OECD Green Growth Strategy SELA Regular Meeting of the Latin American Council Caracas, Venezuela 21 October 2011 Nathalie Girouard Coordinator, 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 growth  Green 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 BankSource: 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 ( ) 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 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 CO 2 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 Source: OECD

Infrastructure investment Source: OECD Global investment (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)

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 17 What are the implementation challenges?

A framework for green growth indicators

Green Growth framework Balanced tax structures R&D and innovation policy Competition Infrastructure investment Openness to trade and FDI Enabling conditions Pricing of pollution and resource use Subsidy reform Regulatory and policy predictability Support to basic research and emerging technologies Governance of natural assets Key policy tools Water scarcity Climate change Health impacts of pollution Biodiversity loss Major environmental issues Skills and labour market adjustment Distributional and competitiveness concerns Science and technology cooperation Development assistance Management of global public goods Promoting transition Productivity of resource use Physical evolution of the natural asset base Environmental quality of life Opportunities arising from environmental considerations Evolution of policy and social responses Promoting efforts consistent with international standards Measurement agenda

TimelineDeliverables 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