Presentation by the OECD

The OECD Green Growth Strategy
and its measurement framework
Workshop on green growth measurement in Armenia
11 May 2016, Yerevan
Krzysztof Michalak and Mikaela Rambali
Green Growth and Global Relations Division
OECD Environment Directorate

Green Growth indicators
• Risks to development are rising as growth continues to erode
natural capital.
– If left unchecked, this would mean increased water scarcity, resource
bottlenecks, greater pollution, climate change, and unrecoverable
biodiversity loss.
• It is becoming increasingly costly to substitute natural capital by
physical capital.
• Change does not necessarily follow a smooth, foreseeable
trajectory.
New ways of producing and consuming things, and even
redefine what we mean by progress and how we measure it
Need for Green Growth

What do we mean by “green growth”?
Fostering economic growth and development
while ensuring that the natural assets continue to provide
the resources and environmental services
on which our well-being relies.
• Securing future wellbeing
• Delivering growth that is within environmental limits
• Implementing smart policies to stimulate innovation and avoid
lock-in to costly systems
• Getting the prices and governance frameworks right

Israeli economic efficiency of agricultural water
use, 1986-2008
Source: OECD (2010), OECD Review of Agricultural Policies: Israel, 2010 . 5
0
20
40
60
80
100
120
140
1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
Index 1986=100
Value of agricultural production per m3 of water utilized for irrigation
Real price of fresh water to agriculture (inflation adjusted)

• Productivity.
– Incentives for greater efficiency in the use of resources and natural assets, including
enhancing productivity, reducing waste and energy consumption, and making resources
available to their highest value use.
• Innovation.
– Opportunities for innovation, spurred by policies and framework conditions that allow for new
ways of creating value and addressing environmental problems.
• New markets.
– Creation of new markets by stimulating demand for green technologies, goods, and services;
creating new job opportunities.
• Confidence.
– Boosting investor confidence through greater predictability and continuity around how
governments deal with major environmental issues.
• Stability.
– More balanced macroeconomic conditions, reduced resource price volatility and supporting
fiscal consolidation through, for instance, reviewing the composition and efficiency of public
spending, and increasing revenues through putting a price on pollution.
Green growth can open new sources of
growth

• From bottlenecks that arise when resource scarcity or reduced
quality makes investment more costly, such as the need for capital
intensive infrastructure when water supplies become scarce or
water quality decreases
– the loss of natural capital can exceed the gains generated by economic activity,
undermining the ability to sustain future growth.
• From imbalances in natural systems that raise the risk of abrupt,
highly damaging – and potentially irreversible – effects
– attempts to identify potential thresholds suggest that some – climate change,
global nitrogen cycles and biodiversity loss – have already been exceeded.
Green growth can also reduce the risk to
growth

• Reframing growth and analytical frameworks
– Account for the contribution that natural assets and ecosystem services
make to growth: in measurement, in analysis, in decision making.
• An operational and coherent policy framework to help achieve
concrete results, esp.:
– Remove environmentally harmful subsidies
– Make pollution more costly
– Value and price the natural assets and ecosystem services: stimulate
innovation
– Sound financial and governance framework
• Reliable measurement tools and indicators
– Inform policy development and
– Measure progress and policy outcomes
What is required to move towards “green
growth”?

• Initiated in 2009, delivered to Ministers in 2011
• Drawing upon long-standing experience with:
• Fact-based policy analysis and evaluation
• Country reviews
• Environmental policies and economy-environment
policy integration
• Multi-disciplinary inter-governmental process
• Involving 25 OECD Committees: Finance, Economy,
Environment, Agriculture, Development Co-operation,
Industry, etc.
• International cooperation for green growth
• GG Knowledge Platform
(GGGI, WB, UNEP, OECD)
• Cooperation and partnerships: UNEP, UNSD, UNIDO, World
Bank, European Union, ...
The OECD Green Growth Strategy

• GG Reports for Emerging Economies
• GG and Developing Countries
• Food and Agriculture
• Energy (OECD/IEA)
• Biodiversity
• Water
• Development
• Innovation & technology transfer
• Freedom of investment for GG
• Green Financing
• Green Cities
• Environmental regulations and growth
• Job potential of a shift towards a low-
carbon economy
Mainstreaming green growth in OECD policy work
Sectoral and thematic Studies

• Country peer reviews and studies
• Economic Surveys
• Environmental Performance Reviews
• Innovation Reviews
• Investment Policy Reviews
• Other OECD Strategies
• Jobs, Skills, Innovation
• Development
• Greening Growth and Going for
Growth
• Analyse the side effects of growth-enhancing
policy priorities on the environment (and on
income distribution).
• Analyse the links between environmental
policies and outcomes and the effects of
environmental policies on growth
Mainstreaming green growth in OECD policy work
National and multilateral policy surveillance

Monitoring progress:
Measurement framework
and indicators
12

• At the core of the OECD GG Strategy
• Drawing upon experience with indicators, statistics,
accounts
• Concrete outputs
– Conceptual measurement framework
– Set of indicators
– Database
• Used in OECD work: policy analysis
and country reviews
• Applications in countries
Monitoring progress towards Green Growth

• Pragmatic
– No composite indicator, rather a set of internationally comparable
indicators of manageable size
• A set of about 25 to 30 indicators
• A small sub-set of 6 headline indicators for communication purposes
– Selected from existing OECD work
• Balanced
– Balanced coverage of “green” and “growth”
– Balance between relevance for OECD countries and for key partners
– Balance between relevance for international work and for countries
• Flexible
– Easy to adapt to countries’ circumstances
– Easy to apply at macro-, meso-, micro-levels
– Easy to improve and develop further
Monitoring progress towards green growth
OECD approach

Conceptual measurement framework
Economic activities (production, consumption, trade)
Consumption
Households
Governments
Investments
Outputs Inputs
Energy & raw materials
water, land, biomass, air
Pollutants
waste
Income
Goods& services
Residuals
Labour
Capital
Resources
13
Production
Multi-factor
productivity
Recycling,
re-use
remanufacturing,
substitution
Natural asset base (capital stocks, environmental quality)
2 Resource
functions
Sink
functions
Service
functions
Policies
Measures
Opportunities
4
Policy
instruments,
innovation,
financing,
education,
employment
Amenities, health &
safety aspects
Combines the main features of green growth with basic accounting principles and the PSR model

Five inter-related indicator groups and topics
• What are the growth characteristics of the
economy? its social context?
• Is the natural asset base preserved?
• Are there risks of future shocks to growth?
• Is the economy becoming greener? More
resource efficient?
• How does this contribute to growth and to
the productivity of the economy?
• Do people benefit from greener growth?
• Are we taking the right measures to
catalyse investments and innovation for
greening the economy?
• Is greening the economy opening up new
sources of growth?
The environmental and
resource productivity of the
economy
1
• Carbon and energy productivity
• Resource productivity: materials, nutrients, water
• Multi-factor productivity
The natural asset base of the
economy2
• Renewable stocks: water, forest, fish resources
• Non-renewable stocks: mineral resources
• Biodiversity and ecosystems
The environmental dimension
of quality of life3
• Environmental health and risks
• Environmental services and amenities
Economic opportunities and
policy responses
4
• Technology and innovation
• Environmental goods & services
• International financial flows
• Prices and transfers
• Skills and training
• Regulations and management approaches
Socio-economic context and
characteristics of growth
• Economic growth and structure
• Productivity and trade
• Labour markets, education and income
• Socio-demographic patterns

Headline indicators to ease communication
Environmental and resource productivity
1. CO2 productivity (production-based, demand-based)
3. Multifactor productivity including environmental services
2. Non-energy material productivity (production-based, demand-based)
Carbon productivity
Resource productivity
Multifactor productivity
6. Air pollution (population exposure to PM 2.5)
Environmental quality of life
Environmental health and risks
Economic opportunities and policy responses
Placeholder – no indicator specified
Technology and innovation, environmental goods
and services, prices and transfers, etc.
The natural asset base
4. Natural resource index
5. Changes in land use and cover
Renewable and non-renewable stocks
Biodiversity and ecosystems
“Green” difficult to isolate
Diversity of country circumstances, of instruments
 countries to choose
• Selected from full set
• For communication with policy makers, the media, citizens

Green Growth indicators 18
Foundations and overall indicator architecture
Monitoring progress towards Green Growth
Socio-economic
& growth
characteristics
Environmental
and resource
productivity
Natural
asset
base
Environmental
quality of life
Economic
opportunities
and policies
OECD indicators and statistical databases
Economic performance
National accounts
Productivity
Environmental
performance
Resource productivity
Science &Technology
Innovation
Entrepreneurship
Development aid
Investment
Trade
Employment
Education
Energy
Agriculture
Transport
UNEP, WB
SEEA
Review & selection:
•Policy relevance
•Analytical soundness
•Measurability
EU
Measuring well-being and the progress of societies – GDP and beyond
Member
countries
IGOs
National
indicators
UN SDGs
Better Life initiative
• Better life index
• How’s life
• Income inequality
UNECE

Green growth indicators and SDGs
UN Statistics (2015) List of indicator proposals, http://unstats.un.org/sdgs/files/List%20of%20Indicator%20Proposals%2011-8-2015.pdf;
Goal 2: End hunger, achieve food security and improved nutrition, and promote sustainable agriculture
• Natural asset base
• Environmental and resource productivity
Goal 3: Ensure healthy lives and promote well-being for all at all ages
• Environmental dimension of life
Goal 4: Ensure inclusive and equitable quality education and promote life-long learning opportunities for all
• Economic opportunities and policy responses
Goal 6: Ensure availability and sustainable management of water and sanitation for all
• Environmental quality of life
Goal 7: Ensure access to affordable, reliable, sustainable, and modern energy for all
Goal 8: Promote sustained, inclusive economic growth, full and productive employment and decent work for all
Goal 9: Build resilient infrastructure, promote inclusive and sustainable industrialisation and foster innovation

Green growth indicators and SDGs
Goal 10: Reduce inequality within and among countries
Goal 11: Make cities and human settlements inclusive, safe, resilient and sustainable
• Environmental quality of life
Goal 12: Ensure sustainable consumption and production patterns
Goal 13: Take urgent action to combat climate change and its impacts
Goal 14: Conserve and sustainably use the oceans, seas and marine resources for sustainable development
Goal 15: Protect, restore and promote sustainable use of terrestrial ecosystems, sustainability manage forests, combat
desertification and halt and reverse land degradation and halt biodiversity loss

• GG indicators are applied in OECD work: country studies,
peer reviews
– 130 GG relevant publications since 2011
– 80 country reports with GG recommendations
• GG indicators are applied in countries: OECD countries,
emerging economies, developing countries
– Chile, Czech Republic, Denmark, Germany, Korea, Mexico,
Netherlands, Poland, Slovak Republic, Slovenia, Ukraine…
– LAC: Colombia, Costa Rica, Ecuador, Guatemala, Paraguay, Peru
– Kyrgyzstan, work in progress…
– 8 East-Asian countries
 Exchange of experience and best practices
 Feedback on relevance
 Contribution to indicator improvement
Green Growth Indicators in practice

OECD Environmental performance reviews: Germany
Part I. Progress towards sustainable development
Towards green growth
Key environmental trends

The natural asset base The environmental quality of life

0
10 000
20 000
30 000
40 000
50 000
60 000
0
1
2
3
4
5
6
7
8
1995 1997 1999 2001 2003 2005 2007 2009
%
Environmentally related tax revenue
% of GDP
% of total tax revenue
EUR millionb
0 2,000 4,000 6,000 8,000 10,000
Public Air
Public Wastewater
Public Waste
Public Noise
Business Air
Business Wastewater
Business Waste
Business Noise
Specialised enterprises Wastewater
Specialised enterprises Waste
EUR million, 2000 prices
2000 2008
Pollution abatement and control expenditure by sector and domain
Source: Federal Statistical Office.
Environmentally related tax revenues

Country examples

• Indicator selection
• Reflecting national circumstances
• Balance between “green” and “growth”
• Data compilation and measurement
• Identifying data sources across government agencies
• Organising data flows
• Harmonising the data and addressing quality issues
• Interpretation and communication
• Placing the indicators in the country’s context
• Correctly interpreting the results and communicating them
• Institutional coordination and capacity building
• Many actors involved, need for continuity in the measurement
efforts, coping with limited resources
 institutional coordination and cooperation, training and capacity
building; proper funding and priority setting
Work on GGIs contributes to better coordination, to
improve EIS and their connection to economic IS
 Learning by doing is essential!
27
Lessons learned

 Fill data gaps
• Consistent environmental-economic data at industry level
 structural changes; industry profiles
• Natural assets and material flows
• Biodiversity and ecosystem services
• Quality of life dimensions [“well-being”]
 Capture better
• The growth contribution of natural assets
• The “greening” of economic sectors beyond “eco-industries”
• Economic opportunities and the effectiveness of policies
 Role of System of Environmental-Economic Accounts (SEEA)
• Key for consistent information on environment-economy interface
• Key for enabling a breakdown by industry
• Key for better capturing the growth contribution of natural assets
29
Advancing the measurement agenda

• The list of indicators in the OECD set is not final
– About 20 indicators are measurable at varying degrees of quality and regularly published
(2011, 2014, 2017)
– Some indicators are not yet fully measurable, but kept to drive measurement agenda
– List of indicators will need to evolve accordingly if better data is available.
• Further develop the indicators (methodologies, underlying
data, interpretation)
GG headline indicators
• Raw material productivity (demand-based; footprint approach)
• Environmentally adjusted multi-factor productivity growth
• Natural resource index (current focus on sub-soil assets)
• Land cover and land use (building on geospatial data)
• Population exposure to air pollution (building on geospatial data)
Other indicators
• Nitrogen flows (nutrient balances),
• Policy response indicators: Innovation (patents); Tax systems (taxes, subsidies, …);
Environmental policy stringency
Ongoing work (1)

• Increase the availability of environmental data by industry
– Air and GHG emissions
– Waste generation, waste water generation, water use
– Expenditure, taxes
• Expand country coverage in database
• OECD, BRIICS, G20
• Strengthen the use of indicators in OECD work
– Country environmental performance reviews
– Economic surveys
– Gain additional feedback on relevance and interpretation (particularly for
new indicators)
• Work with countries to apply GGIs
– Joint OECD-DRC project “Green growth in the context of industrial
upgrading in China”
– EECCA countries
Ongoing work (3)

Green growth indicators
For more information, see
www.oecd.org/greengrowth and
www.oecd.org/greengrowth/indicators
Thank you!

• Traditional measure of productivity growth
• A measure of economic performance that accounts for multiple factor inputs
• Links with material living standards
• Provides insights about long term growth prospects
– BUT:
• can be overestimated in countries where output growth relies on depletion of
natural capital, and on heavily polluting technologies
• can be underestimated in countries that invest in more efficient use of (domestic)
natural resources and invest in pollution abatement and control
• Adjusted measure of productivity growth
• Provides a more accurate measure of economic performance for multiple factor
inputs including the consumption of natural resources and the generation of
undesirable outputs (pollution, waste, …)
• Links “green” and “growth”:
• Provides insights about ways to achieve more sustainable long-term growth
• Fosters the integration of environmental concerns in economic policies
• Starting point for analysing drivers of green growth
34
Environmentally adjusted multifactor productivity growth

• Work so far
– Development of methodology (coherent with ‘traditional’ productivity
measures)
– Pilot calculations for OECD and G20 countries
• For all OECD and G20 countries, from 1990 to 2013
• Accounting for selected air emissions as negative by-products (8 GHG and air
pollutants: CO2, SOx, NOx, CH4, N2O, NMVOC, CO, PM10)
• Accounting for the use of selected natural assets (14 types of fossil fuels and
minerals: Hard coal, soft coal, gas, oil, bauxite, copper, gold, iron ore, lead,
nickel, phosphate, silver, tin and zinc)
– Data sources
• OECD Productivity database; Total Economy Database (TED)
• OECD data on natural asset accounts (and WB WAVES database)
• OECD data on air emission accounts (and other air emission data)
• Emissions Database for Global Atmospheric Research (EDGAR)
• Next steps
– Use the indicators in country reviews; gain feedback
– Improve and complete underlying data
35

• Selected countries, partial measures, long-term annual averages
Note: a zero contribution of natural capital does not mean that a country did not extract any domestic resources in a
given year; rather, it means that its economy has continued to rely on this input in the same way as the previous year
36
Identification of sources of growth
Output growth Input growth Residual growth
OECD
Pollution-
adjusted GDP
GDP
Pollution
abatement
Contribution
of labour
Contribution of
produced capital
Contribution of
natural capital
Environmentally
adjusted multifactor
productivity
Period
Australia 3.15 3.30 -0.15 0.58 0.62 0.09 1.85 1991-2012
Chile* 4.94 5.20 -0.26 0.64 2.48 0.34 1.49 1991-2012
France 1.89 1.57 0.32 0.05 0.44 0.00 1.40 1991-2013
Germany 2.12 1.44 0.68 -0.07 0.42 -0.01 1.78 1991-2013
Italy 1.04 0.72 0.31 0.01 0.32 0.00 0.70 1991-2013
Japan 1.33 0.93 0.40 -0.32 0.53 0.00 1.12 1991-2012
Korea 4.36 5.28 -0.93 0.20 1.29 0.00 2.87 1991-2013
Mexico* 2.05 2.77 -0.73 0.24 0.85 -0.01 0.96 1991-2013
Netherlands 2.35 1.96 0.39 0.46 0.58 0.02 1.30 1991-2013
Norway* 2.70 2.47 0.23 0.21 0.82 -0.16 1.84 1991-2013
Poland* 3.76 3.71 0.05 -0.25 1.40 0.00 2.61 1991-2013
Portugal 1.63 1.53 0.09 0.13 0.60 0.00 0.90 1996-2011
United Kingdom 2.35 2.12 0.23 0.15 0.49 -0.09 1.80 1991-2013
United States 2.57 2.49 0.08 0.32 0.50 0.01 1.74 1991-2013
Brazil* 2.71 2.97 -0.25 0.44 0.90 0.09 1.29 1991-2013
China * 9.39 10.18 -0.79 0.44 6.26 0.27 2.42 1991-2013
India* 5.49 6.52 -1.04 0.89 2.47 0.07 2.06 1991-2013
Indonesia* 4.92 4.97 -0.05 0.48 1.93 0.09 2.43 1991-2012
Russia* 2.82 2.59 0.24 0.20 -0.11 0.59 2.14 1994-2012
South Africa* 2.49 2.66 -0.17 0.37 0.98 0.00 1.14 1991-2012

-1.5
-1
-0.5
0
0.5
1
CZE
DEU
HUN
BEL
JPN
NLD
FRA
ITA
LUX
AUT
SWE
SVK
CHE
RUS
GBR
FIN
NOR
LTU
LVA
DNK
SVN
IRL
PRT
EST
USA
GRC
ISL
POL
CAN
IDN
NZL
ESP
ARG
AUS
ZAF
ISR
BRA
CHL
COL
CRI
MEX
CHN
SAU
KOR
IND
TUR
%pointsofPA-GDP
growth
Adjustment for pollution abatement
-0.4
-0.2
0
0.2
0.4
0.6
0.8
RUS
SAU
CHL
ISR
CHN
COL
AUS
IDN
BRA
IND
CAN
FIN
ARG
NLD
EST
NZL
USA
LTU
GRC
TUR
ZAF
PRT
ESP
POL
CRI
SWE
LUX
BEL
CHE
JPN
KOR
LVA
ISL
DNK
SVN
AUT
FRA
SVK
CZE
ITA
DEU
IRL
MEX
HUN
GBR
NOR
%pointsofPA-GDP
growth
Contribution of natural capital
37
Identification of sources of growth (1990-2013)
Countries with increased emissions  GDP growth adjusted downward
Countries with decreased emissions  GDP growth adjusted upward
Countries with declining contributions of NC :  negative values
Countries with increasing contributions of NC :  positive values
Countries with stable contributions of NC :  close to zero values

Experimental data for China
• EAMFP growth has
been decreasing at a
significant rate
• Increasing reliance on
natural resource
extraction to fuel
growth (coal, oil, iron)
• In case of declining
stocks or negative
demand shocks 
need to search for
alternative sources of
growth to sustain
living standard
• Economic growth
generated at the
expense of higher
pollution

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