OECD Green Growth Strategy SELA Regular Meeting of the Latin American Council Caracas, Venezuela

1. OECD Green Growth Strategy SELA Regular Meeting of the Latin American Council Caracas, Venezuela 21 October 2011 Nathalie Girouard Coordinator, OECD Green Growth Unit

2. 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 growthand itneeds 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

3. 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

4. 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

5. Reducing risks of negative shocks to growth • Resource bottlenecks • Imbalances in natural systems Source: World Bank Source: OECD

6. Risks in not going green: pollution and human health Premature deaths from PM10 exposure(per million inhabitants) Source: OECD

7. Risks in not going green: shocks to food supply Biodiversity loss(2000-2030) Pressures on natural capital By 2030, business as usual: Production +35% Land +6% Land at risk of erosion + 17% Water scarcity +30% % mean species abundance loss Source: OECD

8. Green growth initiatives around the world Source: OECD

9. 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

10. Better measurement: the capital base of economies Capital stock shares Source: Arrow et al (2009) in NBER WP 16599

11. 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: • 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 • 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

12. The modest claims of environmental taxes Revenue, % of GDP Source: OECD/EEA database on instruments for environmental policy.

13. Fossil fuel subsidies: subsidising CO2 emissions Income gains from unilateral fossil fuel subsidy removal (% change in household income vs BAU) US$ 557 bn (2008) US$ 312 bn (2009) emerging & developing country fossil fuel consumption subsidies 10% less GHG emissions globally with removal of fossil fuel subsidies ? developed country subsidies USD 115 billion, 2009 investment in renewables Source: Joint OECD/IEA analysis Source: OECD analysis, based on IEA data

14. Innovation in unexpected places Source: OECD

15. Infrastructure investment Global investment 2010-2030(USD millions) Source: OECD

16. An immediate challenge is to scale up public and private sources of funding to support climate change action North-South investment flows, USD billions (2008) Source: updated from Corfee-Morlot et al. 2009; OECD calculation based on OECD DAC-CRS, UNCTAD WIR (2010), World Bank (2010)

17. What are the implementation challenges? • 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

18. A framework for green growth indicators

19. Green Growth framework

20. Directions for future work