1

Green Growth: An OECD

Perspective

UNEP Workshop on SCP & GE

8-19 March 2010, Paris

Helen Mountford

Acting Deputy Director

OECD Environment Directorate

2

A working understanding of green growth:

“Green growth can be seen as a way to pursue

economic growth and development, while preventing

environmental degradation, biodiversity loss, and

unsustainable natural resource use.”

It is making investing in the environment a driver for

economic growth.

It aims at maximising the chances of exploiting cleaner

sources of growth, thereby leading to further “decoupling”

between environmental and economic performance.

x Not looking for a single definition

x No clear end point “greener” growth

3

How does it differ from what we’ve done

before?

BUT other Ministries are taking ownership of green growth.

Initial ideas on key elements of green growth:

Internalising environmental externalities/ addressing market failures

Incentivising eco-innovation (positive knowledge externalities)

Focus on the transition (employment, distribution, sectoral)

New growth accounting framework

Green growth ≈sustainable

development≈ SCP

4

OECD Green Growth Strategy

Requested by Ministers of Finance, Economy & Trade, for mid-2011.

25 OECD Committees: delegates from Ministries of Agriculture,

Economy, Environment, Development Co-operation, Industry, etc.

A framework for understanding green growth and indicators for identifying

gaps and measuring progress.

A policy toolkit for OECD and partner countries with policy approaches

and measures for:

i. Overcoming policy barriers: e.g. reform of environmentally-harmful subsidies,

removal of barriers to trade in green G&S.

ii. Enabling an efficient shift to green growth: e.g. taxes & MBIs, regulations,

R&D and green innovation policies, VAs, information-based approaches.

iii. Managing the transition: green job opportunities & new skills, industrial

restructuring, distributional aspects.

International co-operation: financing global public goods (climate,

biodiversity), addressing competitiveness effects, green

technology development and transfer, pro-poor GG.

5

Why now? Lessons from the crisis…

Many countries used their stimulus packages to invest in:

– Green infrastructure (public transport, energy efficiency in public buildings, renewable

energy, smart grids, water & sanitation)

– Green RD&D (including CCS)

– Some put in place green tax reform

But other measures may be environmentally harmful:

– Support for auto industry

– Road building

– Car-scrapping schemes (scale effects vs. efficiency effects)

Coming out of the crisis:

– The opportunity cost for green investment is now low

– Opportunity to reform costly & environmentally damaging policy measures (eg some

subsidies to energy and agriculture)

– Opportunity for revenue raising via environmental taxes or auctioned permits (offset

reductions in labour taxes, fiscal consolidation, raise funds for international finance)

– Need to manage employment impacts & develop skills

6

Removing fossil fuel subsidies is good for

the economy & the environment→ G20 Leaders Summit

Impact of energy subsidy removal on GHG emissions in 2050

Source: joint OECD-IEA analysis, cited in OECD (2009), Economics of Climate

Change Mitigation, based on IEA data on subsidies

6

-45

-40

-35

-30

-25

-20

-15

-10

-5

0

World China India Oil-exportingcountries

Russia Non-EUEastern

European countries

% d

ev

iati

on

rela

tiv

e t

o B

usin

ess a

s U

su

al

7

0.0

0.5

1.0

1.5

2.0

2.5

Ru

ssia

Ind

ia

Oil-

pro

du

cin

gco

un

trie

s *

*

Ch

ina

Re

st o

f th

e w

orl

d

Bra

zil

% d

ev

iati

on

re

lati

ve

to

th

e b

as

eli

ne

2050

…and for the economy (household income)→ some win-win opportunities

Source: joint OECD-IEA analysis, cited in OECD (2009), Economics of Climate

Change Mitigation, based on IEA data on subsidies

8

Incentives for eco-innovation: a clear

policy signal

Source: OECD (2010), The Invention and Transfer of Environmental Technologies

8

0

1

2

3

4

5

6

7

8

9

10

11

121980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004P

ate

nti

ng

ac

tivit

y i

n A

nn

ex

1 r

ati

fic

ati

on

co

un

trie

s(3

-ye

ar

mo

vin

g a

ve

rag

e, in

de

xe

d o

n 1

99

0=

1.0

)

Wind power

Fuel cells

Lighting

Solar PV

Electric cars

All tech. sectors

1997- Kyoto Protocol

9

A framework for indicators of green growth

9

Consumers

Inputs:

Labour, capital, energy, materials,

environmental services

Multi-factor productivity

Outputs:

Goods, services

Economic activities (production, consumption, trade)

Policies, measures, instruments:

Taxes, subsidies, regulations, investments, innovation, education

1: Indicators of environmental efficiency of production and changes in production patterns 2: Indicators of environmental efficiency of consumption and changes in consumption patterns 3: Indicators of stocks of natural capital and environmental quality 4: Indicators of objective and subjective environmental quality of life 5: Indicators of responses by economic actors

4

5

1

Production process

Recycling,

re-use, re-manufacturing,

substitution

Pollutants, waste

Natural capital stocks and environmental quality

Services, amenities, health & safety aspects

Economic and social agents

Natural resources (water, biomass, air, land, energy, materials, …)

3

2

Public per-

ceptions

10

Indicators: progress in decoupling selected

emissions in OECD countries

10

40

60

80

100

120

140

16019

90

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Inde

x, 1

990=

100

GHG emissionsSOx emissionsNOx emissionsGDP

Source: OECD Key Environmental Indicators

relative decoupling

Absolute decoupling

11

Indicators: progress in decoupling waste in

OECD countries

11

40

60

80

100

120

140

1601

99

0

19

92

19

94

19

96

19

98

20

00

20

02

20

04

Ind

ex 1

990=

100

DMC (1)

GDP

Municipal waste

Domestic material consumption

Source: OECD Key Environmental Indicators

12

2008 OECD Household Survey on

Environmental Behaviour

Scope: energy, organic, transport, waste, water

Coverage: 10 countries (Australia, Canada, Czech Republic, France, Italy, Korea, Mexico, the Netherlands, Norway, Sweden)

Method of data collection: Internet panel-based Survey

Total sample size: 10 000 respondents (approx. 1000 per country)

Data analysis: 9 expert teams coordinated by the OECD.

Approach: Policy oriented (Survey questionnaire design, Advisory

Committee)

Next steps: publication of results (2010); new survey 2010-2011 with focus

on eco-innovation and low-carbon economy.

13

Share of households who have water

efficient appliances

0%

10%

20%

30%

40%

50%

60%

70%

Water Efficient washing machine

Low volume or dual flush toilets

Water flow restrictor taps / low flow shower

head

No Charge

Variable Water Charge

14

What would encourage you

to reduce your car use most?

0%

10%

20%

30%

40%

50%

60%

70%

80%

Increased cost of drivingbetter public transportcheaper public transportmore and safer cycling paths

15

Green Growth – some emerging messages…

Need a mix of policy instruments to tackle key environmental challenges.

Importance of market-based approaches, but complemented by

regulations & standards, R&D investment, labelling. Ensure coherence in

policy design and implementation.

Internalising environmental externalities is necessary for green growth,

but insufficient need to ensure a smooth transition (sectoral shifts,

employment, skills) and incentivise eco-innovation (internalising positive

knowledge spill-overs).

The green growth framework needs to be flexible will need to be

applied differently in different counties. OECD country peer reviews

(economic, environmental) to help tailor to countries.

Green growth must be fundamentally integrated into economic growth

accounting importance of green growth indicators for identifying gaps

and measuring progress.