OECD Green Growth Strategy: Relevant issues for Investment Policy Review of Ukraine

1. OECD Green Growth Strategy: Relevant issues for Investment Policy Review of Ukraine Brainstorming on IPR Chapter: Investment for Energy Efficiency Kyiv, 6 July 2010 Blanka Kalinova OECD Investment Division blanka.kalinova@oecd.org

2. Presentation • OECD Green Growth Strategy: main elements and adopted approaches • Investment in support of green growth • OECD Green Growth Strategy: Relevant issues for Investment Policy Review of Ukraine

3. What is green growth? Definition: A way to pursue economic growth and development, while preventing environmental degradation, biodiversity loss and unsustainable natural resource use. Objectives: maximize the chances of exploiting cleaner sources of growth and develop a more environmentally sustainable growth model. OECD Green Growth Strategy: • Mandate by OECD Ministerial Council meeting in June 2009: bring together economic, environmental, social, technological and development aspects into a comprehensive framework (horizontal & multidisciplinary project) • Interim Report submitted in May 2010; final report in 2011 • International dimension: strategies should be articulated at the national level, but international cooperation and coordination critical

4. OECD approach: From the analysis to policy recommendations • Develop a conceptual framework for understanding green growth; analyse new issues raised by green growth (e.g. potential effects of green growth on the level and nature of employment) • Develop a set of indicators to measure and asses economic, environmental and well-being aspects of green growth (e.g. environmental efficiency of production and consumption) • Peer reviews of national green growth policies: identify best practices and lessons learned • Address political economy considerations of green growth: public actions and corporate practices • Provide a platform for international co-ordination and dialogue through the International Green Growth Dialogue initiative

5. Green Growth Strategy Framework

6. Overcome barriers to green growth • Getting price right for green growth: design market-based instruments (imposing direct cost on the polluter) and environmentally-related taxes (currently only 1.7% of GDP in OECD countries), such as carbon tax • Reform environmentally harmful subsidies: e.g. subsidies to fossil-fuel energy consumption or production (USD 310bn in 20 non-OECD countries) and agricultural subsidies (USD 265bn in OECD countries) – “win-win” opportunity (reducing budget burden and avoiding misallocation of resources) • Removing barriers to trade in environmental goods and services; encourage international technology transfer • Strengthening policy coherence: avoid environmentally-related taxes which would burden low-incomes or prompt pollution-intensive firms to reallocate their production – international cooperation required to overcome potential competitiveness concerns

7. Promote trajectory shift and support the transition • Acting on both demand and supply sides: diffusion of green technologies and measures for greener consumption • Adopt an integrated policy mix: market pricing signals (environment-related taxes, charges, tradable permits) and non-market based instruments (regulations and policies to support green technologies and innovations) • Design and implementation: no one-size-fits-all approach in the choice of policy instruments – national strategies can differ; • Reform approach: smooth the transition through labour market policies and upgrading skills and competencies;

8. OECD Green Growth Strategy and IPR of Ukraine • Getting price right: energy prices must first reflect production costs to pass right signals to producers and consumers (eliminate energy production/consumption subsidies) • Manage transition and shift to green growth: • Introduce progressively environment-related taxes • Put in place regulations and policies to support green technologies • Take into account the effects on growth, employment and skills • Green growth policy in the energy sector: contributionby International Energy Agency – 3 main areas: • Energy efficiency • Renewable energy • Low carbon technologies

9. Energy efficiency Investing in energy efficiency provides several advantages: • Increase energy security • Reduce energy costs • Improve environment Main energy efficiency policies: • National strategies to impose minimum energy performance standards for appliances and equipment • Innovative financial instruments to encourage energy efficiency investment, e.g. public tariff guarantees in public-private partnership International Partnership for Energy Efficiency Cooperation (IPEEC) established in 2008 (including China, Japan, Russia, UK, USA, the EC) to facilitate actions aimed at high energy efficiency gains

10. Investment in support of green growth: Contribution to OECD Green Growth Strategy • Corporate practices to address climate change (notably greenhouse gas emissions): building on principles of responsible business conduct as reflected in the OECD Guidelines for MNE • Mobilise private investment in support of green growth - the role of government policy: using the OECD Policy Framework for Investment to identify within different policy areas covered (e.g. tax, trade or competition policies) how governments can contribute to encourage investment in non-polluting and environment-friendly technologies • Green Foreign Direct Investment Indicators: identify discriminatory barriers against “green” foreign investment

11. OECD Survey on Business Practices to Reduce Emissions • Survey carried out in March-June 2010: more than 60 companies from 15 countries responded to the questionnaire, representing a broad range of sectors (energy, mining, industry, food, pharmaceuticals) • Issues addressed: • Accounting and disclosing greenhouse gas (GHG) emissions: (i) why? (drivers of business actions – regulations, costs, societal expectations); (ii) how? (reporting framework); (iii) difficulties (to estimate/collect data) • Corporate plans to reduce emissions : (i) motivations (regulations, costs, pressures); (ii) what actions? (energy efficiency, use of less carbon-intensive inputs/technologies) • Interface with suppliers and consumers: (i) involving suppliers; (ii) information to consumers (labels); (iii) governments measures

12. Green Investment module: Relevant issues for IPR of Ukraine • OECD Guidelines for MNE: Ukraine’s adherence is the ultimate goal of the IPR; the Guidelines are recommendations to companies on responsible business conduct; ongoing update will provide further guidance to business in addressing growing environmental concerns • OECD Policy Framework for Investment (PFI): already used in UA IPR – the special chapter on energy efficiency could provide useful insights for envisaged “greening” PFI, i.e. how to create investment-friendly environment for “green” investment • OECD survey on business practices to reduce emissions: some answers from companies operating in Ukraine welcome to see their practices in comparison with other countries

13. Some insights from the OECD Survey on business practices to reduce emissions: Motivations for undertaking a GHG inventory

14. OECD Survey: Motivations to reduce GHG emissions

15. OECD Survey: Actions taken by companies to reduce GHG emissions

16. OECD Survey: Usefulness of government measures to engage suppliers

17. OECD Survey: How companies transfer clean technologies

18. OECD Survey: Usefulness of government measures in host countries to support technology transfer by companies

19. Possible lessons for IPR from the OECD survey Energy savings/efficiency is the main motivation of the surveyed firms for: • undertaking a GHG inventory • reducing GHG emissions • actions to reduce GHG emissions Government measures/public policy play a critical role to: • engage suppliers • support technology transfer by companies Some evidence of “greening” effects: • Companies transfer the same level of technology & procedures in all company Invitation to companies operating in Ukraine to respond to OECD questionnaire

20. For more information on OECD Green Growth Strategy www.oecd.org/greengrowth Investment Policy Issues www.oecd.org/daf/investment