Catherine tracking progress webinar presentation - (final) ...
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OECD's Chief Economist, Catherine Mann introducing the Green Growth "Towards Green Growth? Tracking Progress" report.
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Catherine tracking progress webinar presentation - (final) ...
- 1. INTRODUCTION Catherine L. Mann OECD Chief Economist Towards Green Growth? Official Launch of the OECD's Tracking Progress Report July 27, 2015 1
- 2. GREEN GROWTH: A FUNDAMENTAL PILLAR FOR GROWTH 2
- 3. ALIGNING ENVIRONMENTAL AND ECONOMIC OBJECTIVES OECD’s Green Growth Strategy 3
- 4. ECONOMIC OPPORTUNITIES AND TRADE-OFFS OF GREEN GROWTH Simulated effects of EPS tightening on productivity growth – industry and firm 4 Do stringent environmental policies impact growth? Simulated effects of EPS tightening on productivity growth – industry and firm
- 5. ECONOMIC OPPORTUNITIES AND TRADE-OFFS OF GREEN GROWTH What about firm entry and competition? 5 A. World Economic Forum – perceived environmental policy stringency B. Environmental policy stringency proxy (OECD, de jure) AUS AUT BEL CAN CHE CHL CZE DEU DNK ESP EST GBR GRC HRV HUN ISR ITA JPN MEX NLD NOR NZL POL PRT SVK SVN SWE TUR ZAF USA IRL KOR FRA ISL 3 4 5 6 7 0,5 1 1,5 2 2,5 3 3,5 4 4,5 Total BEEP indicator WEF perceived EPS (2012) Morestringentenvironmentalpolicies Policies more burdensome to entry and competition AUS AUT BEL CAN CHE DEU DNK ESP GBR GRC HUN ITA JPN NLD NOR POL PRT SWE USA IRL KOR FRA 1 2 3 4 5 0,5 1 1,5 2 2,5 3 3,5 4 4,5 Total BEEP indicator OECD EPS (de jure, 2012) Morestringentenvironmentalpolicies Policies more burdensome to entry and competition
- 6. ECONOMIC OPPORTUNITIES AND TRADE-OFFS OF GREEN GROWTH What impact do stringent environmental policies have on trade in environmental goods? 6 Countries having stringent environmental regulations tend to export environmental products relatively more.
- 7. DRIVING GREEN GROWTH THROUGHOUT THE ECONOMY OECD’s Green Growth Strategy 7
Editor's Notes
- Starting premise for OECD work on green growth: risks to growth are rising as traditional growth models negatively affect the physical environment that ultimately underlines well-being. [Example: global GDP impacts from climate change alone are projected to increase more rapidly than economic growth: water scarcity, worsening resource bottlenecks, increased pollution and biodiversity loss can all also undermine growth (OECD CIRCLE project).] Mismanaging and undervaluing natural resources can impose substantial human and economic costs. [Example: the estimated costs to society of outdoor air pollution, in terms of lives lost and ill health, were USD 1.7 trillion in 2010 (OECD countries), USD 1.3 trillion in China and USD 2.5 trillion in India (the Costs of Air Pollution: Health Impacts of Road Transport)]. A standard definition of economic growth does not fully account for potential impacts of environmental degradation on growth and well-being. In addition to productivity growth, growth agendas should take account of the role of natural capital, as well as the consequences of productivity growth for the physical environment. Growth must also be inclusive and the OECD is pursuing in parallel work to broaden concepts of prosperity to take into account income and other inequalities. Opportunities can arise from green growth. [E.g. through productivity gains, expanding markets for green technologies, processes and services, improved market confidence from environmental policy clarity, and incentives for innovation and efficiency improvements.] In 2009, OECD ministers agreed to strengthen efforts to pursue green growth as part of response measures to the financial crisis, recognising the dangers of a return to “business as usual”. The 2011 Green Growth Strategy sets a framework for governments to foster economic growth and development, while ensuring that natural assets continue to provide the resources and environmental services vital to human well-being.
- At the heart of the strategy is the need for governments to embed environmental challenges in economic policy making. This means aligning economic growth and environmental objectives in a consistent set of policy criteria that jointly reinforce growth and natural capital conservation. [E.g take full account of the value of natural capital as a criterion for growth; focus on cost-effective ways to relieve environmental pressures and avoid crossing critical environmental thresholds; target areas presenting clear beneficial overlap between economic and environmental policies; address constraints to green growth (e.g. quality of innovation policies, improving infrastructure).] A flexible, dynamic economy will best spur the transition. [E.g. well-designed and executed core fiscal and regulatory settings for growth in areas such as tax and competition can help improve resource allocation; decouple economic activity from natural capital depletion; open up greener sources of growth]. Finance and economic ministries therefore have a major role to play. This is why the Economics Department is fully engaged. As Chief Economist, I am personally charged with overseeing the Green Growth Strategy (with the Head of the Environment Directorate). A number of countries have taken relevant measures since the launch of the strategy (we’ll here more on developments from Nathalie Girouard shortly). But no country has comprehensively linked environmental and economic reform priorities. Much better understanding of the complementarities and trade-offs between economic and environmental goals is fundamental to progress. The Economics Department is undertaking a broad range of work to help advance understanding at the economic-environmental interface and better integrate environmental priorities into structural economic reform priorities. [E.g. integrating green growth analysis into Economic Surveys; Going for Growth; Economic Outlook, bridging staff with ENV in structural policy analysis team and personnel overseeing mainstreaming in country analysis].
- The Economics Department is working to fill a number of knowledge gaps and address a number of key questions related to green growth. Environmental Policy Stringency (EPS) Indicator - shows that environmental policies have become more stringent over the past two decades. Productivity has generally not been negatively affected by environmental policies with only temporary adjustments in the first few years (i.e., productive firms can benefit; least productive firms can be affected). If resources are quickly reallocated, the overall impacts can be positive (i.e., if policies enable entry and exit of firms and to support employment and innovation). ------------------------------------------------------ Simulated effect of one year effects of a median increase in environmental policy stringency, i.e. 0.12 change in the value of the EPS index in one single year (equivalent to the change in annual average tightening from the level in Italy or Greece to that of the Nordic countries). High (low) pollution intensity is defined as an industry with the highest (lowest) pollution intensity on seven selected key pollutants with respect to value added. (3) High productivity is defined as the country-industry pair (or firm) on or close to the estimated global industry (or firm) productivity frontier. Low productivity is defined as country-industry pair (or firm) at the 75th percentile of distance to the global industry (or firm) productivity frontier. 90% confidence intervals are reported. Effects are estimated to last for three years after the policy change and then fade away. No lead effect is found.
- Burdens on the Economy due to Environmental Policies (BEEP) - shows that barriers to entry and competition, and the consideration given to economic effects of environmental policies vary across countries, but are not related to the stringency of environmental policies. Hence, stringent environmental policies should be implemented with minimum barriers to entry and competition. Policy Design - frameworks should encourage the growth of young and dynamic firms and the development of new products/processes that meet tighter environmental standards (e.g., minimising barriers to market entry and competition, improving access to financing, and promoting trade/innovation). Policies need to be flexible, efficient and encourage competition to positively effect productivity (e.g., market-based instruments - green taxes). ----------- Shows absolutely no correlation between EP stringency (measured in two ways) and barriers to entry and competition (BEEP), effectively implying that environmental objectives can be pursued in more (or less) growth friendly ways.
- International Trade and the Environment – analysis shows that more stringent environmental policies spur the development of markets for environmental technology, improve country specialisation in these products and when combined with open trade can form a vital channel for reducing pollution and spurring growth both globally and domestically. ------------------------- This graph serves to highlight our new work on stringent environmental regulations and trade in environmental goods, while also illustrating the fact that markets for environmental goods (incl. low-carbon ones) are essentially regulation-led. It conveys the idea that environmental regulations do not necessarily mean a loss of competitiveness. -------------------------- As a complement to this work, my colleagues in the Environment Directorate are working to model the sorts of feedbacks on the economy that will result from inaction on environmental and natural capital degradation. [CIRCLE predicts 1-3.3% projected global GDP loss by 2060 from limited modelled climate change effects alone, with much larger variations in consequences on specific sectors and regions. Work is at an early stage and doesn’t include effects from changes in extreme weather events, water stress, large-scale disruptions, biodiversity loss etc.] [Work on the health impacts of outdoor air pollution shows the average cost of air-pollution-related deaths and illnesses amounted to 4% of GDP in OECD countries in 2010, reaching over 10% in some countries (e.g. Hungary), and 12% and 9% respectively for China and India.] They are also examining how more effective use of cost-benefit analysis can help assess environment impacts of policy choices through better ex ante and ex post assessments. [ENV/EPOC/WPIEEP(2014)16: finds clear guidelines for use of CBA are non-existent across countries for ex post policy and project assessment, and exist of only a few countries for ex ante policy assessments (energy and transport investment is an exception).) These are just some of the questions the OECD has been looking at to help understand complementarities and trade-offs between economic and environmental goals. A number of further work priorities are identified in the Tracking Report. [E.g. on the effects of environment policy on investment, firm entry-exit, international trade and relocation, employment and production processes; further ex-post policy evaluation studies at the micro-level to help advance the understanding of the consequences of environmental policies on households and firms].
- Of course, green growth goes beyond core growth settings: sector-specific policies in areas such as energy, transport, agriculture and water will also need to be geared to reflect green growth priorities. This comes on top of the need to develop policy packages to price pollution and provide incentives for efficient resource use. The Economics Department and Environment Directorate therefore do not act alone on green growth – work is being completed across virtually all relevant OECD committees. Over 130 sectoral publications and 80 country-reviews with green growth recommendations have been released since the Green Growth Strategy’s launch. Our recent Aligning Policies for a Low-Carbon Economy report highlights the scope of potential to improve policy alignment across the economy for green growth. Our sister agencies are also undertaking relevant work. The International Energy Agency (IEA), for example, continues to look at how energy and climate needs can be reconciled [Energy and Climate Change: World Energy Outlook Special Report]; and track energy market, policy and technology developments relevant to the transition to green growth [Tracking Clean Energy Progress; Medium-Term Renewable Energy Market Report], This publication – Towards Green Growth? Tracking Progress – aims to pull the threads of this considerable amount of work together and take stock of country experience in implementing green growth to enhance green growth policy design. It also looks at how we can improve our institutional settings to accelerate mainstreaming of green growth across the Organisation. The ultimate aim is to accelerate country implementation of green growth. I’d like to now pass over to Nathalie Girouard, former Co-Ordinator of the Green Growth Strategy at OECD from 2009 to end-2014 (now Head, Environmental Performance and Information Division, Environment Directorate) to talk us through the outcomes of the report.