Greening Growth in Eurasian Transition Economies: Some Drivers and Key Policy Measures

Angela Bularga Environment Directorate Almaty, 12 June 2014

2

• Reasons for policy action

• Strategies to enable green growth

• Need for policy dialogue

Questions to be addressed

3

Resource-intensive model of growth in Eurasian transition economies

Source: OECD (2012), Green Growth and Environmental Governance in EECCA.

Export product share by factor intensity

Price volatility calls for resource efficiency and diversification

1990 1993 1996 1999 2002 2005 2008 20110.0

50.0

100.0

150.0

200.0

250.0

Food Price Index

Source: World Bank Source: OECD.

0.00

50.00

100.00

150.00

200.00

250.00

300.00

Energy commodity price index constant USD 2000

5

Jobs in many countries depend upon sectors vulnerable to external shocks

Loss of ecosystem services because of land-use change compared to GDP

Estimates show that global land use changes between 1997 and 2011 have resulted in a loss of ecosystem services of between $4.3 and $20.2 trillion/year

GDP - GDP in current U.S. dollars. Not adjusted for inflation. Source: World Bank data.

7

Natural resources remain the main source of wealth

8

High interdependency for energy and water in the Caspian Sea Basin

9

High and often increasing water losses

Armen

ia

Azerb

aija

n

Bel

arus

Geo

rgia

Kaz

akhst

an

Kyr

gyz Rep

ublic

Mol

dova

Russia

n Fed

erat

ion

Ukr

aine

0

5

10

15

20

25

30

35

40

45

% of water losses 2000 % of water losses 2009

Source: OECD, 2012.

Total water withdrawal as share of available water resources

Source: UNEP, 2014.

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• Value and price the natural assets and ecosystem services

• Remove environmentally harmful subsidies

• Make pollution more costly

• Improve regulations

• Influence consumer choices

• Encourage voluntary action and supply chain pressure

• Use better data to promote more sound decision making

• Reform institutions

• Help SMEs to go greener

• Scale up funding

What policy measures could enable a green transformation of economy?

12

More adequate price signals reduced energy intensities though not enough

Sources: World Bank calculations based on data from IEA 2011 and World Bank, World Development Indicators.Note: Energy intensity is the amount of energy used to produce US$1 of GDP. The shaded area represents the minimum-maximum range of the EU-15. EU-10 + 1 includes the EU-10 countries plus Croatia; kgoe = kilograms of oil equivalent.

Energy intensities in Europe and Central Asia Relative to EU-15 levels, 1990-2009

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Energy tariffs have increased in many countries of the region

14

So did water tariffs

15

Water pricing can work: Israeli economic efficiency of agricultural water use

Source: OECD (2010), OECD Review of Agricultural Policies: Israel, 2010 .

0

20

40

60

80

100

120

140

Index 1986=100

Value of agricultural production per m3 of water utilized for irrigation

Real price of fresh water to agriculture (inflation adjusted)

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Pricing pollution while reducing labour taxation: Multiple-dividend policy

Mexico

CanadaJapan

Slovak Repu...

Switzerla

nd

Norway

United Kin...

Estonia

Greece

Czech

Repu...Isr

ael

Netherlands

Uzbekist

an**

Belarus**

Moldova**-1.0

0.0

1.0

2.0

3.0

4.0

5.0

Other Motor vehicles Energy

Note: * are 2009 data; ** are 2008 data. Source: OECD, UNECE, and country data.

Revenue from environmental taxes: Share of GDP, %

Electricity

Coal

Natural gas

Oil

0102030405060708090

Iran

Saud

i Ara

bia

Russ

iaIn

dia

Chin

aEg

ypt

Vene

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sia

Uzb

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Iraq

Alge

riaM

exic

oTh

aila

ndU

krai

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wai

tPa

kist

anAr

genti

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alay

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Bang

lade

shTu

rkm

enis

tan

Kaza

khst

anLi

bya

Qat

arEc

uado

r

Billi

on d

olla

rsFossil fuel subsidies distort prices and the incentive framework

Source: IEA.

Fossil fuel consumption subsidies for the top 25 non-OECD countries, 2010, IEA

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Subsidies do not always benefit the poorest people

19

Change may happen faster than we think! Pace of innovation uptake: Wind energy

Wind Energy Capacity in the EU-15, 2009 vs. Forecasts 1990–2002

Source: Based on World Bank (2013), Glowing Green: The Economic Benefits of Climate Action.

1995 2000 2005 2008 2010 2015 2020 2025 20300

10

20

30

40

50

60

70

80

Gig

awatt

s

Actual

IEA Forecast, 2002

Establishing sound institutions: “mission possible” at any income level

Nor

way U

K

Georg

ia

Finla

nd

Swed

en

Germ

any

Switz

erla

nd

Net

herla

nds

Armen

ia

Kazak

hsta

n

Czech

Rep

ublic

Azerb

aijan

Russia

Tajik

ista

n

Uzb

ekista

n0

40

80

120

160

6 7 9 11 1320

28 31 32

4965 67

112

141154

Source: World Bank (2013), Doing Business 2013: Smarter Regulations for Small and Medium-Size Enterprises. Washington, DC: World Bank Group. DOI: 10.1596/978-0-8213-9615-5.

Quality of the overall framework: “Ease of Doing Business” Ranking

Scaling up funding is a priority

Source: updated from Corfee-Morlot et al. 2009; OECD calculation based on OECD DAC-CRS, UNCTAD WIR (2010), World Bank (2010)

North-South investment flows, USD billions (2008)

$323.9

$253.6 $212.5

$41.1

$70.3 $57.9 $12.4

Total Private and Public Investment

Private Investment

Brown Private Investment

Green Private Investment

Public Investment

Brown Public Investment

Green Public Investment

Private Investment

Public Investment

$323.9

$253.6 $212.5

$41.1

$70.3 $57.9 $12.4

Total Private and Public Investment

Private Investment

Brown Private Investment

Green Private Investment

Public Investment

Brown Public Investment

Green Public Investment

Private Investment

Public Investment

$323.9

$253.6 $212.5

$41.1

$70.3 $57.9 $12.4

Total Private and Public Investment

Private Investment

Brown Private Investment

Green Private Investment

Public Investment

Brown Public Investment

Green Public Investment

Private Investment

Public Investment

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• Beneficial at all (and across) levels of governance– Sub-national

– Country

– Regional – EaP GREEN example

– International

• Involving all stakeholder groups – Influencing policies

– Using the value of business to business dialogue

• Many on-going initiatives

What role for policy dialogue?

Goal of policy dialogue and action within EaP GREEN programme

COMPONENT 2: USE OF SEA AND EIA AS

PLANNING TOOLSPromote the use of the Strategic

Environmental Assessment (SEA) and Environmental Impact

Assessment (EIA)

OVERALL OBJECTIVE

Enable countries of the Eastern Partnership to move towards a

green economy

COMPONENT 1: GOVERNANCE AND FINANCING TOOLS

Mainstream sustainable consumption and production into national development strategies

COMPONENT 3: DEMONSTRATION

PROJECTS IN SUPPORT OF CORPORATE ACTION

Apply sustainable consumption and production practices in selected economic sectors

(agriculture and manufacturing)

• Regional programme, with a blend of regional-level and national-level actions targeting public and private sectors

• Aims at supporting six Eastern Partnership countries– Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine

• Multi-partner implementation– OECD, UNECE, UNEP, UNIDO

• Multi-donor financing– European Union – the main donor;

• 48 month implementation period as of January 2013

• 12.5 million Euros total estimated budget, including 10 million Euros contribution from the European Union

Programme overview

Higher productivity and competitiveness

Cleaner production and resource efficiencyIdentification of environmentally harmful subsidies (EHS)Organic agriculture

New business opportunities and more jobs

Organic agricultureGreening product policies & procurementGreening of SMEs

Better quality of life and improved infrastructure

Cleaner productionGreening product policiesOrganic agriculture

Policy coherence and fiscal objectives

Strategic planning and green growth indicators (GGIs)Strategic Environmental Assessment (SEA) EHS reform and access to finance

A programme tailored to grasp the benefits of green economy

Catalysing decision-making on national green economy priorities•Reaching key stakeholders during national-level workshops in all countries •Bilateral meetings with high-level policy-makers•Rolling up modelling work in Belarus, Moldova and Ukraine

Regional exchange of experience on several issues•Role of green economy for the real sector development •Monitoring frameworks for green economy •Use of economic instruments for greening product policies and green public procurement

Launch of national-level projects and enterprise support•National Focal Points identified in economic and environmental ministries •Some twenty country-level projects launched in 2013 though different level of engagement•Institutional arrangements completed in support to enterprise-level work

New capacity development tools and capacity development•Manual on economic instruments for greening products•Policy brief and a draft guide on green growth indicators ,and training in four countries•Extensive training on SEA and EIA

Achievements so far

• A comprehensive policy toolkit – prices, regulation, information, institutions, finance

• A wider policy focus – education and employment, innovation, trade, investment, territorial planning

and infrastructure development

• Access to finance, particularly in lower-income countries

• Better institutional frameworks and international cooperation

• Full understanding of distributional effects and impacts on competitiveness

• Need for a tailored approach

Recapping the essentials of policies in support to greener growth