded a gamut of explanations. Gendered stereotypes for example: many people still consider that teaching children is for women and working in construction is for men. Whatever the reasons and strategies you devise to break down the gendered employment divide, it is important to acknowledge there is such a thing as “women’s jobs”, and that these are often more poorly paid than so-called “men’s jobs”. The Washington Post cites an analysis done in 2016 by job search engine

Glassdoor of a half a million self-reported salaries in the US. It found that occupational segregation accounted for 54% of the overall pay gap between men and women. Indeed, The Pursuit of Gender Equality: An Uphill Battle notes that as

As greater numbers of women move into certain professions these become lower paid over time greater numbers of women move into certain professions, these become lower paid over time. This is borne out by a study carried out on US census data from 1950 to 2000 which controlled for education and skill. This makes women particularly vulnerable to poverty. And, if a macro-economic argument must be made, wages that are stuck at low levels make any pick-up in the economy fragile at best. Hence the alarm bell Ms Mann sounded in her economic forecast. The laundry list mentioned earlier can work in the long term to, if not erase, at least muddle the boundary between men’s jobs and women’s jobs. And society at large needs to confront gendered assumptions that

assign girls and boys–and later, women and men–to certain tasks and not others. In the meantime, however, revaluing underpaid women’s jobs should be part of a spectrum of strategies to close the gap between wages earned by men and those earned by women. This can be done by raising wages, whether through implementing a wage floor, redistributing the tax burden or social contributions, or upping salaries. It would be something not just women, but many men would cheer for too. Share article at http://oe.cd/266 References and links OECD (2017), The Pursuit of Gender Equality: An Uphill Battle. OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264281318-en ILO (2016), Women at Work. Geneva, Switzerland. Visit www.ilo.org/gender/ Chamberlain, Andrew (2016), “Demystifying the Gender Pay Gap: Evidence from Glassdoor Salary Data”, Mill Valley, CA, https://www.glassdoor.com/research/ studies/gender-pay-gap/ Levanon, Asaf, Paula England, Paul Allison (2009), “Occupational feminization and pay: assessing causal dynamics using 1950–2000 U.S. census data”, Social Forces, Volume 88, Issue 2, Oxford University Press, https://doi.org/10.1353/sof.0.0264 OECD (2017), Education at a Glance 2017: OECD Indicators. OECD Publishing, Paris, http://dx.doi.org/10.1787/eag-2017-en

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OECD Observer No 312 Q4 2017




Climate action: Time for implementation Angel Gurría, Secretary-General of the OECD I want to focus on the urgent and systemic issue of climate change, which is more than just an environmental problem. Not long ago, the Lancet Countdown report reminded us unequivocally that climate change is already a critical public health issue, one disproportionately affecting the most vulnerable as well as those least responsible for anthropogenic warming. Climate change is the result of our fossil fuel-entangled global economy. This week the World Meteorological Organisation (WMO) announced that atmospheric carbon dioxide concentrations continue to rise rapidly, and that their rate of growth in 2016 was 50% above the 10-year average before that. Concentrations of CO2 are now 145% of pre-industrial (before 1750) levels, the highest in 800,000 years. Yet powerful interests continue to resist the transition towards a low-carbon economy, even as the old economic model is dying. Now is the time to accelerate our efforts. Our response today will define our collective future for generations to come. […] However, there are fundamental barriers to overcome. Chief among these is what might be termed the “tragedy of the national horizon”, wherein policies to address climate change are designed primarily, if not exclusively, from a national perspective. But greenhouse gases emitted anywhere in the world have global impact. Narrow national agendas are fundamentally inadequate to deal with global climate disruption. […] The tragedy of the time horizon and that of the national horizon are mutually reinforcing. Short-termism and a narrow focus on national interests undermine effective action on emissions and limit the provision of resources to help the poorest and most vulnerable to cope with the climate impacts we already face and which will become increasingly severe. As well as deepening current patterns of poverty and inequality, inaction by the current generation further mortgages the future prospects of our children and grandchildren. We are in a race against time. Without vision, ambition and resolve, more countries may yet retreat further into their national bunkers. The outcome would be a downwards spiral of increasing human, fiscal, financial and environmental insecurity. We would all suffer in such a bleak scenario. A far more positive future still lies within our grasp, however. We have the means and the ingenuity to make a decisive transition to an inclusive, low-emissions, climate-resilient development pathway that benefits developed and developing countries alike. We need to combine pro-growth structural reforms with coherent climate policy and ensure that they are aligned with other Sustainable Development Goals. In the Paris Agreement of December 2015, we have an international legal instrument that could and should help us meet these significant and urgent climate challenges. The Paris Agreement differs fundamentally from previous climate accords in terms of ambition, reach and commitment by the international


community. Contributions to emissions reductions beyond 2020 are set out in the so-called nationally determined contributions (NDCs). Already 190 countries have pledged contributions to 2025 or beyond, and these represent more than 96% of global emissions

Our response today will define our collective future for generations to come as of 2016. Climate finance commitments by developed countries will play a vital role in facilitating higher levels of mitigation in emerging and developing countries. The OECD was pleased to have played a positive role in the road that paved the way to Paris, through the OECD-IEA Climate Change Expert Group as well as by providing greater transparency about developed countries’ progress in meeting their commitment to mobilise US$100 billion a year for climate action in developing countries by 2020. And we are committed to continue working to ensure implementation. […] While vested interests will continue to resist the drive to combat climate change, the reality is that socio-economic transformation towards a low carbon economy is not only necessary, but inevitable. The only question is whether such transition will happen quickly enough. This change should take place both internationally and within nations. Stranded communities are more important than stranded assets. The risk of both increases if action is delayed. Action on issues such as local air pollution will help align short-term, national incentives with climate action over the next decade or two. And advances in technology will continue to enable and drive the transformation. But the pace and scale of the transformation required to meet the Paris goals cannot be achieved without the positive feedbacks between strong government policies and the transformative potential of non-state actors. Developed countries also need to ensure that developing countries have access to the financial, technological and other support needed for them to scale up their own actions against climate change. The vast majority of governments are now committed to both an ambitious global temperature goal and national actions to limit emissions. The Paris Agreement provides new hope that the tragedies of both time and national horizons can be overcome. The agreement provides the necessary dynamism to ensure that the ambition of action increases over time. Now is the time for governments above all, but also cities, businesses and ordinary citizens, to accelerate and scale up our efforts. As one cannot repeat enough, our response will define our collective future for generations to come. This extract is adapted from OECD Secretary-General Angel Gurría’s speech “Climate action: Time for implementation”, delivered at the Munk School of Global Affairs, University of Toronto, Canada, 1 November 2017. The full 5,000 word speech is available at http:// oe.cd/SGGurriaClim



Investment in renewable energy: What policymakers must do to make it happen

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Geraldine Ang, OECD Environment Directorate

Investment in renewable energy needs to increase annually by 150%–and, cumulatively, by about US$16 trillion between 2015 and 2050 according to the International Energy Agency (IEA)–to achieve the Paris Climate Agreement goal of limiting temperature rise to below 2°C by 2050. This target is also backed by the UN Sustainable Development Goal (SDG) 7 on affordable and clean energy. The good news is that there is enough capital out there to do it: the financial sector represents around €100 trillion in global assets, and OECD institutional investors alone manage an estimated US$54 trillion (including pension funds, insurance companies and public pension reserve funds, but excluding investment

funds). In addition, renewable energy technologies have become more costcompetitive: the cost of solar energy has fallen by more than 60% and that of onshore wind energy by 20% since 2010. So why is investment in renewables still wanting? New OECD research shows that incoherent policies, misalignments in electricity markets, and cumbersome and risky investment conditions are to blame. Incoherent incentives towards investment are worrying on a number of fronts, not only for investment in deployed renewables but also for innovation in earlier-stage renewables technologies. Results show that feed-in

tariffs, for instance, stimulate renewable energy patents, yet policy has instead been shifting towards public tenders to adjust to changing market conditions, control the deployment of large-scale renewables, and reduce costs for consumers. Innovation in renewable technologies is also impeded by very low government spending in R&D (reseach and development) and sluggish deployment of low-carbon technologies despite research showing that public R&D expenditures play an important role in stimulating patenting in renewable technologies. To meet renewable energy deployment goals, policymakers need to strengthen investment conditions across the policy

OECD Observer No 312 Q4 2017




spectrum and in all markets. We also need to take advantage of the fact that climate mitigation policies actually enhance each other’s positive effects when combined. For example, setting carbon prices while providing public RD&D (research, development and demonstration) spending in renewable technologies has helped to mobilise investment. Denmark, for instance, has become a leader in renewable technologies by providing integrated, sector-wide policy support to the R&D and deployment of renewables. Policy for deployment Step one at the policy level is to design coherent and targeted investment incentives such as feed-in tariffs, renewable certificates and public tenders, with combined approaches to allow for virtuous circles. Feed-in tariffs and certificates have already driven investment in advanced countries: for example, they have led to an 11% increase in renewables investment for each additional unit. Meanwhile, auctions and public tenders have supported renewables investment in emerging markets. Explicit carbon prices, using the likes of carbon taxes and emissions trading schemes, have driven investment in renewables in both the European Union and in emerging economies, as well as among OECD and G20 countries in solar power. Yet pressure from fossil-fuel subsidies in the electricity sector has simultaneously deterred renewables investment in emerging economies. Step two is to make the renewable energy investment environment–and especially solar and wind energy–far more attractive and business-friendly. At investment policy level, this means rethinking things like property registration, corruption perception, regulatory quality, and licensing and permitting systems. At competition and trade policy levels, it means easing trade across borders. And in terms of financial access, it means providing access to domestic credit for the private


sector and considering the possible unintended consequences of financial regulations on long-term renewables debt financing. Step three is to ensure that the broader investment environment doesn’t work against climate mitigation action. For instance, the implementation of important Basel III banking regulations

Setting carbon prices while providing public RD&D spending in renewable technologies helps mobilise investment may have had the unintended consequence of constraining access to debt financing for capital-intensive renewable projects. Another example has to do with public tenders, which can interact negatively with state-owned enterprises, deterring investment from independent renewable power producers entering a market through tendering procedures. So how can we shift incentives and strengthen enabling conditions to make renewable power more attractive to investors and meet this trillion-dollar target? Governments need to understand how the broader investment environment influences those incentives and vice versa. They also need to set the right type of incentives to support both investment and innovation in renewable

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technologies. This is particularly relevant in the context of ongoing incentive schemes reforms for renewable energy. The OECD stands ready to support these critical goals. Note: The OECD hosted its fourth annual Forum on Green Finance and Investment on 24-25 October 2017, gathering 600 senior policymakers and key actors in green finance and investment from around the world. The OECD Centre on Green Finance and Investment (www.oecd.org/cgfi/) was launched in October 2016 to support the transition to a green, low-emissions and climate-resilient economy. Share article at http://oe.cd/290 References and links Ang, G., D. Röttgers and P. Burli (2017), “The empirics of enabling investment and innovation in renewable energy”, OECD Environment Working Papers, No. 123, OECD Publishing, Paris, http://dx.doi.org/10.1787/67d221b8-en EU High-Level Expert Group on Sustainable Finance (2017), Financing a Sustainable European Economy, interim report, July 2017, https://ec.europa.eu/info/sites/info/files/170713sustainable-finance-report_en.pdf IEA/IRENA (2017), Perspectives for the Energy Transition, IEA, Paris, https://www.iea.org/publications/ insights/insightpublications/perspectives-for-the-energytransition.html OECD (2015), Aligning Policies for a Low-carbon Economy, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264233294-en OECD (2015), Policy Guidance for Investment in Clean Energy Infrastructure: Expanding Access to Clean Energy for Green Growth and Development, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264212664-en

Carbon prices are still far too low to prevent climate change Kurt Van Dender, OECD Centre for Tax Policy and Administration



tradable emission permits. This database, which we presented in our 2016 OECD report, Effective Carbon Rates, calculates effective carbon rates for 41 OECD and G20 countries, covering 80% of global energy use and the associated carbon emissions. In one sense, the picture that effective carbon rates depict is a little brighter than that presented by Messrs Stiglitz and Stern as

Almost no emissions from energy use are priced at levels required to keep global temperature increases below the 2°C limit, beyond which climate change could spin out of control it includes a broader range of taxes, so higher rates. In another and more fundamental sense, the picture actually is a little darker, as effective carbon rates show the enormous size of the challenge we face in battling down greenhouse gas emissions, even when taking a broader view of carbon pricing.

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Indeed, according to our database, 60% of emissions from energy use in the 41 countries are currently not priced (compared with 85% in the commission’s report). However, some 78% of emissions are priced at less than €10/tCO2, which is no less discouraging. So while our more comprehensive estimates indicate that carbon pricing is more widespread than the High-Level Commission’s report suggests, they nevertheless reinforce the commission’s main point that carbon pricing still only plays a very limited role, and that we are a far cry from what is required to reach the Paris Agreement objectives.

Pricing carbon is one of the surest policy means we know for curbing greenhouse gas emissions and meeting the targets of the Paris Climate Agreement agreed in 2015. Has there been any progress with its implementation since then? Not enough, is the verdict of some of the world’s leading experts. Some 85% of global emissions are currently not priced, according to a report issued in May 2017 by a High-Level Commission on Carbon Prices, co-chaired by Joseph Stiglitz and Lord Nicholas Stern, both respected economists in the fight against climate change. Moreover, about three quarters of the emissions covered by a carbon price are priced below US$10 per tonne of CO2 (tCO2). That price is much too low. If we are to achieve the Paris temperature target, says the report, the explicit carbon-price level should be at least US$40-80/tCO2 by 2020 and US$50-100/tCO2 by 2030. One gap in these numbers is that they do not take into account excise taxes on the likes of transport fuel, heating and energy use more widely. These have virtually the same behavioural impacts as more narrowly defined carbon taxes, and should therefore also lead to reduced emissions. If these rather commonplace excise taxes on energy use are added into the mix, we can form a broader view of how carbon emissions are currently being priced. To gauge this, we have developed “effective carbon rates”, which are made up of all specific taxes on energy use, carbon taxes, and prices of

The High-Level Commission estimates that carbon prices should range between €40 and €80/tCO2 in 2020 for the Paris Agreement targets to have a chance of being met. Currently, effective carbon rates are below €40/tCO2 for 93% of emissions, and are below €80/ tCO2 for 95% of emissions. Omitting road transport (where excise taxes are relatively high) from the calculation increases these shares to 99%. In short, almost no emissions from energy use are priced at levels required to keep global temperature increase below the 2°C limit beyond which climate change could spin out of control. The world’s leaders understood the gravity of this prospect by signing up to the Paris Climate Agreement. It is now critical that they take the policy action needed to meet those goals, and that means increasing carbon prices now. Share article at http://oe.cd/2cj References and links High-Level Commission on Carbon Prices (2017), Report of the High-Level Commission on Carbon Prices, World Bank, Washington, DC., https://static1.squarespace.com/ static/54ff9c5ce4b0a53decccfb4c/t/59b7f2409f8dce5316811916/1505227332748/ CarbonPricing_FullReport.pdf Visit https://www.carbonpricingleadership.org/report-of-the-highlevel-commission-oncarbon-prices OECD (2017), Investing in Climate, Investing in Growth, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264273528-en OECD (2016), Effective Carbon Rates: Pricing CO2 through Taxes and Emissions Trading Systems, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264260115-en

OECD Observer No 312 Q4 2017



OECD Observer Roundtable

Making our climate objectives work

Solving climate problems is about innovation

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Carl Pope, Senior Adviser to UN Envoy for Cities and Climate, Michael Bloomberg, and former Executive Director, Sierra Club

How optimistic are you that we will reach our climate objectives? Mike Bloomberg and I are very optimistic about our ability to solve the climate challenges we face. We think the solutions to the climate problems we face not only help us in the long term, they also make us richer, healthier, and safer in the short term. When the solutions to a problem are good news in the short term and good news in the long term, it’s much easier to get it done. What concrete steps can we take to achieve our climate objectives? We need to replace dirty and expensive fossil fuels with cleaner and, now, cheaper renewable power. Wind and solar generate free electricity. Electric cars are a lot more fun to drive and they make our cities quieter and cleaner in addition


corporations, civil society, philanthropic sectors and more. Here are some perspectives from our key speakers at the 2017 Forum. Watch the videos in our “Perspectives on Green Finance and Investment” series at: www.oecd.org/ cgfi/perspectives.htm

to reducing our dependence on often imported, expensive and unreliable oil. Some of our climate solutions may not be so obvious. If we reconstructed agriculture so that in addition to producing fruits and vegetables and meat our farmers were also taking carbon out of the atmosphere and putting it back into the soils, increasing fertility and storing more water, we would be much better off, farmers would have a much easier job, and we would begin to see carbon dioxide concentration in the atmosphere actually come down. Why focus on the role of cities in the global fight against climate change? Cities generate 70% of the world’s climate emissions and they drive 70% of the world’s economy. By the middle of the century when we complete the lowcarbon transition, cities will account for 90% of the world’s climate emissions and 90% of the world’s GDP. Cities are where the action is because they are where the economy is. Solving climate problems is about innovation, it’s about replacing fossil fuels with renewable power, it’s about developing electrified transportation in place of combustion engines, it’s about learning to refrigerate our homes in efficient ways with safe chemicals instead of inefficiently with toxic ones. And cities are the hub of innovation. When people move to a city, they move to change so when somebody gets to a city, they’re much more flexible and willing to look at new ways of doing things than they were back in the village. So, we see the great wave of people moving from villages to cities as a tidal wave of innovation waiting to happen.

OECD helps to leverage the concept of the green investment pipeline Marcelo Allain, Director, BR Infra Group

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The annual Forum of the OECD Centre on Green Finance and Investment brings together leading actors in the green finance and investment community. This includes institutional investors, asset managers, ministries of finance and central banks, financial regulators, commercial and investment banks, international climate funds, multilateral development banks, green investment banks,

How can green transportation projects like subways and railways attract private investment? In Brazil we have a lot of need for improving our transportation system. The best way to do this is to use new green models. We have to work on the risk matrix on those projects so that the economic and financial model can attract the interest of private investors, and not only depend on public money to finance them. What is the current state of play of the green bond market in Brazil? We are working to develop the green bond market in Brazil. Brazil is among the ten largest green bond issuers right now and in September 2017, issued US$3.7 billion in green bonds; unfortunately most of those issuers are not in the infrastructure sector. I believe that many multilateral organisations can help in this journey



Finding real world financial solutions to our biggest problems Hugh Wheelan, Co-founder and Managing Editor, Responsible-Investor.com

how they should be looking at their business in 5, 10 and 15 years.

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to improve the climate conditions in infrastructure. The OECD has done a huge amount of work on trying to get leverage on the concept of the green investment pipeline, on standardising the processes, and trying to raise the importance of this issue.

Naoko Ishii public partnerships is really achieving scale. That is the question we need to ask.

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Private-public partnerships need to change their policy environment and incentivise the private sector to move from unsustainable dirty business practices to more sustainable green practices. That’s something we need to do, and institutions like the OECD are very useful in creating that kind of multi-stakeholder platform. What are the key issues for people following responsible investment issues? What they’re really interested in is how policymakers are coming together with investors to put together the actual framework for product development, for policy, for addressing the real issues that investors have about putting money on the table to meet the challenges the world has in financing the green transition. That’s the kind of detail you can get when you bring in people from a global audience to talk about what the work that’s being done is, and how it can then be taken forward.

Naoko Ishii, Chairperson and Chief Executive Officer, Global Environment Facility Public institutions have already started to mobilise private sector investment by taking other risks, or sharing the risk of private sector investments through capacity building or paying aggregation costs. However, I have started to doubt that the compilation of nice private-

South Africa’s Energy Mix Penny Herbst, Non-Executive Director, Africa GreenCo.

We try to make investors see an opportunity in the green finance area

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Sir Roger Gifford, Chairman, Green Finance Initiative, City of London Corporation

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Private-public partnerships need to change their policy environment

At the same time, big institutional investors are under pressure to look at what they’re doing in the environmental, social and governance spaces. The Green Finance Initiative was set up two years ago and it’s very much a joint venture between the Treasury and other governmental offices with other players like The Bank of England and the London Stock Exchange and major investing institutions. I think the excitement is if we can find a number of policy recommendations which we can suggest to the government that will then give impetus to industry and institutional investors in the green finance area. We’re talking about incentives which may be around regulation or the way that markets work as much as they are about financial inducements.

All corporates are considering what they should be doing about the risk that climate can bring to their own balance sheets. This is something that’s not been in much of the financial analysis in the past. They’re internalising what we say and bringing into their corporate thinking

What is South Africa doing to take advantage of its vast renewable energy potential? Energy planning is the way forward with regard to new and renewable sources. For South Africa it all came together around 1998 when there was a shortage of power in the country and a new direction had to be taken. There were things like determining what kind of energy mix there was going to be, when those were going to be procured and, very importantly, a clear procurement process. I think that really helped develop the market and give a clear new direction in terms of energy mix.

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Tracking climate finance: Progress and challenges Nicolina Lamhauge, OECD Development Co-operation Directorate, and Raphael Jachnik, OECD Environment Directorate

renewable energy; a few developing countries have prepared Climate Public Expenditure and Institutional Reviews (CPEIR); and the International Development Finance Club (IDFC) annually maps green finance flows provided by its members, including a number of national development banks. Beyond the provision of public finance, meeting climate-related investment requires increased participation from the

ŠDavid Rooney

Data show a gradual shift towards activities that mainstream climate change considerations into broader development portfolios

At the 2009 United Nations Framework Convention on climate Change (UNFCCC), developed countries committed to mobilising US$100 billion each year for climate action in developing countries by 2020. As negotiations on a new climate agreement intensified in the lead-up to COP21 in 2015, an understanding of the progress made towards this commitment was important in keeping everyone around the table. In this context, the OECD estimated that US$62 billion had been mobilised in 2014, up by US$10 billion since 2013. Updated estimates towards the US$100 billion commitment will be needed in the run-up to 2020, along with new information about climate finance beyond this goal. But further progress relies on robust and transparent tracking of the different streams of climate finance. One of these streams relates to official development finance in support of climate change adaptation and mitigation in developing countries, including investments in renewable energy or in drought-resilient crops. The latest data available from the OECD Development Assistance Committee (DAC) point to a steady increase in bilateral climaterelated development finance since 2010,


exceeding US$30 billion in 2016. The data also underline a gradual shift towards activities that mainstream climate change considerations into broader development portfolios, such as land-use planning efforts that contribute to changes in greenhouse gas emissions or food security initiatives that consider climatechange impacts. Many developed countries use the data they report to the OECD as a basis for their climate finance reporting to the UNFCCC, but make adjustments for activities that do not principally focus on climate change. Recognising this, the DAC has proposed some adjustments in the information reported that will allow its members to indicate the relationship between the two sets of data. Ongoing modernisation of the DAC statistical system will also broaden the coverage of data reported to include all development finance provided by official bilateral and multilateral institutions. This, however, will not yet capture domestic public finance or public finance that does not have a developmental mandate. Other processes can help fill those gaps though: official export credit agencies for example have initiated work to identify climate-friendly export credits beyond

private sector. Although data on this front are hard to come by, the OECD-led Research Collaborative on Tracking Private Climate Finance and the DAC are making steady progress in developing methods and collecting data in order to measure the mobilisation of private finance through official development finance. Such methodologies balance accuracy with practicality and also aim to avoid double counting. To date, data indicate that official development finance mobilised US$81.1 billion from the private sector during the period 2012-2015, out of which US$21.3 billion (or 26%) targeted climate mitigation and adaptation. In terms of instruments, guarantees played the most significant role. Besides this, we still only know little about the mobilisation of private finance by non-developmental and domestic public climate finance. To capture private climate finance in a more comprehensive manner, such information will have to be identified and reported through complementary channels, including national monitoring and evaluation systems. Further, the provision of private finance for low-emissions and climate-resilient projects is typically enabled by a range of public capacity-building activities and policies, the effect of which is hard



Blending finance for climate and poverty to capture. Recent Research Collaborative work has made some headway in quantifying private finance invested as a result of targeted climate policies (such as feed-in tariffs and tax breaks). A pilot study in South Africa indicated that such policies resulted in private investments amounting to US$9 billion for renewable energy and US$4 billion for energy efficiency over the period 2010-2015. Further research in this area can, over time, help source more private climate finance data in all countries.

Naeeda Crishna Morgado and Jens Sedemund, OECD Development Co-operation Directorate

Beyond the tracking of finance provided and mobilised for climate action in developing countries, the Paris Agreement also calls for a broader assessment of the extent to which global financial flows are consistent with climate objectives. This implies collecting, collating and reporting a much wider range of domestic and international climate finance-related data than has been the case to date, and a lot of work ahead for statisticians and analysts. At the same time, let’s remember that tracking on its own is not the end goal: progress on this front must contribute to accelerated climate action. Share article at: http://oe.cd/2bH Benn, J., C. Sangaré and T. Hos (2017), “Amounts mobilised from the private sector by official development finance interventions: Guarantees, syndicated loans, shares in collective investment vehicles, direct investment in companies, credit lines”, OECD Development Co-operation Working Papers, No. 36, OECD Publishing, Paris, http://dx.doi.org/10.1787/8135abde-en McNicoll, L., Jachnik, R., Montmasson-Clair, G., and Mudombi, S. (2017), “Estimating publicly-mobilised private finance for climate action: A South African case study”, OECD Environment Working Papers, No. 125, OECD Publishing, Paris, http://dx.doi.org/10.1787/a606277c-en. OECD (2017), Climate-Related Development Finance in 2016. Read at https://issuu.com/oecd-dcd/docs/ climate-related-development-finance OECD (2015), Climate Finance in 2013-14 and the USD 100 Billion Goal: A Report by the OECD in Collaboration with Climate Policy Initiative, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264249424-en For more information on OECD work on external development financing see: www.oecd.org/dac/ environment-development/rioconventions.htm For more information on OECD development finance statistics see: www.oecd.org/development/stats/ mobilisation.htm

©David Rooney

References and links

Ending poverty and combating climate change: two years after the adoption of the UN Sustainable Development Goals and the Paris Climate Agreement, these interrelated challenges remain as daunting as ever, not least in developing countries. The investment required to meet the task runs into the trillions of dollars over the next 15 years, and current spending is insufficient. So how can we finance climate and development action, and as quickly as possible? A summit to check progress on fighting climate change in Paris in December focused on this very question.

policies. Measures to enable climatecompatible investment, for instance, can scale up the volumes needed, while driving growth and further funds for more action. Improved fiscal policies and greater capacity to collect taxes would also help governments, as would more effort to leverage business capital to be able to finance clean transport and renewable energy as well as hospitals and schools, and other projects aimed at lifting the poorest and most vulnerable countries to a higher, more robust level of well-being. But how can the massive sums of money needed be raised?

Generating the resources depends on choosing and implementing the right

The answer is to use development funds and financial instruments better to

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encourage private investment in developing countries, markets and sectors that would otherwise be considered too risky, costly or simply not relevant for businesses. This is what “blended finance” is about. The logic is simple: a wind power project in Kenya or a public transport system in Cairo, for example, may have a sound business case but to woo unconvinced

Blended finance is not a new concept but it certainly has returned as a new buzzword commercial investors, public support through blended finance can make the “risk-return” profile of these investments more attractive. Blended finance is not a new concept but it certainly has returned as a new buzzword in the international development community. More than 167 donor facilities have been launched since 2000, pooling donor government resources towards blended finance approaches. Donor countries, non-governmental organisations, philanthropists and other actors all engage in blended finance. The trouble is their approaches vary, and many lack a clear strategy or guidance. It is not always clear that the finance raised is going where it needs to: into a feasible energy project that will enable poorer communities to access electricity, for instance. Of the US$81 billion in private resources mobilised by public development finance in 2012-14–through credit lines, investment in companies and funds, guarantees, and syndicated loans–only 10% of this was in least developed and other low-income countries, with the lion’s share (77%) being mobilised in middle-income countries, and the rest targeting global or regional efforts. This balance should be improved. To help achieve more impact from such funding, OECD Blended Finance Principles


were adopted by the High-Level Meeting of the OECD Development Assistance Committee (DAC) in October 2017. They are composed of five principles which together provide a common standard and set goals for what blending should deliver: anchoring the use of blended finance to a development rationale; ensuring blended finance increases the mobilisation of commercial finance; tailoring blended finance to local contexts; effective partnerships between public and private actors; monitoring blended finance to improve transparency and ensure results.

market in developing countries by encouraging more local financial institutions to issue green bonds for proper market reward. The fund uses a simple two-tier structure, where the IFC takes a junior tranche, thereby cushioning the risk for institutional investors who can bank on getting a higher return. And thanks to a technical assistance grant, the IFC and the fund manager can provide training, share best practices and offer other technical assistance to local financial institutions as a way of bolstering their capacity and effectiveness.

By focusing on why, what, who, where and how, these new principles should prove useful in pushing for more donor governments and development finance providers towards the most important and crucial climate action in developing countries.

Blended finance is not a silver bullet, but can make a difference in nudging countries forward to meet the UN Sustainable Development Goals and the Paris Climate Agreement. All countries are “investable”, even poorer ones, and blended finance can help pave the way.

Take concessional or subsidised finance for instance. Concessional resources (such as long-term loans on favourable terms) are often necessary to mobilise additional financing, especially in countries with weak governance and regulation, or for newer technologies. But this is not always the case. The new Green Cornerstone Bond Fund, for example, uses US$325 million from the International Finance Corporation (IFC) at normal market terms to mobilise capital from institutional investors for a total fund volume of US$2 billion. The fund aims to spur the green bond

Share article at http://oe.cd/2bI References and links Benn, J., C. Sangaré and T. Hos (2017), “Amounts mobilised from the private sector by official development finance Interventions: Guarantees, syndicated loans, shares in collective investment vehicles, direct investment in companies, credit lines”, OECD Development Co-operation Working Papers, No. 36, OECD Publishing, Paris, http://dx.doi.org/10.1787/8135abde-en OECD (2018), Making Blended Finance Work for the Sustainable Development Goals, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264288768-en OECD (2017), Communiqué on blended finance of the OECD Development Assistance High-Level Meeting, 30-31 October 2017, available at www.oecd.org/dac/DAC-HLM-2017-Communique.pdf

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Climate change: Is shipping finally on board? strategy on reducing those greenhouse gases. At one end of the spectrum, we have a group of Pacific Island states, most notably the Marshall Islands, home of the world’s third largest shipping registry but also threatened by rising sea levels. They want the shipping sector to reach zero emissions as early as 2035.

Olaf Merk, International Transport Forum

The other end of the spectrum is mostly dominated by emerging economies such as Brazil who want to postpone

©Mike Hutchings/Reuters

To keep the planet’s temperature “well below” a 2°C rise, shipping’s GHG emissions must peak as early as possible and descend to zero by the third quarter of this century decarbonisation efforts of the sector to the second half of this century. They have not specified preferred targets for shipping emissions.

Trade is on the rise again globally, and ships are back trawling our seas, connecting places and people. But ships don’t just drive trade, they unfortunately contribute to climate change too. In fact, global shipping is responsible for about 2.5% of global greenhouse gas (GHG) emissions, and these are projected to rise by between 50% and 250% by 2050 if nothing improves. And yet, maritime transport was excluded from the Paris Climate Agreement struck two years ago. Why? One problem lies in deciding which country to assign carbon emissions to when ships are almost always outside national borders. The issue is further complicated by the fact that the actual nationality of ships is often different from that of their owners, operators or crew. Because of this, regulation of the international maritime sector’s greenhouse gas emissions falls to the International Maritime Organization (IMO), a specialised agency of the United Nations whose 172 member countries set global shipping standards.

Has the IMO made any progress on reducing GHG emissions in the past two years? Well, it depends on whether you are the kind of person who sees the glass half full or half empty. Half-empty types feel the organisation has lost time embarking on a process to define a greenhouse gas emissions reduction strategy rather than just adhering to the targets of the Paris agreement right away. This process is intended to yield an “initial strategy” in April 2018 and a “revised strategy” in 2023, eight years after the Paris Agreement. The one publicly available outcome two years after COP21 is a seven-line draft outline and a decision to start collecting data on the fuel consumption of ships. Half-full types, however, see this as a thorough approach. By establishing the “how” first, the IMO sets and adheres to targets they are sure can be met. Whether these are sufficient to reduce shipping’s footprint remains a matter of discussion. Different greenhouse gas emissions strategies What is clear is that the highly divergent positions of the IMO’s member countries will make it harder to achieve a unified

In between lie most of the OECD countries. A group of EU countries has proposed reducing maritime carbon emissions by an absolute target of 70% by 2050. They also want to reduce carbon intensity, that is, the number of tonnes of carbon emission emitted per kilometre, by 90%, using the 2008 rate as baseline. The shipping sector itself, represented by the International Chamber of Shipping (ICS), has officially proposed reducing carbon intensity by 50% to 2050, but not suggested an absolute reduction target. Whatever carbon reduction strategy the IMO settles on, to keep the planet’s temperature “well below” a 2°C rise, as spelt out in the Paris Agreement, requires that shipping’s GHG emissions peak as early as possible and descend to zero by the third quarter of this century. The aforementioned IMO projection of an increase in emissions of 50-250% by 2050 makes that target difficult to attain, to say the least. Efficiency by design One of the ways IMO member states have agreed on to reduce greenhouse gas emissions is to increase the energy efficiency of ships. The IMO’s Energy

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The long flight towards clean aviation Efficiency Design Index, known in shipping circles simply as EEDI, entered into force in 2013. But its effects are limited and very gradual: the new energy efficiency standards get stricter in stages. They also apply only to new ships, with the average lifetime of a ship being approximately 26 years. And two thirds of new container and general cargo ships already comply with the stricter standards that will enter into force after 2025, which has raised questions about their effectiveness. Besides energy efficiency, other measures that have been suggested include speed optimisation for ships, retrofitting existing ships to make them more energy efficient and use of alternative energy sources (see below). But there is no agreement on targets or measures, and, in a larger context, there are two stumbling blocks to consensus on how to lower shipping emissions: one which concerns principles and the other, economic effects. Developing and emerging economies argue that developed countries should carry a greater financial burden in lowering greenhouse gas emissions from shipping. They base their argument on the United Nations Framework Convention of Climate Change (UNFCCC) principle of “common but differentiated responsibilities and respective capabilities”. But how does this sit with the IMO’s principle that all ships should be treated equally, otherwise known as the “no more favourable treatment” principle? The second stumbling block is also financial in nature. Several countries that are located far from the world’s main consumer markets are worried that decarbonisation of shipping will raise transport costs and affect the competitiveness of their exporting sectors. While the concern is legitimate, it is far from clear how trade flows will change in the future and what the impact will be. Dynamic modelling of global trade flows could help project the possible effects of decarbonising shipping, which, in turn, might provide a basis for some sort of compensation mechanism.


Looking ahead More effort is needed as the basis for consensus on an effective Initial Greenhouse Gas Strategy for shipping by April 2018. An unambitious target and postponement of any policy measure until 2023 could stifle innovation and increase the likelihood of a patchwork of uncoordinated, potentially ineffective, regional and national measures. It might even lead to the unravelling of the global framework as public patience is tried. The European Union has already indicated that shipping will be integrated into its emissions trading scheme by 2023 if no significant progress is made at the IMO. China has embarked on an ambitious national programme to decarbonise its shipping sector, including via carbon pricing. Front-runners in the maritime sector are beginning to embrace emissions-reducing technologies. There are already ships roaming the oceans that are propelled by electricity, methanol, hydrogen, biofuels and–as the OECD Observer reported as long ago as in 2010–wind (see references). The innovations to help keep greenhouse gases down are available, and an ambitious, agreed-upon emissions strategy in April will put extra wind in the sails of a cleaner, more efficient maritime industry. The glass is still half full; shipping nations should take care not to accidentally knock it over. Share article at http://oe.cd/2cv References IMO (2014), Third IMO Greenhouse Gas Study 2014, International Maritime Organization, London ITF (forthcoming), Reducing Shipping GHG Emissions: Lessons from Port-Based Incentives, International Transport Forum, OECD, Paris OECD Observer (2010), “Sailing into the future”, in No 279, May 2010. See http://oe.cd/2cm UMAS (2016), CO2 Emissions from international shipping; possible reduction targets and their associated pathways, London

Vincent Benezech, International Transport Forum The Paris climate summit in November 2015 was a great diplomatic success but aviation, like shipping, was not included in the final agreement. International air transport currently represents about 1.5% of all man-made emissions, though with a projected doubling of demand for air travel over the next 10-20 years, up from approximately 3.5 billion in 2015, action had to be taken. In 2016, the 192 member states of the International Civil Aviation Organization (ICAO) forged a ground breaking agreement. Aircraft operators will collectively offset, or compensate for, CO2 emissions that go above a threshold based on the average of 2019/20 emissions. Following a trial phase between 2021 and 2023 and a voluntary phase between 2024 and 2026, the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) will become mandatory, with a few exceptions, for instance for least developed countries. As a global, sector-wide emissionsreduction mechanism, CORSIA is one of the first of its kind. It will ensure that emissions from international aviation stop growing after 2020 even if demand for air travel keeps rising. But the ambitions of the aviation industry, represented by the Air Transport Action Group, do not stop there. Emissions reductions and improved efficiency In addition to carbon-neutral growth, airlines, airports and aircraft manufacturers are also committed to bringing aviation emissions down to half of their 2005 level by 2050 regardless of any increase in demand. Better aircraft and improved operations render flying more fuel efficient. In the past decade or so, fuel use per passenger and per kilometre has fallen by more than 2% annually–quite an achievement compared with the 1% reduction for an average car



©2016 by NASA/ZUMA/REA

the world population flies in a given year. Any global increase in ticket prices would mostly hit people in emerging markets who have only just begun to connect with the world through international aviation. Within developed economies, a general increase in ticket prices would hurt the poorest travellers, and tourism as a whole would be affected too.

in Europe. But at the same time, it’s an insufficient achievement since the number of air travellers grew at a yearly rate of 5-6% and efficiency gains should be aligned with the increase in passenger volumes for carbon-neutral growth. Efficiency improvements are set to continue with ICAO agreeing on global efficiency standards for new airplanes from 2020 and for currently produced aircrafts as of 2023. At the same time, CO2 offsets will decrease emissions in sectors and regions, notably in developing countries where it is easier and less costly to put in place, and will buy some time for the sector to develop new solutions, such as advanced-generation biofuels. Biofuels and electric planes While only a fraction of aviation fuel comes from such low-carbon bio-sources today, there is intense research and development on advanced generation biofuels, and several airlines are running trials with them. But there are many constraints. Biofuels produced from non-food crops have only limited global availability and are still too expensive to produce at scale. So far, they are not cost-competitive compared to conventional

kerosene, which remains consistently cheap and in full supply. Additionally, growing competition between economic sectors for sustainable forms of energy is likely, and aviation may not hold the best hand. Precious biofuels may be better allocated to, for instance, carbon-negative electricity power generation, which captures and stores CO2 during the electricity production phase. The airline industry has other technological innovations in the pipeline, for instance, electric planes. But, as with biofuels, many uncertainties remain as to the exact potential of this technology. A recent announcement by a major European low-cost carrier that they would be flying battery-powered planes on short-haul flights in a decade or so was met with both hope and scepticism. Enhancing aviation’s sustainability Aviation’s share of global CO2 emissions is still relatively small, but even so, is it worth considering creating incentives to fly less to mitigate emissions? After all, demand management is one of the pillars of climate mitigation strategies for surface transport. It actually wouldn’t really be feasible or equitable to do so. Already, less than 5% of

A better way to frame the question is to ask how the societal benefits of aviation can be maximised. How can policymakers help air travel contribute more to economic and social development, and reduce inequality, by bolstering regional development for instance? Some voices in the sustainable tourism sector argue that one option would be to encourage longer trips. By spending more time at a destination, visitors would not only inject more money into local communities but would be better able to partake in a wider range of activities. This would also help people integrate more, and bridge divides. Remembering that flying is a means to an end should help aviation move in a more sustainable and inclusive direction. References ATAG (2015) Aviation Climate Solutions, Air Transport Action Group, https://aviationbenefits.org/media/125796/ Aviation-Climate-Solutions_WEB.pdf ICAO (2016) Assembly Resolution A39-3, containing Resolution 22/2 “Consolidated statement of continuing ICAO policies and practices related to environmental protection – Global Market-based Measure (MBM) scheme”, adopted at the 39th session of the International Civil Aviation Organization Plenary Assembly, October 2016, Montreal. https://www.icao.int/Meetings/a39/ Documents/WP/wp_530_en.pdf IRENA (2017) Biofuels for Aviation, Technology Brief, International Renewable Energy Agency, http://www.irena. org/documentdownloads/publications/irena_biofuels_for_ aviation_2017.pdf ITF (2017), ITF Transport Outlook 2017, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789282108000-en ITF (2015) Reducing CO2 Emissions from International Aviation – Policy Options to 2050, ITF policy brief prepared for COP21, https://www.itf-oecd.org/sites/default/ files/cop-pdf-01.pdf

OECD Observer No 312 Q4 2017




Rising sea levels: Will we adapt or drown?


Lisa Danielson and Michael Mullan, OECD Environment Directorate

Low-lying island states like the Maldives and densely populated coastal cities like New York have at least one thing in common: they are faced with the challenge of rising sea levels. In fact, close to a quarter of the world’s population lives within 100 metres of a coast. Although we cannot predict exactly the pace and upper limits of the current rise, we do know that sea levels will continue rising and that the impacts will be costly. In Europe alone, there are at least €0.5-1 trillion of assets located within 500 metres of the coast, a 2009 estimate of property values that has almost certainly gone up. Moreover, if the West Antarctic and Greenland ice sheets break up, we will be looking at over 2 metres of sea-level rise by 2100. That is enough to flood, if not submerge, major cities from Miami to Shanghai, not to mention delta countries such as Bangladesh. Ultimately, the only way to reduce the risk of unmanageable catastrophic


impacts is for countries to meet the global commitment of keeping temperature rises well below 2°C. In addition to this, what else can policymakers do to prevent the worst from happening? For a start, they need to assess clearly what is at risk if their coastlines are hit. People are clearly the most important, but policy must also be about safeguarding (and possibly relocating) so-called fixed assets too, which our towns and cities, and often whole regions, rely on: hospitals, power generators, art and heritage, business and transport equipment, data centres, and much more. And they must do more to discourage people from settling and building up new assets in these vulnerable zones in the future. More implementation needed Many countries are developing national and subnational strategies for adapting to climate change that consider how they will prepare for sea-level rise. For instance,

The Netherlands’ Delta programme is investing over €1 billion per year to manage the risk of flooding from the sea and rivers. All OECD countries have strategies that are either ready or under development, including plans for adapting to climate change. However, time is ticking and it is important to advance on these strategies and assure their implementation sooner rather than later. Just look around: in poorer countries and in some rich ones too, we are still building in high-risk areas, and many infrastructures being developed are simply not sustainable or able to resist rising sea levels. And in some cases, disaster compensation agreements continue to use national funds to rebuild destroyed areas exactly as they were before, with no adaptation schemes and, so it would seem, no lessons learned. In the poorest and most vulnerable regions, climate resilience and adaptation

plans are impeded by inadequate institutional capacity, human resources and financing. They are further hampered by rampant, unplanned urbanisation, with informal settlements typically located in the riskiest areas. International financial resources are starting to be mobilised to support adaptation. Vanuatu is re-vegetating parts of its coast with international support. In Tuvalu, the United Nations Development Programme (UNDP) and the Green Climate Fund are supporting the government’s efforts to protect the coast through ecosystem restoration and hard defences, such as sea walls. But even in wealthy countries, a range of financial and institutional constraints and policy inconsistencies are not only getting in the way of implementation, but paving the way for future disasters. For example, local governments may have limits on how much they can borrow financially, and often receive most of their funding from property taxation. As a result, they may baulk at measures that stop new coastal developments, particularly in high-value beachfront areas, no matter how vulnerable these coasts may be to erosion and flooding. Real estate markets can be oblivious to flood and erosion risks, with properties in the most precarious places commanding very high prices. For instance, in 2009, a local government in Australia was considering buying properties in a high-risk coastal area in order to protect the assets, but could not afford to do so as the property values were so high. Seeing where we are heading Better information is important, but so is policy action. Thankfully, proactive adaptation is starting to happen, and the OECD has developed a framework to support such initiatives, to improve spatial planning, for instance, as well as identify assets and utilities, and build cost-effective resilience mechanisms into infrastructure investment. New York has been adding new green spaces, adapting waste-water treatment plants and reworking hard

surfaces on roads and roofs of buildings to allow faster collection and run-off of excess flood water. Other countries, including France and South Africa, have implemented a range of innovative nature-based solutions to coastal risk such

A range of financial and institutional constraints and policy inconsistencies in wealthy countries are preventing implementation and paving the way for future disasters as restoring and protecting wetlands that absorb excess water, and coastal erosion-reducing dunes and reefs. Better monitoring and assessment can also help inform future policy and improve practices. In the UK, the national climate change risk assessment includes an evaluation of people and property at risk of coastal inundation and erosion alongside measures to reduce that risk. In 2017 the oil city of Houston was flooded after the passing of a major hurricane, with scores of casualties and costly damage to property and other assets. At around the same time, Bangladesh



was struck by severe flooding which killed over a thousand people. How bad do things have to get before we begin to take proactive development decisions to safeguard our coastal communities and homes from rising sea levels? It is not enough to be warned. For as Albert Einstein once said, while a clever person solves a problem, a wise person seeks to prevent it. Share article at http://oe.cd/ 2bJ References and links Holloway, Cas (2011), “Beautiful waterways for the Big Apple”, OECD Observer. Read at http://oe.cd/29b OECD (2015), National Climate Change Adaptation: Emerging Practices in Monitoring and Evaluation, OECD Publishing, Paris, http://dx.doi. org/10.1787/9789264229679-en OECD (2015), The Economic Consequences of Climate Change, OECD Publishing, Paris, http://dx.doi. org/10.1787/9789264235410-en Read “Adaptation to climate change in the coastal zone in Vanuatu” at www.pacific.undp.org/content/pacific/en/ home/operations/projects/environment_and_energy/ Van_CAP.html Rigg, Kelly (2012), “Waking up to climate change”, OECD Observer. Read at http://oe.cd/29c Vallejo, L. and M. Mullan (2017), “Climate-resilient infrastructure: Getting the policies right”, OECD Environment Working Papers, No. 121, OECD Publishing, Paris, http://dx.doi.org/10.1787/02f74d61-en

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OECD Observer No 312 Q4 2017




Water and climate: From risk management to investment opportunity Xavier Leflaive and Kathleen Dominique, OECD Environment Directorate

©Roy Philippe/HEMIS.FR

Lack of funding is a recurrent theme in global water discussions. And there is a compelling human rights and economic case for investment in water. The Human Right to Water and Sanitation, recognised by the UN General Assembly in 2010, has yet to become a reality for a significant share of the global population. WHO estimates that, as of 2015, 2.1 billion people still lacked access to safely managed drinking water services and 4.5 billion lacked access to sanitation compatible with the SDG 6 objectives. The benefits from strategic investment in water security could exceed hundreds of billions of dollars annually. In developed countries, investments in flood and resilience infrastructure protect valuable assets against flood risks. In developing countries, the benefits would accrue essentially in terms of improved health and productivity gains (especially for women) and ensuring children’s (especially girls’) ability to go to school. In September 2017, the United Nations (UN) adopted a dedicated Sustainable Development Goal (SDG) on water. For years, water had been undervalued, underpriced and too often taken for granted, so Goal 6 on water and sanitation was a momentous recognition of water’s crucial policy importance. Though just one of 17 SDGs, this goal also sits at the heart of many of them: water is essential for food security, health, cities, sustainable consumption and production, and terrestrial ecosystems. But this recognition remains partial and fragile: weeks after SDG 6 was adopted in New York, water was not on the COP21 agenda in Paris. And yet one of the most fundamental impacts of climate change is on the global water cycle and regional


Roundtable on Financing Water (a joint initiative by the government of the Netherlands, the OECD and the World Water Council) was founded to provide a global public-private platform to strengthen the evidence base and spur effective collaboration between the water community and financiers.

weather patterns, which in turn affect access to water resources for food production, drinking and sanitation, energy, industry and ecosystems. It also increases the risk of floods, droughts and wildfires. Managing water must now be placed at the heart of successful adaptation strategies and climate resilience. Fortunately, the water community is advancing the policy agenda via other means: in 2017, the UN General Assembly re-ignited a dialogue on global water governance to better integrate and co-ordinate the work of the UN on water-related SDGs. The COP23 in Bonn in November hosted a Water Day devoted to actions to help implement the Paris Climate Agreement. And last year, the

Yet finance isn’t flowing at the scale required. To achieve universal and equitable access to safe and affordable drinking water, and adequate and equitable sanitation and hygiene for all by 2030, the World Bank estimates that capital investment must triple to reach US$1.7 trillion. In addition, operating and maintenance costs will be higher. The Food and Agriculture Organization of the United Nations (FAO) has projected that an estimated US$960 billion of capital investment is needed to expand and improve irrigation in 93 developing countries between 2005 and 2050. Valuing water for positive return on investment The current economic climate and abundance of global capital provide a

Innovative technologies such as membranes, energy recovery, and digitisation provide further opportunities for investment and business development. New business models can convert investment benefits into revenue streams, thus improving the risk-return profile of water investments. For instance, investments in floodplains or wetlands could be financed by capturing some of the value added that such nature-based infrastructure provide properties in terms of flood protection. Blended finance which strategically combines development funds and financial instruments to mobilise private investment towards sustainable goals is a promising way to leverage contributions from different sources of finance with different risk appetites to make projects more bankable. Investments in water security can maximise net benefits when portfolios of projects are considered as part of a long-term strategy. Governments have a role to play by putting in place institutions and policies that promote such innovative practices at scale. The 2030 Development Agenda is now gaining traction and the global

This issue marks the 55th anniversary of the OECD Observer, an award-winning magazine which addresses the policy challenges of today. 55th anniversary edition No 312 Q4


er.org dobserv www.oec

Climate: ent’s Investmind new w

c outlook Economi s Rosling What Han taught us erver OECD Obs rd crosswo

Share article at http://oe.cd/2bU References and links Gurría, A. (2017), “Putting water at the centre of the global agenda”, Lecture at the Centre for Foreign relations, New York City, 24 April 2017 Hutton, G., and Varughese M.C. (2016), The Costs of Meeting the 2030 Sustainable Development Goals Targets on Drinking Water, Sanitation, and Hygiene, The World Bank Koohafkan, P. et al. (2011), Investments in Land and Water, SOLAW Background Thematic Report–TR17, Food and Agriculture Organization OECD (2016), “Water, growth and finance”, Policy Perspectives, https://www.oecd.org/environment/ resources/Water-Growth-and-Finance-policyperspectives.pdf

No. 1, 15 November 1962

space available to governments to support investments in urban development, irrigation, energy and industry. Mainstreaming water considerations into development finance portfolios in energy, transport, agriculture and climate would provide additional resources to reduce vulnerability to water risks and enhance resilience and adaptive capacity.

Whether you are a financier or a professional in urban development, agriculture or energy, you have a role to play. The Roundtable on Financing Water provides a platform to accelerate investments in water at scale. Please visit www.oecd.org/environment/resources/ roundtableonfinancingwater.htm and contribute to ensuring that water can deliver investment-grade opportunities, a condition for other investments to deliver expected outcomes and returns, in both developed and developing countries.

Staying power


Water management should be at the heart of successful adaptation strategies and climate resilience. The difficulty is finance and how to turn on the investment tap

community is striving to translate the aims of the Paris Agreement into financing flows and investment. A sizeable share of these investments therefore has the potential to facilitate access to safe water and sanitation, and protect against risks of floods, droughts, or water pollution.


window of opportunity to scale up water-friendly infrastructure investment that contributes to sustainable growth. In many advanced economies, interest rates are close to zero, increasing the fiscal



OECD (2005), Water and Climate Change Adaptation: Policies to Navigate Future Unchartered Waters, OECD Publishing, Paris, http://dx.doi. org/10.1787/9789264200449-en Sadoff C. et al. (2015), Securing Water, Sustaining Growth, Report of the GWP/OECD Task Force on water security and sustainable growth, Oxford WHO-UNICEF (2017), Progress on Drinking Water, Sanitation and Hygiene: 2017 Update and SDG Baselines, https://www.unicef.org/publications/ index_96611.html Winpenny, J. (2015), Water: Fit to Finance? Catalyzing National Growth through Investment in Water Security, report of the High Level Panel on Financing Infrastructure for a Water-Secure World

Flicking through the issues, from 1962 to today, is like taking a trip through our times. To browse the full archive of OECD Observers, visit: https://www.oecd-ilibrary.org/ Or contact Library&Archives@oecd.org Subscribe at: www.oecdobserver.org/subscribe.html or return the order form on page 52

OECD Observer No 312 Q4 2017




Rice and risks in the Mekong Delta

©Christoph Mohr/Picture Alliance/DPA/AFP

Robert Akam and Guillaume Gruere, OECD Trade and Agriculture Directorate

The wet and verdant expanse of the Mekong Delta’s rivers and farms is a veritable rice bowl for the world. Not only do the region’s paddies produce half of Viet Nam’s rice crop yearly, the country is the world’s third largest rice exporter with 17% of world exports of paddy rice, the vast majority of which is produced in the Mekong Delta. But the natural wealth of the great delta belies serious risks which people living in this fragile, low-lying ecosystem now face. Quite simply, the abundant freshwater that defines this region is coming under threat. In recent years, saline water has started to encroach further inland from the


ocean, to such a degree that farmers in some areas of the delta now speak of a “salty season”. Some have even had to change from growing rice to farming shrimp which can cope in the now brackish water. Local communities are increasingly turning to pumping groundwater for irrigation, aquaculture and drinking water, but this only accelerates the salinisation. Pumping also causes land subsidence and depletes underground water supplies, reducing water security for future generations. Meanwhile, sea levels are expected to rise in the region by 45-75 cm by 2090. This is a major threat to a part of the world which, on average, is less than 2 metres above sea level. A rise in the

sea level of only 30 cm could see the loss of nearly 200,000 hectares of rice cultivation. These risks are compounded by extensive dam-building along the river’s length and the development of sand mining. Together these activities severely impede

Water stresses in northeast China, northwest India and the southwest United States would result in price increases of 5-8% for certain commodities the flow of the sediment that supports fish and shrimp farms and replenishes soils in the delta lost to erosion.

The economic risks are significant, and not just for Viet Nam. How long will it be possible to maintain rice production given the ongoing damage to the ecosystem? And at which point will the impact of these water risks begin to affect global markets? The Mekong Delta is one of a number of localised agricultural regions in the world that face acute water risks, which we have identified as water-risk “hotspots” that require a targeted policy response. These water risks are not only the result of climate change but involve a range of factors, including farming itself, that cause water shortages, floods and degradation of water quality, all of which threaten agricultural production. Our projections of future water risks suggest that China, India and the United States will be the three countries where agricultural production will be the most severely affected globally. Water stresses in the hotspot regions of northeast China, northwest India and the southwest United States alone would result in price increases of 5-8% globally for certain commodities such as cotton, maize and wheat, and cause significant shifts in

their trade too. Our analysis identifies Viet Nam as facing the world’s fourth highest water risks for rice production. In the face of water risks, how can we safeguard agricultural production and our food security? Targeted adaptation and co-ordination will be key here. Farmers can shift production–as is already taking place in the Mekong Delta–or improve their agricultural practices, such as changing when in the year they plant crops or adopting new and adapted rice varieties. At the same time, agro-food companies could work with farmers to improve their practices, such as by providing them with saltwater monitoring systems, or by encouraging rainwater collection as a supply of freshwater in place of groundwater during the dry season. In parallel, governments must focus their attention and efforts on hotspot regions by tailoring existing policy instruments and introducing new measures that directly address water risks while ensuring their actions complement those of private actors. They also need to strengthen market and trade relationships at the national and international levels to



dilute price effects and ensure regional impacts are contained. This response would be supported by efforts at the international level to share information about water risks to reduce the spread of indirect impacts. Just as with our case studies in northeast China, northwest India or the southwest United States, public and private actors in the Mekong Delta are now taking the first steps to mitigate agriculture water risks in the region, as discussed at the first Asia-Pacific Economic Cooperation (APEC) Meeting of Water Resource Authorities on “Challenges for food security in a context of climate change” in Viet Nam in August 2017. These efforts need to be intensified in a strategic and co-ordinated manner, as we argue in Water Risks Hotspots for Agriculture, to ensure that they effectively reduce the risks for future generations. With the right policies and approaches, not only can food production in hotspots such as the Mekong Delta and other farming regions be preserved, but people’s livelihoods and the great ecosystems we rely on can also be secured. Share article at http://oe.cd/2cp

Future water risk hotspots for global production of major agricultural commodities, 2024-2050 average

References and further reading The report findings were presented during an OECD: Green Talk Live webinar on 18 October 2017, the recording of which is available at: https://www.youtube.com/watch?v=BYX6sUk6DFI OECD (2017), Water Risk Hotspots for Agriculture, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264279551-en USDA Foreign Agriculture Service (2012), Vietnam: Record Rice Production Forecast on Surge in Planting in Mekong Delta, Commodity Intelligence Report, December 12, 2012, https://ipad.fas.usda.gov/ highlights/2012/12/Vietnam/ An overview of the OECD’s work on water use in agriculture can be found here: http://www.oecd.org/tad/ sustainable-agriculture/water-use-in-agriculture.htm

0 to 0.5

0.5 to 1

1 to 2

2 to 4

4 to 10

Note: The index can be interpreted as the expected share of overall global production of the key agriculture commodities likely to face high water risks without adaption action in each of the 77 largest agriculture-producing countries. Source: OECD

OECD Observer No 312 Q4 2017


Managing earth: The land-water-energy nexus


Water bottleneck


The whole is greater than the sum of its parts By understanding the linkages between resources and economic choices, we can adapt agricultural practices more strategically, allowing them to adjust to shocks in a more integrated manner and to manage impacts and costs. This would help improve policymaking aimed at managing competing land uses at local, regional and global levels. From California

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Linking a physical representation of bottlenecks with a global economic model This nexus is perhaps best viewed through the prism of agriculture. Take water for instance. Unregulated groundwater pumping for irrigation, which occurs in many countries, can lead to a depletion

Increased biofuel production also affects our nexus. On the one hand, biofuels are an economic opportunity and have the potential to grow fast in countries like Brazil and Russia with their abundant land and rain-fed agriculture. But in many cases biofuels reduce land availability for food crops. This “indirect land use change” can have several effects. It can push up global and regional food prices as supply is squeezed, with particular impacts in regions where food security is already vulnerable, such as India and northern Africa. More biofuels can also lead to higher energy prices and cause new vulnerabilities among producers.

Consequences of nexus bottlenecks for regional GDP in 2060


It traces, measures and anticipates how use and regulation of one resource creates bottlenecks for others. Water management, for instance, leads to trade-offs between needs for energy production and irrigation for agriculture, particularly (but not only) in water-stressed regions. Urban sprawl eats away at the land available for growing food, but so do green policies promoting biofuels. Clearly we need to take into account the effects on the land-water-energy nexus for more holistic and effective policies that work for everyone concerned.

either put existing agricultural land out of production, prevent its expansion or shift agricultural production to unprotected lands. In many countries, demand for land for food production has led to deforestation, destroying ecosystems and further driving climate change. Sprawl can also lead to lower crop yields when the most productive croplands disappear.


The model, which assesses the biophysical consequences and economic costs of the nexus in 2060, shows how shocks to one part of the system affect other parts of the system. It reminds us that everything is intrinsically interdependent.

By understanding the linkages between resources and economic choices, we can adapt agricultural practices more strategically


Surely the key is to develop policies that better reflect the linkages between these different resources. A new modelling approach, focusing on the “land-waterenergy nexus”, has been advanced to help do just that, and the readings are quite stark.

There is likewise more demand to protect natural areas, but like urbanisation, this can also lead to increasing pressure on land markets. As green belts around major cities show, protected areas can


Demographics, lifestyle, urbanisation, farming and transport: all are facts of life and, as we try to manage our economies and our environment, they are the focus of millions of policy actions around the world. We must reduce pollution and congestion. But we need farms for our food and roads to get around, which put enormous pressure on land, water and energy resources, endangering the environment and our economic security at the same time. It is a hard balance to strike, as policies that focus on relieving one challenge might add to pressure to another.

of aquifers. This depletion is fastest in drier, water-stressed regions where farmers rely on groundwater, but rising demand for food and urbanisation have led to water pressures for farming even in rainier climates, with farm intensification hardly helping.


Rob Dellink, OECD Environment Directorate, and Olivier Durand-Lasserve, OECD Economics Department

Source: OECD, Land-Water-Energy Nexus: Biophysical and Economic Consequences, 2017



“Oceanfills”: Yet another dumping ground to the Caspian region, and through Africa and India, alarm bells, for water notably, are ringing loudly, calling for policies that address the land-water-energy nexus. As climate change advances, the multiplication of extreme weather events and their growing unpredictability will directly impact agriculture, transform irrigation requirements and add pressure to groundwater resources. In the electricity sector, heat waves will require ever more balancing of supply and demand to cope with less water for power plant cooling and high energy demand for air conditioning and water pumping. The effects of climate change can also be studied in a nexus scenario as an overarching bottleneck. Climate change exaggerates the nexus bottlenecks especially in regions where it is the most acute, such as India and North and sub-Saharan Africa. In these regions, the depletion of groundwater resources will increase people’s vulnerability where precipitation is low, and boost global dependency on regions with rain-fed agriculture. Our global economic welfare depends on getting this balance right. Clearly, the costs and consequences are only a part of the nexus story. The nexus is about local hotspots, where different bottlenecks come together but whose consequences can spread globally to affect all sectors in all regions. The land-water-energy nexus not only points the way to better policies for managing our environmental and economic interdependency, but could give rise to new, effective techniques, initiatives and innovations–technological, political and organisational–for managing resources and ensuring better lives for all. Share article at http://oe.cd/28E References OECD (2017), Land-Water-Energy Nexus: Biophysical and Economic Consequences, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264279360-en

Dulika Rathnayake, OECD Environment Directorate The world’s oceans are being damaged by a constant and unprecedented accumulation of waste known as marine debris. The waste, mostly from effluent human activities, is brought to the oceans through currents and often carried far from where it originated. The waste accumulates in every ocean, often far from our coasts, contaminating our oceans and the ecosystems they support. This litter is mostly made up of plastic, which is not biodegradable: upwards of between 5 million and 12.7 million metric tonnes of the 300 million tonnes of plastic being produced globally per year are being dumped into our oceans. As debris travels down waterways, it eventually reaches the ocean, forming giant garbage patches around the world. For example, approximately 80% of the Great Pacific Garbage Patch–described as a garbage vortex and about twice the size of France–is made up of waste that comes from land-based activities in North America and Asia. Much of this debris sinks below the surface, hiding the majority (about 70%) of the waste contaminating the water. At sea, marine species risk getting entangled in plastic and sometimes mistake it for food, causing suffocation, starvation, physical trauma or damage from chemicals. “Ghost fishing” is part of this soup, involving discarded, lost or abandoned fishing gear that continues to entangle or kill marine life and damage habitats, ultimately impacting fish stocks and quality. Sea turtles, for example, are known to ingest plastic bags, mistaking them for jellyfish, and in the Midway Atoll, an estimated one in three albatross chicks dies from eating plastic debris. If this isn’t alarming enough, plastics decompose into minuscule microplastics that release toxic chemicals and enter the food chain, contaminating what we eat. Plastic litter threatens the access to clean water and the sustainable management of water in freshwater systems too. In

addition to the threat to marine species, ecosystems and food stocks, plastics cause enormous economic and social costs, as well as ecological damage. According to the UN Environment Programme (UNEP), the damage caused

In the Midway Atoll, an estimated one in three albatross chicks dies from eating plastic debris by plastics to the marine environment is estimated at US$13 billion per year globally and upwards of US$75 billion when considering the total natural capital cost of plastic used in consumer goods. The socio-economic costs range from public health to tourism. The greater the amount of marine debris in the ocean, the higher the costs for coastal clean-ups and the heavier the loss of revenue. For example, in California, a six-year beach-cleaning initiative to reverse a decline in tourism revenues cost an estimated US$51 million (OECD, 2016). Bacterial pollution on the beaches of southern California have also been associated with rising healthcare costs, estimated at costing upwards of US$400 million per year. It was reported that in the Asia-Pacific region alone, the fishing, shipping and tourism industry is losing US$1.26 billion every year due to the damage caused by marine litter. The United Nations Development Programme (UNDP) estimates that poor ocean management has a cumulative cost of US$200 billion per year. The United Nation’s Sustainable Development Goals (SDGs) emphasise the urgency of improving and maintaining the health of our water systems. Goal 14 is specifically dedicated to the sustainable use of ocean, sea and marine resources, and among its seven targets, target 14.1 calls for the prevention and significant reduction of marine pollution of all kinds by 2025. Healthy oceans also contribute to poverty eradication (Goal 1) by creating sustainable

OECD Observer No 312 Q4 2017


©Dimitar DIilkoff/AFP


livelihoods and decent working conditions in industries such as fisheries and marine aquaculture, shipping and shipbuilding, ports, tourism, oil, gas, mining, and maritime transportation. For billions of people around the world, taking care of our oceans means greater job security, healthier food and better social protection. Plastic pollution is also a direct threat to food security (Goal 2) as it impacts fish stocks and infects the food chain with microplastics. Studies estimate that if waste management infrastructure on land is not improved, the quantity of plastic waste entering the marine environment is expected to increase by as much as 40% by 2025. The challenge will only get harder. Reversing the impact of marine pollution is no simple task. Cleaning up less than 1% of the garbage in the North Pacific Ocean is


estimated to take 67 ships over a full year. As pointed out by the 2017 G20 Action Plan on Marine Litter, there are many data gaps that need to be filled in order to develop and implement policies that can adequately preserve and protect our water systems. In the meantime, adopting a “circular economy” approach to recycling and reusing materials and reducing waste would help prevent land-based waste from entering the oceans. The global nature of marine debris clearly requires an integrated approach. Governments, scientists, politicians, the private sector, related industries, major users of plastics and chemicals, and the general public all need to take responsibility and play an active role in finding a solution. The OECD’s 2017 Green Growth and Sustainable Development (GGSD) Forum on “Greening the ocean economy” was

held in November 2017 in Paris to explore ideas, opportunities and actions to help clean up our oceans and safeguard the future of our earth. For more information on the Green Growth and Sustainable Development Forum, see: http://www.oecd.org/greengrowth/ggsd-2017. Share article at http://oe.cd/27a References and links OECD (2016), The Ocean Economy in 2030, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264251724-en. OECD (2017), Marine Protected Areas: Economics, Management and Effective Policy Mixes, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264276208-en. Watkins, Emma et al. (2015), “Marine litter: Socioeconomic study, Scoping Report”, Institute for European Environmental Policy, London, Brussels, https://www. g7germany.de/Content/DE/_Anlagen/G7_G20/2015-0601-marine-litter.pdf?__blob=publicationFile&v=4

OECD’s global knowledge base


People, trust and government: Getting the measure Additionally, How’s Life? finds that more than half of OECD residents consider corruption to be widespread in their government.

Lara Fleischer, OECD Statistics Directorate

Deep and chronic distrust of government impedes the smooth and stable functioning of institutions. For one thing, this is bad for economic activities that require the confidence of investors and consumers.

Is trust between people and their governments crumbling? What the great philosopher Jean-Jacques Rousseau (our picture) called the social contract, whereby free citizens voluntarily agree to concede authority to the state in their own interest, could be in question. The OECD’s How’s Life? 2017 report finds that only 38% of people in OECD countries say they trust their government. In 2006, this figure was around 42%. Why is there such a “disconnect” between citizens and their elected representatives? The 2008 crisis is often blamed and could well be a factor. Indeed, trust has fallen by more than 15 percentage points in Greece, Portugal and Spain–some of the OECD countries hardest hit by the crisis. They have also seen the largest falls (or smallest growth) in household income and earnings since 2005, as well as some of the largest increases in long-term unemployment. By contrast, in Germany, Poland and the Slovak Republic, which are some of the countries where trust has increased the most, the average resident is generally better off than they were in 2005. Nevertheless, the


trust issue goes beyond the Great Recession and there is more to it than simple economics. In the US, where opinion polls measuring confidence in federal government go back to the late 1950s, trust has been consistently falling over the long term. There may be other sources for the disconnect between citizens and their government. How’s Life? shows that the political class does not always reflect the people it serves. In the 11 OECD

Younger people and those with lower incomes are less likely to go to the polls countries for which data is available, manual, agricultural and service workers make up 44% of the working population, but only 13% of legislators. Politicians are much more likely to have had a professional or senior management career. Not surprisingly, people might feel politicians are out of touch with their daily lives and unable to understand their basic struggles, from the cost of living to their need for quality public services.

But distrust is bad for democracy, too. The social contract is a two-sided coin. Good governance requires active citizen participation, but what we are seeing instead are people who are disengaging from traditional forms of politics. Voter turnout across the OECD has been steadily declining, and more so among people that are already the least well-represented in public life. How’s Life? shows that younger people and those with lower incomes are less likely to go to the polls: self-reported voter turnout is 14 percentage points lower for people in the bottom income quintile compared to those in the top quintile, and turnout for people aged 65 or more is around 17 percentage points higher than among youth aged 18-24. The trouble is that this disaffection gives the elderly, the more educated and the wealthy a greater political say compared to the rest of the population. This has affected the way people vote as well: in Europe, distrust of institutions has gone hand-in-hand with a rise in voting for non-mainstream, populist parties. That said, voting is the most traditional form of civic engagement, and new types of activism (think of hashtag campaigns, the Occupy or Black Lives Matter movements) have been emerging. However, there is little evidence on whether groups on the margins have shifted to these to make their voices heard. Tellingly, How’s Life? notes that only one in three people in the OECD feels they have influence on what the government does. This feeling is even weaker among the less educated and less wealthy. The first step in addressing the trust crisis is to monitor data regularly, analyse trends and identify what is needed to strengthen and restore trust. But, with the exception


Percentage point change between 2014-16 and 2005-07 (left axis)


100 90 80 70 60 50 40 30 20 10 0 -10 -20 -30 -40


% in 2014-16 (right axis)


100 90 80 70 60 50 40 30 20 10 0 -10 -20 -30 -40


Percentage points

Average confidence in national government in the period 2014-16, and the change with respect to the period 2005-07

Source: OECD calculations based on Gallup World Poll, www.gallup.com/170945/world-poll.aspx

of Australia, Canada, and New Zealand, trust measurement does not have a long tradition in official statistics and is not collected frequently enough or in a way that is internationally comparable.

of their statistical quality is encouraging. In order to answer remaining questions, more official data on trust and their potential determinants should be collected.

One reason trust has not been part of statistical offices’ standard repertoire is its inherent intangibility. If you ask a person through a questionnaire whether they trust their government, is their answer good enough in terms of statistical quality?

The guidelines feature five different question modules, with a core module that can readily be inserted into household surveys measuring trust in parliament, the police and the civil service.

The newly released OECD Guidelines on Measuring Trust offers international recommendations on collecting, publishing and analysing trust data to make it easier for national statistical offices to do so. (Besides trust in institutions, the guidelines also focus on trust in other people, which is a key element of social capital.) On the question of statistical quality, the guidelines provide evidence about the validity and reliability of trust data. It examines non-response rates, the relationship between self-reported trust measures and other proxies such as experimental behavioural indicators, and the consistency of results across surveys and over time. They conclude that we are indeed only at the beginning of fully understanding measures of trust in institutions, but that existing evidence

The guidelines are designed to build the evidence base needed to restore trust. Left unchecked, the growing alienation between people and institutions will feed the disengagement and frustration we are now witnessing in some countries. What is your view? Do you trust your government? What do you suggest should be done to win the public’s trust back? Share this story at http://oe.cd/28N References and links Algan, Yann et al., (2017) “The European trust crisis and the rise of populism”, Brookings Papers on Economic Activity, Washington, DC, www.brookings.edu/ wp-content/uploads/2017/09/4_alganetal.pdf OECD (2017), OECD Guidelines on Measuring Trust, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264278219-en OECD (2017), How’s Life? 2017: Measuring Well-being, OECD Publishing, Paris, http://dx.doi.org/10.1787/how_life-2017-en

OECD Observer No 312 Q4 2017


What is a systems approach?

©David Rooney

Daniel Catalan, OECD Observer

The ancient Greek philosopher Aristotle said that “the whole is greater than the sum of its parts”. He could have been describing a systems approach, which makes organisations more functional by looking at big-picture processes and practices. A systems approach can save money too. Imagine a newly opened office building with 30 stories and only three lifts. Frustrated employees complain to the building’s management about having to wait too long during rush hour. The lifts are sped up a little with manual operators. But employees are still unhappy. So, management considers other solutions. One suggestion is to replace the outdated control device with one that offers a mix of express stops and local ones–costing US$5,000. Another suggestion is to install a new lift, costing much more at US$60,000. But then, a staff member named Anna suggests a clever alternative that would only cost US$300. She argues that the source of frustration in waiting for the lift is boredom rather than the delay itself. Management tests the idea, and installs a television monitor in the lobby to entertain workers while they wait for the lift. The complaints fade away. This is what the systems approach is about. Rather than treat a problem in a vacuum, it is viewed within a greater whole. Taking a holistic view of the problem, Anna and her colleagues shared their perspectives and finally came up with a workable and effective solution. Anna’s solution may have only concerned an elevator, but it is an approach that can be applied far more widely to more complex administrative challenges, from transport and tourism


to the environment. Some of these situations are described in Systems Approaches to Public Sector Challenges, an OECD report that provides examples of systems strategies in action. Take Canada, for example. Toronto’s municipal government used a systems approach to deal with how the sharing economy would disrupt hospitality and transportation. An innovation hub called MaRS Solution Lab was recruited to research the sharing economy. They interviewed experts from the public and private sectors, as well as taxi drivers and hotel employees affected by sharing economy competitors such as Uber and Airbnb. The goal was to better understand how the new system worked both for and against traditional businesses, and to use the collected data to help government achieve balance when devising their regulatory approach. Another example comes from the prime minister’s office in Finland, which in collaboration with a Nordic think tank called Demos Helsinki, combined systems and design-thinking approaches to create and implement experiments on universal basic income. Facing severe time and budgetary restrictions, the Finnish government devised tests to gauge which methods of distributing basic income to the public would be the most effective, using small control groups of recipients. The Finnish government and Demos Helsinki reviewed relevant practices and interviewed experts from the public, private and volunteer sectors. By working together to design the tests, lawyers, bureaucrats and social scientists were collaborating and exchanging information towards a shared goal for the first time. The process of creating the tests was seen as a way to strengthen the links between citizens, end-users, stakeholders and policy designers. In addition, these endeavours attracted attention towards the cause of basic income, inspiring more studies on a subject in which Finland has positioned itself as an international leader. A systems approach brings together interviews, dialogue, openness to perspectives from public and private sectors, and people at all levels of an institution’s hierarchy. Although Aristotle could never have anticipated Anna’s dilemma with the lift, the disruption of the service industry by the sharing economy, or the need for and concept of a universal basic income, his point holds true that an understanding of all parts within a system make complex problems more easily solvable. Share article and links: http://oe.cd/27y References and links Chen, Gordon K.C., “What is the systems approach?”, Interfaces, Nov. 1975, Vol 6. No. 1 OECD (2017), Systems Approaches to Public Sector Challenges: Working with Change, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264279865-en Read “Basic income: An answer to social security problems?” at: http://oe.cd/1W5 Turunen, Marjukka (2017), “Basic income: An answer to social security problems?”, in OECD Yearbook 2017. See: http://oe.cd/1W5

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Development: Some facts Hans Rosling taught us Charlotte Petri Gornitzka, Chair, OECD Development Assistance Committee (DAC) I often wonder how to best show the impact of our combined efforts to eradicate poverty. Having worked on development issues for many years, I have seen the results first-hand. I have listened to women sharing how improved maternal care has enriched their family’s lives, and I have seen how access to financial services has turned unemployed youngsters into entrepreneurs who now employ others. While we all have examples of development co-operation that works, we sometimes lack the hard evidence, the facts, the data. When confronted with scepticism, our stories often become anecdotal examples with little value. Solid data is essential to showing progress towards the UN Sustainable Development Goals (SDGs). We are in the midst of a data revolution where the combination of big data, open data and the rapid proliferation of information technology will radically boost our knowledge and understanding. But what will happen in the least developed and conflict-ridden countries where there are huge data gaps, or data of very poor quality? While many members of the OECD’s Development Assistance Committee (DAC) provide support for the collection and processing of statistics in developing countries, there is more work to be done. DAC donor countries are only just tapping into the potential of big data for development co-operation. To focus this year’s report on data for development is both timely and important. We must invest more in data. The global 2030 Agenda for Sustainable Development requires hard facts and figures to show what works and what doesn’t. We all need statistics to show successes and setbacks in development.

©2014 Hervé Cortinat/OECD

I also like to think that by putting the focus on data for development, we are paying tribute to Hans Rosling,* a legendary professor and statistician. Sadly, Hans passed away in 2017. No one has ever brought statistics to life in the way Hans did. No one has shown the importance of combining datasets to uncover new insights better than he did. I was fortunate enough to have had the opportunity to discuss development issues with Hans. He was


straightforward. He asked questions like, “Why do you spend so much money on these human rights and democracy programmes when you have no data to show they’re working?” He argued that we should invest more in children’s and women’s health because

What you think you know may be wrong because the world is constantly changing. Check the data! he could show the data that proved these policies had the best return on investment. He was also very encouraging and constructive when Sweden embarked on its open data journey (though he thought we should have broken down costs in more detail). One of Hans’ most poignant messages, which I believe to be both very true and yet very easy to forget, was, “What you think you know may be wrong because the world is constantly changing. Check the data!” We all tend to stick to what we know and seek information to confirm our beliefs. Data therefore serves as a reality check as numbers do not lie. We are two years into the implementation of the boldest and most far-reaching development agenda ever created. We will end extreme poverty and at the same time stop climate change and the degradation of biodiversity so that humans and nature can restore balance. To monitor this, we have agreed to follow progress on more than 200 indicators in every single country even though we still lack much of the data today. We need to keep modernising and improving aid statistics and data on financing for sustainable development. We need to increase our support for statistical capacity where it is needed and make better use of results data for policy and feedback to citizens. From my experience, the hardest part will be getting more investment to boost statistical capacity in partner countries. Donors know this is important but NGOs are not pressuring governments to spend more on this; neither is this an effort ministers will get media attention for. The challenge is great, but the opportunities and gains are even greater. With more and better data we can show the much needed progress that girls, boys, women and men are making around the world. With more and better data we can make better and more informed decisions on how to support families who strive for a decent life. With more and better data we can come closer to what Hans Rosling’s son, Ola, calls a world of “factfulness”: a world where opinions, however passionately held and articulated, are supported by facts. *Hans Rosling was a Swedish physician, academic, statistician, and public speaker. He was Professor of International Health at Karolinska Institutet and co-founder and chairman of the Gapminder Foundation, which promotes the use of data to understand global development. Rosling passed away on 7 February 2017 at the age of 68. Share article and links: http://oe.cd/27B References and further reading

Hans Rosling

OECD (2017), Development Co-operation Report 2017: Data for Development, OECD Publishing, Paris, http://dx.doi.org/10.1787/dcr-2017-en Visit: https://www.gapminder.org


Eurasia: Investing for the future

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Andreas Schaal, Director, OECD Global Relations Secretariat

After an extended period of relatively strong economic growth, the countries of Eurasia* have recently experienced a series of powerful external economic shocks. Lower global commodity prices, recession in Russia, moderate growth in China and subdued economic prospects in many west European economies have all hit Eurasia hard. The region’s overall GDP fell in 2015, for only the second time in two decades (the first time was in 2009), and growth in 2016 was weak, according to IMF estimates, with accelerations in a few countries offset by downturns elsewhere. Recovery seems

to have continued into 2017 but is uneven and modest at best, and growth is far below the rates achieved in the 2000s. The region’s oil and metals exporters have naturally been hit hardest by the end of the commodities boom, but, perhaps surprisingly, the comparatively resource-poor economies of Eurasia have also suffered. Many rely heavily on trade with, and remittances from oil exporters, particularly Russia. Moreover, the conflict in Ukraine, which has inflicted enormous costs on the country, has also affected the rest of Eurasia, mainly as a result of the

impact of western sanctions and Russian counter-sanctions on trade flows, as well as the effect of heightened uncertainty on investment. These developments have highlighted some of the structural vulnerabilities of the Eurasia economies. Most have a relatively concentrated export profile– particularly in terms of goods exported * “Eurasia” refers to the countries participating in the OECD Eurasia Competitiveness Programme: Afghanistan, Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, the Republic of Moldova, Mongolia, Tajikistan, Turkmenistan, Ukraine and Uzbekistan.

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but also, in many cases, a heavy reliance on a few key export markets. In a number of Eurasia countries, hydrocarbons and metals account for 80-90% of exports, and the remaining exports depend heavily on agricultural goods with minimal or no processing. Moreover, the data suggest that for most Eurasia countries in the years preceding the present slowdown the commodity share of exports was increasing in many countries. The diversification imperative This problem is not new: the challenge of economic diversification has loomed large on the region’s policy agenda for well over a decade, especially in the oil-exporting economies. There was widespread awareness, even during the boom years before the global financial crisis in 2008, that sustained long-term growth would require a transition to more investment-led and innovation-led growth. The slower rates that followed the crisis–even before the shocks of 2014–seemed to confirm that the growth models from the previous decade were reaching their limits. In fact, our calculations show that the aggregate GDP of the Eurasia region grew by more than 8.5% per year from 2000 to 2008, but grew just 5.1% per year in the post-crisis recovery period from 2010 to 2013, before stalling in 2014 and 2015. When thinking about diversification, policymakers often tend to think in terms of sectors. This poses a problem, largely because such a focus inhibits politicians and officials from identifying the most promising long-term trends in product markets. A more effective approach to diversification focuses on building up a country’s endowments–its natural, human, physical and financial capital. At first glance, it might seem that countries can do little about their natural endowments but there is, in fact, a great deal that depends on policy. For example, while governments cannot change the quality or composition of the soil, the economic potential of such resources is


influenced by legislative and regulatory factors, as well as physical infrastructure and technological capacities–hence the importance of Kazakhstan’s current overhaul of its mining code or Ukraine’s

Eurasia countries need to invest in their human capital development efforts to advance land reform. Similarly, reforms to water policy and water governance in Central Asian states like Tajikistan could support both economic growth and long-term environmental sustainability. The benefits of higher productivity and inclusive growth But reducing external vulnerabilities requires more than diversifying productive activity or exports. Raising productivity also plays a critical role. If these countries are to make the most of their people’s talents and to allow the great mass of their citizens to pursue productive, rewarding careers, the countries of Eurasia need to invest in human capital development. This also means fostering activities that generate more high-skilled and high-productivity employment which directly contributes to the economic well-being of the country and the social well-being of its people. At present, many of the Eurasia countries are characterised by wide disparities in productivity, income and, as a result, well-being, because high-productivity employment in many countries is concentrated in just a few sectors and regions. The case of Kazakhstan is instructive here: value added per worker in resource extraction is more than eight times the national average but it accounts for only about 2% of total employment. By contrast, our calculations based on official data suggest that around 28% of employment is in sectors where output per worker is only about 16% of the average. Higher productivity and inclusive growth require more focus on further reforms to education and training systems, which

have in some cases changed little since communist times. Good governance for well-functioning markets Above all, though, the Eurasia countries need to continue to build up their institutional capital, strengthening public governance and the rule of law, while creating sound framework conditions for investment, entrepreneurship and innovation. Well-designed and well-functioning regulatory and tax regimes are critical, as well as secure property rights, fair competition and open markets. The good news is that the region’s governments are far from idle. The squeeze of the last two years has triggered a new round of reforms in such diverse fields as customs regulation, tax administration and investor protection. Support for start-ups is expanding. But there is more to be done, particularly to create favourable conditions for the growth of new firms and SMEs, the critical drivers of innovation, job creation and diversification. The OECD continues to support countries in Eurasia in designing and implementing institutional and policy reforms that will help strengthen their economic endowments and set them on a path to sustainable, inclusive growth. Share article at http://oe.cd/25Q References and links IMF (2016), World Economic Outlook: Subdued Demand: Symptoms and Remedies, IMF, Washington, D.C. Agency for Statistics of the Republic of Kazakhstan, http://www.stat.gov.kz High-level representatives from Eurasia and OECD countries met in Almaty, Kazakhstan, on 23-25 October 2017 for the fourth annual OECD Eurasia Week, to exchange perspectives on “Openness for shared prosperity”, assess progress made, and discuss the region’s future reform agenda. To learn more about the OECD’s work with the Eurasia region: www.oecd.org/eurasia

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Evidence, persuasion and power: Diplomats in international organisations Aleksander Surdej, Ambassador of Poland to the OECD

might sometimes mean working to prevent domestic policymaking in one country from damaging the interests of another, for instance in setting new trade restrictions. It could also mean working together to help fight cross-border tax evasion, and other initiatives that many states can benefit from, but that no single country is realistically able to provide on its own. International co-operation depends on member countries being able to “co-manage” this effort, thanks to the daily work of their diplomats. Far from the intrigue of classic James Bond novels, today’s diplomats are in fact international public policy analysts, who evaluate and

©David Rooney

The enterprising diplomat can generate real value-added for international policy

Did you know that each of the OECD’s 35 member countries is represented by a mission with full diplomatic status? The size of these OECD delegations varies by country size, but each one has a permanent representative at ambassadorial level, including this author. Together they make up the OECD Council that oversees the work programme set by member countries for the organisation. But our role goes beyond mere representation. The OECD’s experts–those discreet international civil servants who produce data, analysis and insights in great volumes, not to mention guidelines and recommendations on a broad range of government concerns–have an important influence on designing, implementing and monitoring public policies, from the global economy, jobs and tax to education, the environment and public governance. Our inputs affect states, corporations and other national, regional and transnational actors.


It should therefore be no surprise that member countries wish to be as involved as possible in influencing the design and likely outcomes of such proposed policies, and they strive to achieve this through their ambassadorial missions. In representing member countries, unlike business and labour stakeholders, we diplomats have the privilege of exerting our influence from within. Still, we must compete for influence, for instance, to maximise the benefits of a proposed reform and minimise the costs, while co-operating in such a way as to preserve the organisation’s independence and quality as a precondition to effectively address common problems. It’s a delicate balancing act: new rules and approaches developed by the OECD affect different countries and regions in different ways, yet our growing international interdependence make more common rules and international public policies inevitable (see Scott Barrett, 2007, in the references). This

verify information, express opinions based on facts, and seek to win support for particular policy reforms and fight down initiatives they consider to be too costly or ineffective. As a 2016 report on international regulatory co-operation put it, international organisations like the OECD help countries to harmonise technical standards to prevent the confusion and transaction costs stemming from the domestic initiative of individual countries. Modern-day diplomats can be successful only if their arguments are evidencebased and robust enough to be taken seriously by the experts and fellow member countries. Only then will their efforts help improve the design of international public policy. Their work involves them in a process that requires determination and patience, and an ability to persuade. A diplomat in international organisations engages in an open and increasingly transparent public process of persuasion, in which the protagonists must be convinced by evidence. An ability to weave a coalition of support is key for driving progress, particularly on


sensitive issues such as tax or bank transparency, for instance.

enterprising fashion, by identifying new opportunities, bringing new ideas

Though the OECD’s work consists of influencing policymaking and building the general frameworks that underpin the global economy–with rules such as on capital movements, guidelines on multinational enterprises or public sector integrity and much more–it does not generate direct financial benefits or market advantages for anyone. The need for consensus and transparency leaves no scope for lobbyists trying to extract benefits for the few at the expense of the many, or for arranging backdoor deals or making opaque arrangements. Diplomats in this organisation rarely, if ever, find themselves exposed to bribery. The effectiveness of a modern diplomat depends on their ability as a policy analyst to participate in all stages of the policymaking cycle. This means not only collecting, elaborating and presenting fact-based evidence and arguments, but using the space provided by international organisations creatively and in an

Consensus-building means that time is not wasted on unrealistic proposals that everyone knows will lead nowhere and products into play, mobilising resources, and forging partnerships. Like all entrepreneurs, we face an uncertain environment. But if done right, the enterprising diplomat can generate real value-added for international policy and set an example for the wider international community. The chances of a policy proposal surviving scrutiny at international level depend on having a clear understanding of the structural context in which the policy is forged, and a precise and regularly updated mapping of potential winners and losers. Consensus-building leads to necessary compromises from the outset. It also means that time is not wasted on

unrealistic proposals that everyone knows will lead nowhere. Diplomats become solution-focused facilitators of agreement rather than conveyors of conflict or stubborn defenders of domestic political agendas. But diplomats must also be key communicators for their compatriots too, as they constantly seek to translate jargon-laden policymaking into a language that their citizens will understand. Being clear about what, why, who, where and when matters greatly for our work, in part so that diplomats and their governments are on the same page as each other regarding a particular reform or programme, and to convincingly explain the importance of multilateral co-operation for making the programme work. This communication helps build and maintain the public’s trust at a time when “elites” and “experts” are coming under fire for being out of touch. Diplomats can show the substantial benefits that work carried out in the OECD brings for the many. This means using consistent messaging for all our countries, about the role and value of the organisation, and the quality of its management. In an age of transparency, a diplomat in an international organisation must take on the role of both spokesperson for their country and advocate for the principle of multilateralism as embodied in the OECD. Share article at http://oe.cd/2c7 References and further reading The title of this intervention deliberately relates to the title of the classic book by prof. Giandomenico Majone, Evidence, Arguments and Persuasion in the Policy Process, Yale UP, 1989

©OECD/Michael Dean

Barrett, Scott (2007), Why Cooperate?: The Incentive to Supply Global Public Goods, Oxford UP, Oxford OECD (2016), International Regulatory Co-operation: The Role of International Organisations in Fostering Better Rules of Globalisation, OECD Publishing, Paris The writer in discussion with OECD Secretary-General Angel Gurría

Stone, Diane (2013), Knowledge Actors and Transnational Governance: The Private-Public Policy Nexus in the Global Agora, Palgrave MacMillan, London

OECD Observer No 312 Q4 2017



“I was perhaps the first knowledge worker to have his job threatened by a machine,” said chess master Garry Kasparov in a videotaped keynote address at “AI: Intelligent Machines, Smart Policies” last October. Mr Kasparov was referring to his defeat by IBM supercomputer Deep Blue in a six-game match-up in 1997. Attended by researchers, economists, scientists, policymakers, advisors, and labour and corporate representatives, the two-day conference laid out the vastly different landscape artificial intelligence is beginning to create. Part of the OECD’s horizontal project Going Digital: Making the Transformation Work for Growth and Well-Being, the conference responded to the call by G7 ministers to initiate cross-society dialogue on AI. There were many conference takeaways but one of the most important is the need for transparency in AI decision-making. There was also much

©Rights reserved

AI: Intelligent Machines, Smart Policies

discussion about data privacy. Speaker Dudu Mimran, of Telekom Innovation Laboratories and Cyber Security Research Center at Ben-Gurion University in Israel, described the current data environment as the “…Wild West with all companies collecting any data”. Visit http://oe.cd/2cA

Screenagers: What’s the real impact of the digital age on young people? What impact is the digital age having on our children’s well-being? From spending time on social media to playing games online, what risks are teenagers being exposed to? How can parents prevent “screen addiction” from affecting their welfare? And is it just a

phase of today’s digital disruption that will iron itself out? These are just some of the questions that came up during an OECD talk in November after a screening of Screenagers, a documentary directed by Delaney Ruston. The film describes growing up

OECD Forum on Green Finance and Investment 2017

in a tech and digitised world where the balance between screen time and screen-free time is often difficult to draw. You can listen to the lively debate with OECD officials and a special guest speaker here: https://goo.gl/xJB9rr

International Day of the Girl 2017 at the OECD

©Hervé Cortinat/OECD

Presiding over a major international organisation may be child’s play, or at least that is what Alda made it look like when the Indonesian teenager took over as Secretary-General of the OECD on the International Day of the Girl, 11 October. This was part of an initiative organised by PLAN International, a development and humanitarian organisation that advances children’s rights and equality for girls. Alda, an advocate for girls’ education and ending child marriage, was briefed by staff, toured the premises, and interviewed Secretary-General Angel Gurría.


decision-makers from the public and corporate worlds, experts, academics, and other stakeholders, the forum looked at how we can finance the transition to a low-emissions and climate-resilient global economy.

Alda, girls’ rights advocate, with Mari Kiviniemi, Deputy Secretary-General of the OECD

©Hervé Cortinat/OECD

Yuriko Koike, Governor of Tokyo

Unlocking green investment, creating green markets, and mobilising bond markets for a low-carbon transition were among the key issues at the OECD Forum on Green Finance and Investment 2017, 24-25 October. Attended by senior


Recent speeches by Angel Gurría Launch of the November 2017 Economic Outlook Opening remarks delivered in Paris, 28 November 2017

©OECD/Julien Daniel

Special Meeting of the OECD Council on the occasion of the visit of Ms Beata Szydło, Prime Minister of Poland Introductory remarks delivered in Paris, 23 November 2017

Ambassadors Ms Marlies Stubits-Weidinger, Austria Mr Klavs A. Holm, Denmark Mr Noé Van Hulst, Netherlands Ms Annika Markovic, Sweden Ms Claudia Serrano, Chile Ms Elin Østebø Johansen, Norway

For a complete list of the speeches and statements, including those in French and other languages, go to: http://www.oecd.org/about/ secretary-general/

One Planet Summit: Investing in climate, investing in growth through green budgeting and clean energy finance

2017 Green Growth and Sustainable Development Forum: Greening the ocean economy: New challenges for green growth Opening remarks delivered in Paris, 21 November 2017

Mr Ulrich Lehner, Switzerland Mr Carmel Shama-Hacohen, Israel Mr Zoltán Cséfalvay, Hungary Ms Michelle d’Auray, Canada Mr Brian Pontifex, Australia

OPSI Conference on “Innovation in Government: The New Normal”

Mr George Krimpas, Greece

Closing remarks delivered in Paris, Monday 20 November 2017

Mr Jean-Joël Schittecatte, Belgium

CBI Annual Conference: How to ensure globalisation is a positive force?

Mr José Ignacio Wert, Spain

Mr Jong-Won Yoon, Korea Mr Christopher Sharrock, United Kingdom Mr Erdem Başçi, Turkey

Remarks delivered in Paris, 12 December 2017

Remarks delivered in London, UK, 6 November 2017

Ms Ivita Burmistre, Latvia

Visit of the President of Mexico, Enrique Peña Nieto, to the OECD

Climate Action – Time for implementation

Mr Pekka Puustinen, Finland Mr Dermot Nolan, Ireland

Introductory remarks delivered in Paris, France, 11 December 2017

Remarks delivered at the Munk School of Global Affairs, University of Toronto, Canada, 1 November 2017

The High-Level Breakfast on Institutional Investors and the Low-Carbon Transition

Toronto Global Forum: Redefining globalisation

Mr Petr Gandalovič, Czech Republic

Opening remarks delivered in Paris, France, 11 December 2017

Keynote address delivered in Toronto, Canada, 31 October 2017

Mr Hiroshi Oe, Japan

Conference of Paris: “Reshaping Globalisation to make it work for all”

OECD Eurasia Week 2017: “Openness for Shared Prosperity”

Opening remarks delivered in Paris, France, 7 December 2017

Remarks delivered in Almaty, Kazakhstan, 24 October 2017

The 16th Meeting of the OECD Global Forum on Competition

Lecture at Nazarbayev University Remarks delivered in Astana, Kazakhstan, 23 October, 2017

Mr Aleksander Surdej, Poland

Mr Kristjan Andri Stéfansson, Iceland Mr Alessandro Busacca, Italy

Ms Irena Sodin, Slovenia

Mr Alar Streimann, Estonia Ms Monica Aspe Bernal, Mexico Mr Martin Hanz, Germany Ms Martine Schommer, Luxembourg Ms Jane Coombs, New Zealand Mr Bernardo Lucena, Portugal Ms Catherine Colonna, France

Conference of the International Corporate Governance Network: The path towards financial market stability and sustainable growth

APEC FMM: Base Erosion & Profit Shifting

—— Mr Juraj Tomáš, Slovak Republic Chargé d’Affaires a.i.

Remarks delivered in Hoi An, Viet Nam, 21 October 2017

Mr. Andrew Haviland, United States Chargé d’Affaires a.i.

Remarks delivered in Paris, Wednesday 6 December 2017

Seoul Implementation Agenda

—— European Union Mr Rupert Schlegelmilch

G20 Global Forum on Steel Excess Capacity Ministerial Meeting

Launch of the 2017 OECD Economic Survey of the United Kingdom

Remarks delivered in Berlin, Germany, 30 November 2017

Remarks delivered in London, UK, 17 October 2017

Remarks delivered in Paris, 7 December 2017

Launch in Seoul, Korea, 19 October 2017

November 2017

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Calendar highlights Please note that many of the OECD meetings mentioned are not open to the public or the media and are listed as a guide only. All meetings are in Paris, France unless otherwise stated. For a comprehensive list, see the OECD website at www.oecd.org/newsroom/upcomingevents 8-11

Meeting on Tourism Policies for Sustainable and Inclusive Growth, Paris, France

Asia-Pacific Economic Cooperation Summit, Da Nang, Viet Nam



International Forum on Migration Statistics, Paris, France

International Economic Forum on Africa, Paris, France

Launch of the International Energy Agency’s World Energy Outlook 2017, London, UK



World Economic Forum Annual Meeting, Davos-Klosters, Switzerland

Launch of OECD Digital Economy Outlook 2017

Launch of How’s Life? Measuring Well-being 2017




Meeting of the OECD Global Parliamentary Network, Paris, France

Conference on Innovation in Government, Paris, France

High-level conference on Policies for Equal Ageing: a Life-Course Approach, Ljubljana, Slovenia



Champion Mayors Conference, Seoul, Korea

International launch of PISA 2015 Results Volume V


OECD Eurasia Week, Almaty, Kazakhstan



OECD Conference on Artificial Intelligence – “AI: Intelligent Machines, Smart Policies”, Paris, France

OECD Economic Outlook 2017/2, Paris, France

28-30 The Women Political Leaders Global Forum (WPL), Reykjavik, Iceland

OCTOBER 2-3 4 11


OECD Global Parliamentary Network Meeting, Paris, France


SME Ministerial meeting, Mexico City, Mexico





OECD Secretary-General lecture on Climate Action: Time for implementation, Toronto, Canada


Launch of Pensions at a Glance 2017


The Stockholm Conference, Pacific Alliance, Stockholm, Sweden


Public consultation on the tax challenges of digitalisation, Berkeley, US


OECD Global Forum on Competition, Paris, France



OECD participation at UN Framework Convention on Climate Change COP 23, Bonn, Germany


Forum of the Americas, Paris, France



World Anti-corruption Day

Global Parliamentary Network on the Road, Paris, France


Roundtable on 20 years of the Anti-Bribery Convention, Paris, France


Global Forum on Development: Empowering Youth and Women, Paris, France


Public consultation on transfer pricing matters, Paris, France


5th OECD Forum on Tax and Crime, London, UK

This strip originally appeared in OECD Observer 242, March 2004




OECD Tourism Trends and Policies, Berlin, Germany.


OECD Global Anti-Corruption & Integrity Forum, Paris, France

MAY 29-31

OECD Week, Paris, France


Food’s other takeout The popularity of the films Fast Food Nation, What the Health and Rotten has consumers everywhere concerned about the hygiene of their food, but what about the energy cost of producing it? Ready-toeat food, whether fast food or a meal in a restaurant, may be convenient, but requires more energy to produce than less processed foods, such as fruits and vegetables, or conventional butcher meat. Your pre-washed packaged salads may make your life easier but at a cost for the environment. Food production systems account for

nearly 20% of energy usage in OECD countries, so clearly energy efficiency should become more important. Improving Energy Efficiency in the Agro-Food Chain sets out not only to help us understand energy efficiency in relation to our eating habits, but also how to improve it. Energy usage is expected to rise markedly in the coming decades due to technological advances, rising consumer incomes and changes in lifestyle that will contribute to different patterns of food consumption. Small household lifestyle changes such as eating out less and buying less processed food can boost energy efficiency. Reduction of food waste also helps: the Food and Agriculture Organization of the United Nations (FAO) estimated in 2011 that between a third and a half of food produced is wasted worldwide. Farming accounts for less than 30% of energy

usage in the food chain, whereas waste makes up 38%. What about climate change? Extreme weather increases energy usage in farming, which is already a major emitter of greenhouse gases. Drought conditions require more energy to irrigate crops, while more fuel is needed to run machines and tractors in wet conditions. There are many ways to improve energy efficiency, including raising public awareness, and improving know-how and technology. But as with so many challenges, best practices begin at home, including at the dinner table. OECD (2017), Improving Energy Efficiency in the Agro-food Chain, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264278530-en

Finding best practices in trust “Love all, trust a few, do wrong to none.” William Shakespeare’s advice in All’s Well that Ends Well still applies today. After the 2008 financial crisis, it appears that people took his advice, particularly about trust. Citizens lost trust in their government and economic institutions. As a result, measuring trust, which is hard to earn and easy to lose, is now a priority for many institutions and OECD countries. How can you safely and accurately quantify a level of trust–the confidence between two people or a person and an

institution? The OECD Guidelines on Measuring Trust sets out to do just that. There is a wide range of areas to evaluate trust levels, but we will look more closely at interpersonal trust, which can be general or limited–general for persons unknown and limited for people with existing relationships. For example, your mail delivery person or grocery store employees will fall under the category of general trust while co-workers and friends under that of limited trust. Interestingly, policies that ensue from trust evaluation results most often come from interpersonal trust questions such as, “Would you say that most people can be trusted or that you need to be very

careful in dealing with people?” Trust-measuring surveys that are conducted for policy development and international comparability should always focus their first five questions on interpersonal trust. Strategies and guidelines like this make for better quality trust data. And that makes for better policies, and, hopefully, lives that bear out that well-known phrase of Shakespeare’s: all’s well that ends well. OECD (2017), OECD Guidelines on Measuring Trust, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264278219-en

OECD Observer No 312 Q4 2017



New publications Pensions at a Glance 2017: OECD and G20 Indicators

PISA 2015 Results (Volume V): Collaborative Problem Solving

The 2017 edition of Pensions at a Glance highlights the pension reforms undertaken by OECD countries over the last two years. Moreover, one special chapter focuses on flexible retirement options in OECD countries and discusses people’s preferences regarding flexible retirement, the actual use of these programmes and the impact on benefit levels.

PISA 2015 Results (Volume V): Collaborative Problem Solving is one of five volumes that present the results of the PISA 2015 survey. It examines students’ ability to work with two or more people to try to solve a problem.

ISBN: 978-92-64-28749-19 December 2017, 164 pages €35.00 $42.00 £28.00 ¥4 500

OECD Institutional Investors Statistics 2017

The Missing Entrepreneurs 2017: Policies for Inclusive Entrepreneurship Missing Entrepreneurs 2017 is the fourth edition in a series of publications that examine how public policies at national, regional and local levels can support job creation, economic growth and social inclusion by overcoming obstacles to business start-ups and self-employment by people from disadvantaged or under-represented groups in entrepreneurship. ISBN: 978-92-64-28359-14 December 2017, 240 pages €50.00 $60.00 £40.00 ¥6 500

OECD Guidelines on Measuring Trust Trust, both interpersonal trust and trust in institutions, is a key ingredient of growth, societal well-being and governance. As a first step to improving existing measures of trust, the OECD Guidelines on Measuring Trust provide international recommendations on collecting, publishing and analysing trust data to encourage their use by national statistical offices (NSOs). ISBN: 978-92-64-278202-22 December 2017, 212 pages

€40.00 $48.00 £32.00 ¥5 200 50

All publications are available to read and share at www.oecd-ilibrary.org

ISBN: 978-92-64-285507-18 December 2017, 308 pages €60.00 $72.00 £48.00 ¥7 800

This publication provides a unique set of statistics that reflect the level and structure of the financial assets and liabilities of institutional investors in the OECD countries (with the exception of Australia), and in Lithuania and the Russian Federation. ISBN: 978-92-64-282278-18 December 2017, 250 pages €50.00 $60.00 £40.00 ¥6 500

Youth Aspirations and the Reality of Jobs in Developing Countries: Mind the Gap The study draws on the comprehensive data from school-towork transition surveys in 32 developing and transition countries in Africa, Asia, Europe and Latin America. It suggests a number of priority areas for policymakers to enhance youth well-being, raise labour productivity and contain the chilling effects that unmet youth aspirations can generate on society. ISBN: 9789264285651-6 December 2017, 88 pages €24.00 $29.00 £19.00 ¥3 100

How’s Life? 2017: Measuring Well-being How’s Life? 2017 charts the promises and pitfalls for people’s well-being in 35 OECD countries and 6 partner countries. It presents the latest evidence from 50 indicators, covering both current well-being outcomes and resources for future well-being. ISBN: 978-92-64-265578-18 December 2017, 340 pages

€35.00 $42.00 £28.00 ¥4 500

Health at a Glance 2017: OECD Indicators This new edition of Health at a Glance presents the most recent comparable data on the health status of populations and health system performance in OECD countries. ISBN: 978-92-64-280397-22 December 2017, 216 pages €40.00 $48.00 £32.00 ¥5 200

Better Use of Skills in the Workplace: Why It Matters for Productivity and Local Jobs This joint OECD-ILO report provides a comparative analysis of case studies focusing on improving skills use in the workplace across eight countries. The examples provide insights into the practical ways in which employers interact with government services and policies at the local level. ISBN: 978-92-64-281387-6 December 2017, 197 pages €39.00 $47.00 £31.00 ¥5 000


Focus on climate change Investing in Climate, Investing in Growth This report provides an assessment of how governments can generate inclusive economic growth in the short term, while making progress towards climate goals to secure sustainable long-term growth. It describes the development pathways required to meet the Paris Agreement objectives and underlines the value of well-aligned policy packages in mobilising investment and social support for the transition while enhancing growth.

ISBN: 978-92-64-273511-21 July 2017, 312 pages €30.00 $36.00 £24.00 ¥3 900

The Land-WaterEnergy Nexus: Biophysical and Economic Consequences This report contributes to the discussion of interconnections between scarce resources by highlighting the nexus between land, water and energy. It focuses on a dynamic, integrated and disaggregated analysis of how land, water and energy interact in the biophysical and economic systems.

ISBN: 978-92-64-279339-9 October 2017, 140 pages €25.00 $30.00 £20.00 ¥3 200

Improving Energy Efficiency in the Agro-food Chain This report analyses ways of improving energy use in the agro-food sector in relation to both producers and consumers, and puts forward a set of policy recommendations that governments can introduce to meet green growth objectives and achieve sustainable development.

ISBN: 978-92-64-278523-1 August 2017, 108 pages €24.00 $29.00 £19.00 ¥3 100

All publications available at www.OECD-iLibrary.org

Green Growth Indicators 2017 Green growth policies need to be founded on a good understanding of the determinants of green growth and need to be supported with appropriate indicators to monitor progress. This book presents a selection of updated and new indicators that illustrate the progress that OECD and G20 countries have made since the 1990s. It updates the 2014 edition.

ISBN: 978-92-64-265776-29 June 2017, 160 pages €24.00 $29.00 £19.00 ¥3 100

Mobilising Bond Markets for a Low-Carbon Transition

Groundwater Allocation: Managing Growing Pressures on Quantity and Quality This report focuses on groundwater and how its allocation can be improved in terms of economic efficiency, environmental effectiveness and social equity. Drawing on an analysis of groundwater’s distinctive features and nine case studies of groundwater allocation in a range of countries, the report provides practical policy guidance for groundwater allocation in the form of a “health check”.

ISBN: 978-92-64-281523-17 November 2017, 116 pages €24.00 $29.00 £19.00 ¥3 100

Marine Protected Areas: Economics, Management and Effective Policy Mixes

This report describes the development of the green bond market as an innovative instrument for green finance, and provides a review of policy actions and options to promote further market development and growth.

Drawing on the literature and numerous examples from developed and developing countries, this book highlights how the environmental and cost-effectiveness of marine protected areas can be enhanced.

ISBN: 978-92-64-272316-19 April 2017, 132 pages €25.00 $30.00 £20.00 ¥3 200

ISBN: 978-92-64-265806-10 July 2017, 182 pages €40.00 $48.00 £32.00 ¥5 200

Tackling Environmental Problems with the Help of Behavioural Insights The report covers a variety of policy areas: energy, water and food consumption, transport and car choice, waste management and resource efficiency, compliance with environmental regulation, and participation in voluntary schemes. It shows what has proven to work–and what has not–in policy practice in OECD countries and beyond.

ISBN: 978-92-64-273863-15 May 2017, 148 pages €30.00 $36.00 £24.00 ¥3 900

Adapting Transport to Climate Change and Extreme Weather This report addresses the fundamental challenges that climate change poses to infrastructure owners, who face two major challenges. First, they must ensure continued asset performance under sometimes significantly modified climate conditions that may decrease the present value of their networks or increase maintenance and refurbishment costs. Second, they must build new assets in the context of changing and uncertain climate variables.

ISBN: 978-92-82-108062-24 April 2017, 140 pages €25.00 $30.00 £20.00 ¥3 200 OECD Observer No 312 Q4 2017



An uncertain climate Extreme weather is now par for the course worldwide thanks to climate change. While everyone may enjoy a day off work due to transportation troubles, extreme temperature and rising sea levels can damage infrastructure. Heat exposes it to a higher risk of fire, storms and precipitation can cause physical asset damage, and rising sea levels endanger low-lying systems. We must change our existing systems and Adapting Transport to Climate Change and Extreme Weather: Implications for Infrastructure Owners and Network Managers provides a wealth of information about why and how we can best do this.

Since 1980, we have tallied up increasing losses due to extreme weather events. Public transportation systems are not the only ones affected by weather. Unusually warm temperatures cause bridges to unduly expand, strong winds delay flights, and flooding increases mudslides, and rail and road washouts. A recent assessment of how much extreme weather cost affected transport systems in Europe from 1998 to 2010 came to an estimated €2.5 billion per year. This included damage, repairs, and maintenance and systems operations costs. While the financial impact is substantial, it’s near impossible to do cost-benefit analyses of adapting transportation systems because of the myriad of probabilities in climate-change effects. Instead, we need to measure criteria such as the robustness of our systems to

determine how to adapt current transport infrastructure to extreme weather eventualities. We can utilise real-options analyses, which is a management evaluation tool used to decide whether to engage in or defer acquiring or upgrading capital equipment, to determine when to build new systems and how to upgrade them. As accurate climate change projections are viable only until 2050, we need to find ways to prepare for what comes after. We need to develop new tools and new ways to re-evaluate our systems. Most importantly, we need to act now. ITF (2016), Adapting Transport to Climate Change and Extreme Weather: Implications for Infrastructure Owners and Network Managers, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789282108079-en

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Trusting parliament 7



3 2



R = 0.6


But the nature of parliament is also that the voting public can keep it in check and change it completely, as elections from France and the US have demonstrated. Parliaments, in turn, know that while it is their job to discuss, contradict, argue, agree and oppose, they must do so in the public interest. Clearly, parliament can be vital in promoting better policies for better lives–the OECD Observer was launched by the Secretary-General 55 years ago in large part to inform parliaments of the organisation’s policy work. Today, with the Global Parliamentary Network, the OECD actively engages with members of parliament from around the world by



8 Trust in parliament

providing them with analysis, data and expert opinion. It also creates a rather special space for MPs to hear about each other’s experiences and learn from them. After all, listening is fundamental to building trust. It is the wind in the sails of Walt Whitman’s democracy. OECD (2017), How’s Life? 2017: Measuring Well-being, OECD Publishing, Paris, http://dx.doi.org/10.1787/how_life-2017-en OECD Global Parliamentary Network, http://www.oecd.org/parliamentarians/ European Social Survey, http://www.europeansocialsurvey.org/

Fossil fuel support high despite signs of decline Total support for fossil fuels in OECD countries (left) and selected partner economies (right) by year and type of fuel (billions of current US$) 160 140 120


Natural gas


160 140 120











Natural gas


20 05

20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16



20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16


Source: OECD Companion to the Inventory of Support Measures for Fossil Fuels 2017, forthcoming 2018.

What can be done to further curb these subsidies? More pressure Coal international Natural gas Petroleum can help. The reform of fossil fuel subsidies has gained global momentum, encouraged along by multilateral fora such as the Asia-Pacific Economic Cooperation (APEC), the G20 and the OECD, which support peer reviews to help countries phase out inefficient and distortive support

measures. Still, more effort is needed stop Coal supporting fuels and start Naturalfossil gas Petroleum 140 focusing the freed-up resources on 120 developing cleaner technologies 100 for tomorrow. 160 to



(forthcoming 2018), OECD Companion the Inventory of Support Measures for Fossil Fuels 2017, OECD Publishing, Paris 20

to 40

20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16

0 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16

Total fossil fuel subsidies amounted to US$151 billion in 2016 in the 43 countries covered by the OECD’s Inventory of Support Measures for Fossil Fuels, marking a significant decline from US$249 billion in 2012. Fossil fuel subsidies have plateaued in OECD member countries over the last two years, hovering around US$82 billion. In eight selected partner economies of the OECD, such as Argentina, China, Indonesia and South Africa, subsidies have declined even more sharply from US$142 billion in 2013 to US$69 billion in 2016. This has been due to factors such as the recent low oil price regime and policy reforms.



Source: OECD, How’s Life? 2017: Measuring Well-being, 2017

Phase them out! Fossil fuel subsidies keep fuel prices artificially low, and weigh heavily on government budgets and on the climate too. Phasing out these subsidies will help reduce CO2 emissions and possibly raise public revenues as well.
















20 05

People who are more satisfied with democracy are also those who trust their assembly of elected representatives more. Switzerland and the Nordic countries, Denmark, Norway and Sweden, show the greatest satisfaction with democracy and highest level of trust in their parliament, whereas southern and eastern European countries such as Italy, Portugal and Slovenia trust their elected representatives less and are less satisfied with democracy overall. Interestingly, Europeans trust parliament less than the legal system, and even the police, according to the European Social Survey.

Selected countries, 2012 Satisfaction in democracy

“Sail, sail thy best, ship of democracy, […] With thee Time voyages in trust,” wrote American poet Walt Whitman in his poem “Song of democracy”. But do we trust democracy to take us in the right direction? In European countries, there is a clear relationship between how satisfied we are with democracy and how much we trust its most important institution–parliament. Believing that our elected representatives will act in our best interests is crucial to maintaining the legitimacy of democracy.

Europeans’ satisfaction with democracy and trust in parliament

OECD Observer No 312 Q4 2017


DATABANK % change from:


previous period

previous year

level: current period

same period last year


Gross domestic product Industrial production Consumer price index

Q3-2017 Q2-2017 Q2-2017 Q3-2017 Q2-2017 Q3-2017

0.6 1.4 0.6 0.7

2.8 3.6 4.7 1.8 1.9

Current balance Unemployment rate Interest rate

Q3-2017 Q2-2014 Q3-2017 Q2-2014 Q4-2017 Q2-2014

-7.2 -12.8 5.5 5.9 1.7 2.7

-9.3 -12.9 5.7 5.6 1.8 2.9


Gross domestic product Industrial production Consumer price index

Q3-2017 Q2-2014 Q2-2014 Q3-2017 Q2-2014 Q3-2017

0.8 0.2 -0.9 1.3 1.0 0.1

0.9 3.5 4.9 0.2 1.8 2.1

Current balance Unemployment rate Interest rate

Q3-2017 Q1-2014 Q3-2017 Q2-2014 Q4-2017 Q2-2014

3.1 1.5 5.4 5.0 -0.3 0.3

2.2 3.1 6.2 4.7 -0.3 0.2


Gross domestic product Industrial production Consumer price index

Q3-2017 Q2-2014 Q2-2014 Q3-2017 Q2-2014 Q4-2017

0.3 0.1 0.6 2.6 -0.3 0.4

1.0 1.7 4.6 3.4 0.4 2.1

Current balance Unemployment rate Interest rate

Q3-2017 Q1-2014 Q3-2017 Q2-2014 Q4-2017 Q2-2014

0.8 -0.2 7.1 8.5 -0.3 0.3

-1.0 -5.0 7.7 8.4 -0.3 0.2


Gross domestic product Industrial production Consumer price index

Q2-2014 Q3-2017 Q2-2014 Q3-2017 Q2-2014 Q3-2017

0.8 0.4 0.8 0.3 0.1 1.3

3.0 2.5 4.0 4.5 2.2 1.4

Current balance Unemployment rate Interest rate

Q3-2017 Q2-2014 Q4-2017 Q2-2014 Q4-2017 Q2-2014

-15.4 -10.9 6.0 7.0 1.3 1.2

-13.1 -15.0 6.9 7.1 0.8 1.2


Gross domestic product Industrial production Consumer price index

Q2-2014 Q3-2017 Q2-2014 Q3-2017 Q2-2014 Q4-2017

0.2 1.5 -3.3 5.1 0.7 1.6

2.2 2.1 -1.5 3.7 2.0 5.1

Current balance Unemployment rate Interest rate

Q3-2017 Q1-2014 Q3-2017 Q2-2014 Q3-2017 Q2-2014

-0.7 -2.0 6.5 6.2 2.5 3.9

-1.3 -3.1 6.6 5.9 3.5 5.0

Czech Republic

Gross domestic product Industrial production Consumer price index

Q2-2014 Q3-2017 Q2-2014 Q3-2017 Q2-2014 Q3-2017

0.3 0.5 0.2 1.4 0.5 0.1

5.0 2.5 6.0 5.8 0.2 2.5

Current balance Unemployment rate Interest rate

Q3-2017 Q2-2014 Q3-2017 Q2-2014 Q4-2017 Q2-2014

0.3 -1.9 2.8 6.2 0.7 0.4

0.8 -1.0 4.0 6.9 0.3 0.5


Gross domestic product Industrial production Consumer price index

Q2-2014 Q3-2017 Q2-2014 Q3-2017 Q2-2014 Q4-2017

-0.5 0.2 -2.6 0.6 -0.2 0.4

1.5 1.1 0.8 0.3 0.6 1.3

Current balance Unemployment rate Interest rate

Q3-2017 Q2-2014 Q3-2017 Q2-2014 Q4-2017 Q2-2014

6.3 5.3 5.8 6.4 -0.3 0.3

4.4 5.8 6.3 6.9 -0.2 0.3


Gross domestic product Industrial production Consumer price index

Q2-2014 Q3-2017 Q2-2014 Q3-2017 Q2-2014 Q4-2017

0.3 1.1 -2.5 3.3 0.3 0.1

2.9 4.2 2.5 4.7 0.0 3.8

Current balance Unemployment rate Interest rate

Q3-2017 Q1-2014 Q3-2017 Q2-2014 Q4-2017 Q2-2014

0.2 -0.1 5.7 7.5 -0.3 0.3

0.2 0.0 7.2 8.3 -0.3 0.2


Gross domestic product Industrial production Consumer price index

Q2-2014 Q3-2017 Q2-2014 Q3-2017 Q2-2014 Q3-2017

0.4 0.2 0.6 0.5 0.0 0.2

-0.1 3.0 -1.9 3.8 0.9 0.7

Current balance Unemployment rate Interest rate

Q3-2017 Q1-2014 Q3-2017 Q2-2014 Q4-2017 Q2-2014

0.6 -0.4 8.5 8.6 -0.3 0.3

-1.2 -0.5 8.7 8.1 -0.3 0.2


Gross domestic product Industrial production Consumer price index

Q2-2014 Q3-2017 Q2-2014 Q3-2017 Q2-2014 Q4-2017

0.0 0.6 -0.5 0.8 0.3 0.4

2.3 0.1 -2.1 2.7 0.6 1.1

Current balance Unemployment rate Interest rate

Q3-2017 Q1-2014 Q3-2017 Q2-2014 Q4-2017 Q2-2014

1.2 -6.7 9.5 10.2 -0.3 0.3

-7.5 -13.2 9.9 10.3 -0.3 0.2


Gross domestic product Industrial production Consumer price index

Q2-2014 Q3-2017 Q2-2014 Q3-2017 Q2-2014 Q3-2017

-0.2 0.8 -0.9 1.8 0.2 0.5

2.8 1.3 4.9 1.5 1.7 1.1

Current balance Unemployment rate Interest rate

Q3-2017 Q1-2014 Q3-2017 Q2-2014 Q4-2017 Q2-2014

77.4 68.6 3.7 5.0 -0.3 0.3

69.0 65.0 4.1 5.3 -0.3 0.2


Gross domestic product Industrial production Consumer price index

Q3-2017 Q1-2014 Q3-2017 Q2-2014 Q4-2017

0.3.. 2.4 1.1 0.9 1.2

1.3.. 3.9 0.5 0.8 -1.5

Current balance Unemployment rate Interest rate

Q3-2017 Q2-2014 Q3-2017 Q2-2014 Q4-2017 Q2-2014

-0.5 0.4 20.7 27.1 -0.3 0.3

0.0 0.2 23.3 27.6 -0.3 0.2


Gross domestic product Industrial production Consumer price index

Q2-2014 Q3-2017 Q2-2014 Q3-2017 Q2-2014 Q4-2017

0.8 0.9 -1.2 3.5 0.6 0.2

3.7 4.1 10.3 5.1 -0.2 2.3

Current balance Unemployment rate Interest rate

Q3-2017 Q4-2013 Q3-2017 Q2-2014 Q4-2017 Q2-2014

0.4 1.4 4.2 8.0 0.1 2.8

1.9 0.3 5.0 10.4 0.7 4.6


Gross domestic product Industrial production Consumer price index

Q2-2014 Q3-2017 Q2-2014 Q2-2014 Q4-2017

-1.2 2.2 -5.0.. 0.9 0.6

2.2 1.5 -1.7.. 2.3 1.8

Current balance Unemployment rate Interest rate

Q3-2017 Q1-2014 Q3-2017 Q2-2014 Q4-2017 Q2-2014

0.2 0.0 2.9 5.1 4.7 6.1

0.4 0.1 3.0 6.1 5.9 6.2


Gross domestic product Industrial production Consumer price index

Q2-2014 Q3-2017 Q1-2014 Q3-2017 Q2-2014 Q3-2017

4.2 1.5 -1.3 3.8 0.8 0.1

10.4 6.5 -3.4 2.8 0.4 0.1

Current balance Unemployment rate Interest rate

Q3-2017 Q1-2014 Q3-2017 Q2-2014 Q4-2017 Q2-2014

13.8 3.0 6.4 11.7 -0.3 0.3

8.1 3.2 8.2 13.7 -0.3 0.2


Gross domestic product Industrial production Consumer price index

Q2-2014 Q3-2017 Q2-2014 Q3-2017 Q2-2014 Q3-2017

0.9 0.4 -3.9 -2.3 -0.2 0.4

2.9 2.2 -0.6 2.0 -0.2 0.8

Current balance Unemployment rate Interest rate

Q3-2017 Q2-2014 Q3-2017 Q2-2014 Q4-2017 Q2-2014

2.2 2.2 4.1 6.1 0.1 0.7

1.9 1.7 4.8 6.7 0.1 1.5


Gross domestic product Industrial production Consumer price index

Q3-2017 Q2-2014 Q2-2014 Q3-2017 Q2-2014 Q4-2017

-0.2 0.4 -0.5 1.4 -0.3 0.2

-0.2 1.7 -0.1 3.9 0.9 0.4

Current balance Unemployment rate Interest rate

Q3-2017 Q1-2014 Q3-2017 Q2-2014 Q4-2017 Q2-2014

14.9 7.9 11.2 12.5 -0.3 0.3

14.0 -0.1 11.6 12.2 -0.3 0.2


Gross domestic product Industrial production Consumer price index

Q3-2017 Q2-2014 Q3-2017 Q2-2014 Q3-2017 Q2-2014

-1.8 0.6 -3.6 0.4 0.0 2.5

0.0 2.1 4.4 2.4 0.6 3.6

Current balance Unemployment rate Interest rate

Q3-2017 Q2-2014 Q3-2017 Q2-2014 Q3-2017 Q2-2014

55.3 6.3 2.8 3.6 0.1 0.2

47.4 18.7 3.0 4.0 0.1 0.2


Gross domestic product Industrial production Consumer price index

Q3-2017 Q2-2014 Q3-2017 Q2-2014 Q4-2017 Q2-2014

0.5 1.5 -0.9 1.6 -0.2 0.3

3.8 3.5 1.4 1.2 1.6 1.5

Current balance Unemployment rate Interest rate

Q3-2017 Q2-2014 Q4-2017 Q2-2014 Q4-2017 Q2-2014

23.4 23.6 3.6 3.7 1.5 2.7

20.5 19.4 3.6 3.1 1.4 2.7

Luxembourg Latvia

Gross domestic product Industrial production Consumer price index

Q3-2017 Q1-2014 Q3-2017 Q2-2014 Q4-2017 Q2-2014

0.8 1.5 -0.1 1.5 0.9 0.5

3.8 6.2 11.3 8.8 0.9 2.6

Current balance Unemployment rate Interest rate

Q3-2017 Q2-2017 Q3-2017 Q2-2017 Q4-2017 Q2-2017

-0.3 -0.2 8.7 8.9 -0.3

0.2 0.0 9.7 9.5 -0.3

Luxembourg Mexico

Gross domestic product Industrial production Consumer price index

Q2-2014 Q3-2017 Q3-2017 Q2-2014 Q4-2017 Q2-2014

1.0 1.7 0.9 0.7 -0.1 0.2

3.2 2.7 2.3.. 3.6 1.6

Current balance Unemployment rate Interest rate

Q3-2017 Q2-2014 Q3-2017 Q2-2014 Q4-2017 Q2-2014

1.8 -7.1 5.7 5.0 -0.3 3.7

1.2 -5.7 6.3 5.1 -0.3 4.3


Gross domestic product Industrial production Consumer price index


-0.3 .. 1.9

1.6 .. 6.6

Current balance Unemployment rate Interest rate

Q3-2017 Q3-2017 Q4-2017

-5.7 3.3 7.5

-6.5 3.8 5.6



% change from: previous period

previous year

current period

same period last year


Gross domestic product Industrial production Consumer price index

Q2-2014 Q3-2017 Q2-2014 Q3-2017 Q2-2014 Q4-2017

0.7 0.4 3.7 0.1 0.8 -0.1

1.1 3.2 -2.0 1.2 1.0 1.4

Current balance Unemployment rate Interest rate

Q4-2013 Q3-2017 Q2-2014 Q3-2017 Q2-2014 Q4-2017

24.7 23.2 7.0 4.7 0.3 -0.3

25.6 15.5 6.6 5.8 0.2 -0.3

New Zealand

Gross domestic product Industrial production Consumer price index

Q2-2014 Q3-2017 Q2-2014 Q3-2017 Q2-2014 Q3-2017

0.5 0.9 -1.1 0.0 0.3 0.5

3.3 3.0 2.7 1.7 1.6 1.9

Current balance Unemployment rate Interest rate

Q4-2013 Q3-2017 Q2-2014 Q3-2017 Q2-2014 Q4-2017

-0.7 -1.0 5.6 4.6 3.4 1.9

-1.8 -1.4 6.4 4.9 2.6 2.1


Gross domestic product Industrial production Consumer price index

Q2-2014 Q3-2017 Q2-2014 Q3-2017 Q2-2014 Q4-2017

0.9 0.7 -1.1 0.4 0.7 0.3

1.8 3.5 0.2 6.8 1.8 1.3

Current balance Unemployment rate Interest rate

Q2-2014 Q3-2017 Q2-2014 Q3-2017 Q2-2014 Q4-2017

12.4 4.0 3.3 4.1 1.8 0.8

14.3 3.0 3.5 4.9 1.81.1


Gross domestic product Industrial production Consumer price index

Q2-2014 Q3-2017 Q2-2014 Q3-2017 Q2-2014 Q3-2017

0.6 1.2 -0.2 1.4 0.0 -0.2

3.3 5.2 3.4 7.4 0.3 2.0

Current balance Unemployment rate Interest rate

Q1-2014 Q3-2017 Q2-2014 Q3-2017 Q2-2014 Q4-2017

-0.8 0.4 9.2 4.8 2.7 1.7

-3.0 -2.6 10.5 6.1 2.9 1.7


Gross domestic product Industrial production Consumer price index

Q2-2014 Q3-2017 Q2-2014 Q3-2017 Q2-2014 Q4-2017

0.3 0.5 1.6 5.2 1.0 0.7

0.9 2.5 1.5 7.1 -0.3 1.5

Current balance Unemployment rate Interest rate

Q2-2014 Q3-2017 Q2-2014 Q3-2017 Q2-2014 Q4-2017

-0.1 0.3 14.4 8.7 0.3 -0.3

1.0 0.4 16.9 10.9 0.2 -0.3

Slovak Republic

Gross domestic product Industrial production Consumer price index

Q2-2014 Q3-2017 Q2-2014 Q3-2017 Q2-2014 Q3-2017

0.6 0.8 -0.8 0.0 0.2

2.4 3.5 4.9 4.7 -0.1 1.5

Current balance Unemployment rate Interest rate

Q1-2014 Q3-2017 Q2-2014 Q3-2017 Q2-2014 Q4-2017

0.5 -0.4 13.4 8.0 0.3 -0.3

0.5 -0.1 14.3 9.5 0.2 -0.3


Gross domestic product Industrial production Consumer price index

Q2014 Q3-2017 Q2-2014 Q3-2017 Q2-2014 Q3-2017

1.0 1.8 2.3 1.5 -0.4

2.8 4.9 3.8 8.3 0.6 1.2

Current balance Unemployment rate Interest rate

Q2-2014 Q3-2017 Q2-2014 Q3-2017 Q2-2014 Q4-2017

0.7 0.8 9.5 6.7 0.3 -0.3

0.7 0.5 10.5 7.8 0.2 -0.3


Gross domestic product Industrial production Consumer price index

Q2-2014 Q3-2017 Q2-2014 Q3-2017 Q2-2014 Q4-2017

0.6 0.8 0.6 1.1 1.0 1.4

1.2 3.1 2.3 2.7 0.2 1.4

Current balance Unemployment rate Interest rate

Q2-2014 Q3-2017 Q2-2014 Q3-2017 Q2-2014 Q4-2017

-5.6 5.5 24.7 16.8 0.3 -0.3

1.3 6.2 26.2 19.4 0.2 -0.3


Gross domestic product Industrial production Consumer price index

Q2-2014 Q3-2017 Q2-2014 Q3-2017 Q2-2014 Q4-2017

0.7 0.8 -1.4 -0.2 0.6 0.2

2.6 2.9 -0.6 4.6 0.0 1.8

Current balance Unemployment rate Interest rate

Q2-2014 Q3-2017 Q2-2014 Q3-2017 Q2-2014 Q4-2017

7.5 5.1 8.0 6.8 0.6 -0.7

9.2 5.6 8.0 6.9 0.9 -0.8


Gross domestic product Industrial production Consumer price index

Q2-2014 Q3-2017 Q4-2013 Q3-2017 Q2-2014 Q4-2017

0.0 0.6 -1.0 5.3 0.5 0.2

1.1 -1.2 8.7 0.1 0.8

Current balance Unemployment rate Interest rate

Q4-2013 Q3-2017 Q2-2014 Q3-2017 Q2-2014 Q4-2017

14.3 11.8 4.4 5.0 0.0 -0.7

15.1 14.1 4.2 5.1 0.0 -0.7


Gross domestic product Industrial production Consumer price index

Q2-2014 Q3-2017 Q2-2014 Q3-2017 Q2-2014 Q4-2017

-0.5 1.2 -0.9 1.9 2.6 4.0

2.5 10.2 2.6 9.9 9.4 12.3

Current balance Unemployment rate Interest rate

Q2-2014 Q3-2017 Q1-2014 Q3-2017

-9.3.. 9.1 11.0 ..

-17.5 -8.5 8.5 11.4 .. ..

United Kingdom

Gross domestic product Industrial production Consumer price index

Q2-2014 Q3-2017 Q2-2014 Q3-2017 Q2-2014 Q3-2017

0.9 0.4 0.3 1.3 0.7 0.5

3.2 1.7 2.1 2.4 1.7 2.8

Current balance Unemployment rate Interest rate

Q1-2014 Q3-2017 Q2-2014 Q3-2017 Q2-2014 Q3-2017

-30.6 -29.8 6.3 4.2 0.5 0.3

-27.3 -43.9 7.7 4.8 0.5 0.5

United States

Gross domestic product Industrial production Consumer price index

Q2-2014 Q3-2017 Q2-2014 Q3-2017 Q2-2014 Q4-2017

1.1 0.8 1.3 -0.2 1.2 0.4

2.6 2.3 4.2 1.7 2.1

Current balance Unemployment rate Interest rate

Q2-2014 Q3-2017 Q2-2014 Q4-2017 Q4-2013 Q4-2017

-98.5 -100.6 6.2 4.1 0.0 1.4

-106.1 -110.3 7.5 4.7 0.2 0.8

European Union

Gross domestic product Industrial production Consumer price index

Q2-2014 Q3-2017 Q2-2014 Q3-2017 Q2-2014 Q3-2017

0.2 0.6 0.0 1.0 ..

1.2 2.6 1.3 3.7 0.7 1.7

Current balance Unemployment rate Interest rate

Q3-2017 Q2-2014 Q3-2017

81.6.. 10.3 7.5 ..

.. 50.0 10.9 8.4 .. ..

Euro area

Gross domestic product Industrial production Consumer price index

Q2-2014 Q3-2017 Q2-2014 Q3-2017 Q2-2014 Q3-2017

0.0 0.6 -0.1 1.2 ..

0.7 2.6 0.8 3.6 0.6 1.4

Current balance Unemployment rate Interest rate

Q4-2012 Q3-2017 Q2-2014 Q3-2017 Q2-2014 Q4-2017

51.7 122.0 11.6 9.0 0.3 -0.3

17.2 93.2 12.0 9.9 0.2 -0.3


Brazil Brazil

Gross Gross domestic domestic product product Industrial Industrial production production Consumer Consumer price price index index

Q3-2017 Q2-2014 Q3-2017 Q2-2014 Q4-2017 Q2-2014

-0.6 0.1 -1.9 1.0 0.9 2.0

-0.8 1.4 -4.2 2.9 2.8 6.4

Current balance Unemployment rate Interest rate

Q3-2017 Q2-2014

-19.6 -6.7 .... ....

-19.9 -5.5 .. .. .. ..

China China

Gross Gross domestic domestic product product Industrial Industrial production production Consumer Consumer price price index index

.. .. -0.4 0.1

.. .. 2.2 1.8

Current balance Unemployment rate Interest rate

Q3-2017 Q2-2013

Q4-2017 Q2-2014

54.2 31.4 .... 4.6..

58.1 65.1 .. .. 4.7 ..


India India

Gross Gross domestic domestic product product Industrial Industrial production production Consumer Consumer price price index index

Q3-2017 Q2-2014 Q3-2017 Q2-2014 Q3-2017 Q2-2014

1.6 1.2 2.0 1.6 2.4 2.5

5.9 6.1 4.3 3.3 6.9 2.4

Current balance Unemployment rate Interest rate


-5.9.. .... 6.1..

-2.2 .. .. .. 6.6 ..

Indonesia Indonesia

Gross Gross domestic domestic product product Industrial Industrial production production Consumer Consumer price price index index

Q3-2017 Q2-2014 Q4-2017 Q2-2014

1.2 .. 0.4

5.0 5.1 .. 3.5 7.1

Current balance Unemployment rate Interest rate

Russian Russian Federation Federation

Gross Gross domestic domestic product product Industrial Industrial production production Consumer Consumer price price index index

Q3-2017 Q1-2014 Q3-2017 Q2-2014 Q3-2017 Q2-2014

-0.3 0.1 0.9 -1.1 0.2 2.6

0.7 2.5 1.6 1.1 3.4 7.6

Current balance Unemployment rate Interest rate

-3.5 -3.2 .. 6.5 .. 8.5..

-7.3 -4.2 .. 6.9 5.7 5.5

South South Africa Africa

Gross Gross domestic domestic product product Industrial Industrial production production Consumer Consumer price price index index

Q3-2017 Q2-2014

0.2 0.5 .. 0.6 2.0

1.0 1.1 .. 6.6 4.6

Current balance Unemployment rate Interest rate





Q3-2017 Q2-2014

Gross domestic product: Volume series; seasonally adjusted. Leading indicators: A composite indicator based on other indicators of economic activity, which signals cyclical movements in industrial production from six to nine months in advance. Consumer price index: Measures changes in average retail prices of a fixed basket of goods and services. Current balance: Billion US$; seasonally adjusted. Unemployment rate: % of civilian labour force, standardised unemployment rate; national definitions for Iceland, Mexico and Turkey; seasonally adjusted apart from Turkey. Interest rate: Three months.

Current balance data are reported according to the BPM6 classification.


Q3-2017 Q3-2017 Q4-2013 Q3-2017 .. Q2-2014 Q3-2017 Q2-2012 Q3-2017 Q2-2014 Q3-2017 Q4-2017

22.7.. 8.7.. 8.8.. .... 7.4..

23.4 .. 11.0 .. 7.4 -2.2 .. .. 7.5 ..

..=not available, 1 Key Partners. Source: Main Economic Indicators.

OECD Observer No 312 Q4 2017



Israel’s spatial planning divide Arab-Israelis are Israel’s largest minority group and represent 20% of the country’s population though they usually form a majority in the urban areas and towns where they reside. Despite their relative prosperity when compared with their neighbours in Arab countries–a GDP per head of about US$8,000, compared to closer to US$5,000 in Lebanon or US$3,000 in Jordan in 2005–surveys of satisfaction with living conditions and local services paint a less rosy picture when compared with their Jewish counterparts. Spatial Planning and Policy in Israel: The Cases of Netanya and Umm al-Fahm cites a 2014 survey which was held to gauge how satisfied Israel’s inhabitants are with their neighbourhoods. For a start, it shows that the Arab population is more likely to rate their roads and pavements as well as their waste disposal services as unsatisfactory. The parks and public gardens in their municipalities leave much to be desired too, with only 15% of those surveyed satisfied with the amount of these public spaces, compared to 65%

Planning challenge Satisfaction of Israel’s population with their area of residence: Share of respondents that were satisfied or very satisfied, by population group 2014 100% 90% 80% 70%

Jewish and other


60% 50% 40% 30% 20% 10% 0%

Area in general

Cleanliness of the area

Garbage collection service

Source: OECD, Spatial Planning and Policy in Israel: The Cases of Netanya and Umm al-Fahm, 2017

of Jewish respondents. Both Jewish and Arab inhabitants have similar problems with their public transportation with only 40% of those surveyed expressing satisfaction. Recent government initiatives recognise that public transportation is an issue and that it is necessary to invest in its improvement, specifically in the Arab sector.

OECD Observer Crossword


State of the roads and sidewalks

Amount of parks, public gardens in your area


The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law. OECD (2017), Spatial Planning and Policy in Israel: The Cases of Netanya and Umm al-Fahm, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264277366-en

No 4, 2017 Across 1 Capable of being preserved and allowed to survive into the future 7 Emirates, for short 8 Serious environmental problem in several of the world’s cities, 2 words 11 Requiring immediate action 12 Plus the others 13 The renewable kind is better 15 Alien craft 18 Source of solar power 21 Ideally perfect worlds 23 Lux. neighbor 25 Vane direction, abbr. 26 Connection 27 Endures

© Myles Mellor/OECD Observer

Public transport in area of residence

Down 1 They have been rising on many coasts globally, 2 words 2 Continue to exist, as a race perhaps 3 Treat badly 4 Colorful insects now the subject of conservation efforts 5 Assign, as responsibility 6 __ Doc Smith, Sci-fi writer 9 Running behind 10 Polar ___-cap 14 Assess 16 Smoke from this fuel’s burning is an atmospheric pollutant 17 Takes advantage of 19 __40, English reggae band 20 __zero carbon footprint 22 Underground colonist 24 Roman 51

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OECD Observer No 312 Q4 2017  

OECD Observer No 312 Q4 2017