OECD Green Growth StrategySELA Regular Meeting of the Latin American Council

Caracas, Venezuela21 October 2011

Nathalie GirouardCoordinator, OECD Green Growth Unit

The Green Growth Strategy

• Multi-disciplinary inter-governmental process, involving 25 OECD Committees: delegates from Ministries of Finance, Economy, Environment, Agriculture Development Co-operation, Industry, etc.

• Our work starts with the premise is that there is no necessary conflict between pursuing economic growth and doing so in a green way.

– We need growth and it needs to be green.

• Key deliverables at the 2011 Ministerial meeting:• Synthesis Report: Towards Green Growth• Toolkit: Tools for delivering on green growth• Indicators Report: Towards Green Growth: Measuring Progress – OECD

Indicators

What is green growth?

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. Catalyses investment and innovation underpinning sustained growth and gives rise to new sources of growth.

Green Growth and Sustainable Development:

Green growth as a flexible means to accelerate progress towards sustainable

development: an operational policy framework to help achieve concrete,

measurable results across the economic/environmental pillars

Green growth focus on fostering innovation, investment and competition that can

give rise to new sources of economic growthGreen growth strategies pay attention to social issues and equity concerns as a

result of greening growth

Green growth can address economic and environmental challenges

and open up new sources of growth

Expanding economic opportunities for a growing global population

√ Enhanced productivity√ Innovation√ New markets√ Boosting confidence√ Macroeconomic stability

Reducing risks of negative shocks to growth

√Resource bottlenecks√Imbalances in natural systems

Source: World Bank Source: OECD

Risks in not going green: pollution and human health

Premature deaths from PM10 exposure(per million inhabitants)

Source: OECD

Risks in not going green: shocks to food supply

Production +35%

Land +6%

Land at risk of erosion + 17%

By 2030, business as usual:

Biodiversity loss(2000-2030)

Pressures on natural capital

Water scarcity +30%

% mean species abundance loss

Source: OECD

Green growth initiatives around the world

Source: OECD

Green growth and poverty reduction

• Greening growth can contribute to poverty reduction by e.g.:– bringing more efficient technologies and infrastructure to people

(energy and transport)

– underpinning sustained long term growth‑

– alleviating poor health associated with environmental pollution

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

Need for a tailored approach

Better measurement: the capital base of economies

Source: Arrow et al (2009) in NBER WP 16599

Capital stock shares

What are some of the policies for promoting green growth?

General points• Governments need to draw from a wide menu of policies• Involve a mix of policy instruments which differ across countries• Central element is to put a price on pollution or on the over-exploitation of

scarce natural resources Two sets of policies:

1. Policies that mutually reinforce green and growth:• Policies to encourage innovation including adequate IPRs• Labour and product market policies facilitating entry/exit/reallocation• Growth conducive tax structures • Openness to trade and investment

2. Policies specifically aimed at greening growth:• Price-based instruments: environmental taxation, emission trading systems,

emission credit systems, subsidies• Non-market instruments: regulation, standards, active technology support,

information-based measures, voluntary agreements

The modest claims of environmental taxes

Revenue, % of GDP

Source: OECD/EEA database on instruments for environmental policy.

Source: Joint OECD/IEA analysis

Fossil fuel subsidies: subsidising CO2 emissions

USD 115 billion, 2009 investment in renewables

10% less GHG emissions

globally with

removal of fossil

fuel subsidies

US$ 557 bn (2008) US$ 312 bn (2009)emerging & developing country fossil fuel consumption subsidies

?developed

country subsidies

Income gains from unilateral fossil fuel subsidy removal (% change in household income vs BAU)

Source: OECD analysis, based on IEA data

Innovation in unexpected places

Green Technology

Chemical Engineering Chemistry Material

Science Physics

Agricultural and Biological

Sciences

Immunologyand

Microbiology

Biochemistry, Genetics and

Molecular Biology

Energy

Earth and Planetary Sciences

Engineering

EnvironmentalScience

17.4%10.5%

4.9%

7.5%5.7%3.7%6.6%

4.8%

10.6%

9.5%14.2%

ScientificPapers

Patents

Patent-science link via citations

(100% = all citations)

Legend:

Source: OECD

Infrastructure investment

Source: OECD

Global investment 2010-2030(USD millions)

An immediate challenge is to scale up public and private sources of funding to support climate change action

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

• Distributional impacts: e.g. from taxes on energy used for heating and cooking can have significant impacts on low-income households. – Distributive impacts are better addressed through broader means, such as lowering

personal income taxes, supplementing low-income supports or providing cash payments to the most affected low-income citizens.

• Competitiveness concerns: changes in competitiveness in the transition, ought to be addressed through multilateral policy coordination. Compensatory schemes can be justified but they come with their own costs.

• Employment effects: the scale of adjustment should not be overstated. E.g. significant reductions of GHG emissions can be achieved with only limited effects on the pace of employment growth/ LM performance can improve if revenues from carbon pricing used to promote labour demand– Need for inclusive and dynamic package of LM policies

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What are the implementation challenges?

A framework for green growth indicators

Economic activities (production, consumption, trade)

Consumption

HouseholdsGovernments

Investments

Outputs Inputs

Energy & raw materialswater, land, biomass, air

Pollutants waste

Policies, measures,

opportunities

TaxesSubsidies,

Regulations

InvestmentsInnovation

TradeEducation &

training

4

Production

Multi-factor productivity

Recycling,re-use,

re-manufacturing, substitution

IncomeGoods& services

Residuals

LabourCapitalResources

2

13

The natural asset baseResource functions

Sink functions

Amenities, health & safety aspects

The socio-economic context and characteristics of growth1: Indicators monitoring environmental and resource productivity2: Indicators monitoring the natural asset base3: Indicators monitoring the environmental quality of life4: indicators monitoring economic opportunities and policy responses

Green Growth framework

Timeline Deliverables

2011 MCM Green Growth Strategy Synthesis Report Green Growth Indicators Report

2011/2012

Green growth monitoring work: indicators, country surveys Green Growth Reports for Emerging Economies Report on Green Growth and Developing Countries A Green Growth Strategy for Food and Agriculture Joint IEA/OECD Green Growth Study for Energy 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

Directions for future work