OECD Perspectives and Work on Green Growth: A Brief Overview

Angela BulargaPrincipal Administrator, EAP Task Force Secretariat

UNEP/MAP 14th Meeting of the MCSD, 30 May - 1 June 2011

The OECD Green Growth Strategy

• Requested by Ministers of Finance, Economy and Trade, at the 2009 OECD Ministerial Council Meeting (MCM)

• Multi-disciplinary inter-governmental process, involving 25 OECD Committees

• Key deliverables for the 2011 MCM:• Synthesis Report: Towards Green Growth – sets the analytical framework for

developing green growth strategies– Toolkit: Tools for Delivering on Green Growth– Communication by the “Freedom of Investment Roundtable”

• Indicators Report: Towards Green Growth: Measuring Progress – OECD Indicators

• Thereafter, integrated into OECD work

The OECD Perspective on Green Growth in a Nutshell

• Green Growth requires effective environmental and cross-cutting policies

• Green Growth and Sustainable Development– SD is an important antecedent for GG; GG does not replace it.– GG helps operationalise SD: policies to achieve concrete, measurable progress– GG is narrower, but pays attention to social issues and equity concerns as a result of GG

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

Dividends from green growth

• Dividends for development– Enhanced productivity – Spurred (eco-)innovation – New markets and job opportunities – Water and energy security – Higher investor confidence– Economic diversification– Increased stability of prices for natural resources– Reduced costs of environmental degradation

• Fiscal revenue – to be treated with care

• Reduced risks of negative shocks to economic growth and security in a trans-boundary context– arising from, e.g., resource scarcities or imbalances in ecosystems

Complementarities between green growth and poverty reduction

• Green growth can help drive progress towards the MDGs by:

– Bringing more efficient infrastructure to people

– Underpinning sustained long term growth, e.g. by promoting the use of ‑efficient technologies

– Alleviating public health impacts associated with environmental pollution

– Minimizing the risks of a legacy of costly environmental degradation as development proceeds

• Green growth can preserve the countries’ natural capital by improving the use of natural assets (including ecosystems)

– In low-income countries, natural capital comprises, in average, 25% of total per capita wealth - as compared to 2% in OECD countries

The essentials of green growth policies• A comprehensive policy toolkit including, for instance:

– Instruments to price pollution and natural resource use– Mechanisms for using subsidies more effectively

• Shaping good incentives• Removing and reforming perverse subsidies which encourage pollution or over-extraction

of resources and place a drain on the public purse – with due consideration to social and competitiveness impacts

– Effective regulatory requirements and information-based instruments

• A larger focus with policies that address education and employment, innovation, trade, investment, as well as 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: policies will differ across countries according to

local environmental and economic conditions, institutional settings and stages of development

Institutional capacity to implement reforms

• Integrate green growth objectives into broader economic policymaking and development planning, e.g.– formal national level planning processes/ national plans– public financial management (especially the budget process)– strategies for key economic sectors, including at the sub-national level

• Building capacity to improve the governance and oversight of natural assets and to enforce policies, i.e. cooperation with stakeholders

• Finance, economic and environmental agencies need to play a leading role

• Effective governance/coordination across different levels of government

The importance of pricing: Water Conservation(% ownership against water fee structure)

Removing fossil fuel subsidies can reduce GHG emissions, public spending … and grow the economy

% change in GHG emissions w.r.t BAU: phasing-out of fossil fuel subsidies subsidies in 37 countries; caps on emissions in other countries

-40%

-35%

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

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Au

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EU

27

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Jap

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2050

Source: OECD ENV-Linkages, based on IEA subsidies data.

9

10% less global emissions

+ increased economic efficiency for countries implementing the reforms - up to

4% real income gains in certain countries

Green taxes may serve fiscal objectives Environmental-related taxes (revenues as % of GDP)

Source: OECD

Includes: taxes on energy, CO2, vehicles and pollutants;Excludes: royalties and taxes on natural resource rents

International co-operation for green growth• Strengthened arrangements for managing access to global public goods,

especially in biodiversity and climate• More concerted approaches to accelerate technology development and

diffusion:

– building research capacity in developing countries

– targeted, time-bound financing mechanisms, e.g. loan guarantees and insurance mechanisms, other forms of risk sharing

– stable, predictable economic and environmental policy

• Increased efforts to boost global trade and investment flows to help underpin sustained growth and diffusion of green technologies

• Address concerns about green protectionism• Official Development Assistance could help align incentives across countries

with different initial conditions– Ensure policy coherence for development

Timeline Deliverables

2011 MCM Green Growth Strategy Synthesis Report Green Growth Indicators Report

2011/2012

A Green Growth Strategy for Food and Agriculture (preliminary report) Joint IEA/OECD Green Growth Study for Energy Green growth monitoring work: green growth indicators, further green growth

chapters in Economic Surveys and Environmental Performance Reviews Green growth reports for emerging economies and developing countries Monitoring green investment protectionism concerns Report on green innovation Green growth and biodiversity Green Cities Programme Project on green financing Green growth and water Environmental regulations and growth Green fiscal revenue Job potential of a shift towards a low-carbon economy

Selected elements of future OECD work

Regional Programmes: Relevant OECD Work in Eastern Europe, Caucasus, and Central Asia

• OECD has provided assistance to the EECCA region in support to countries’ “environmental reconstruction” and policy reforms as part of their transition to market economy – under the umbrella of the EAP Task Force

• Almost 20 years of cooperation, with an evolving focus of work• A strong record of real changes, induced in policies and legal frameworks• Various tools developed in support to reforms• Demonstration projects and National Policy Dialogues• Demand for future work on green growth (2012-2015), including

– Integration of fiscal and environmental policies– Economics of water management – Providing incentives for the private sector’s green investment– Financing for climate change adaptation – Strengthening governance and institutional capacity

• Mandate to be renewed at the “Environment for Europe” Ministerial Conference in September 2011

Cooperation with MENA countries: Initiative on Governance and Investment for Development

• A regional effort, initiated and led by countries in the Middle East and North Africa

• Promotes broad reforms to enhance the investment climate, modernise governance structures and operations, strengthen regional and international partnerships, and promote sustainable economic growth throughout the MENA region

• Consists of two pillars:– Good Governance for Development (GfD) in the Arab Countries Initiative –

aimed at modernising public governance structures and processes (a new focus group on territorial development and green growth)

– Investment Programme – aimed at improving investment climate and policies

• Complemented by work in other areas, such as education or water management

Join the discussion!

• International Green Growth Dialogue online community

• A secure site for sharing your perspectives and initiatives, and discussing the development of the Green Growth Strategy.

• To register, email your contact details to: green.growth@oecd.org