Catherine L. Mann discusses the links between economic growth, the environment, and sustainability. She outlines three key pillars: (1) firms and households, (2) income and expenditure, and (3) reducing environmental inputs through recycling and extended product life. Models show environmental degradation could reduce global GDP by 1-7% by 2060, though many impacts are excluded. Air pollution alone could cost $3-25 trillion annually by 2060 in mortality and morbidity. Studies also suggest stringent environmental policies can be compatible with growth by creating both winners and losers among firms, and positive and negative trade effects are very small. Environmental policies provide opportunities if designed to promote green growth.

1. Catherine L. Mann
OECD Chief Economist
Paris, 24-25th October 2016
The Environment
and Growth:
Stating facts, dispelling myths and
identifying what we don’t know

2. Three pillars of growth and sustainable
development (and wellbeing)
2
Global Forum on
Environment 2016

3. What are the consequences of a circular
economy? (actual and “measured”?)
Firms
Households
(&
environment)
Income (wages,
interest, profits)
=GDP
in return for inputs into
production
Expenditure
=GDP
in return for goods and
services
Reduce
(env) inputs
Consumer 2
consumer
(eg sharing)
Recycling
Extended
capital life
Recycling,
reuse,
extended
product life
New
services

4. 4
Example: modelled effects of environmental
degradation (climate change) on growth…
Source: ENV-Linkages calculations
Uncertainty ranges in 2060
dueto uncertainty in ECS
-7%
-6%
-5%
-4%
-3%
-2%
-1%
0%
2010 2020 2030 2040 2050 2060
-South & South East Asia
OECD Pacific
Rest of Europe & Asia
OECD Europe
Latin America
OECD America
World
-Sub Saharan Africa
Middle East & North Africa

5. ... but a lot of important effects and risks are not
included
Includes:
• Agriculture productivity
• Sea level rise (capital
and land losses in costal
zones)
• Health (heat stress)
• Energy demand
• Tourism
• Capital damages from
hurricanes
Doesn’t include:
• Fatalities from
heatwaves
• Urban damages from
river floods
• Biodiversity loss
• Large-scale disruptive
events
Tail risks

6. 6
Global non-market costs of air pollution:
mortality and morbidity
Mortality costs: USD 3 trillion
0
5
15
25
35
2015 2020 2025 2030 2035 2040 2045 2050 2055 2060
Non-market costs (mortality and morbidity)
TrillionsofUSD(2010,inPPP)
-> USD 18 – 25 trillion in 2060
Morbidity costs: USD 300 billion -> USD 2 trillion in 2060
Source: OECD (2016), The economic consequences of outdoor air pollution

7. Are stringent environmental policies compatible with
growth?

8. Firms – both losers and winners
Source: Albrizio et al.
(2014)
8
Effects of tightening of environmental policies on productivity
growth

9. Very small effects on trade – both
positive and negative
Source: Kozluk and Timiliotis, (2016), Do environmental policies affect
global value chains? A new perspective on the pollution haven hypothesis.

10. More evidence: environmental policies
do provide opportunities
Source: Sauvage, 2014. 10

11.  How does economic growth depend on the
environment and natural resources?
(Session 2)
 How does environmental degradation
affect economic growth? (Session 3)
 How environmental policies can be
designed to be compatible with (green)
economic growth? (Session 4)
GFE 2016: Towards quantifying the links
between the environment and growth

12. • Acknowledgements:
• Tomasz Kozluk
Thank you!