Sustainable Development Panel Nov 2014 Prague - Simon Upton

1. Simon Upton
OECD, Director for the Environment
Economic Instruments to
Achieve Sustainable
Development
Sustainable Development Forum 2014
Prague, 28 November 2014

2. HOW TO
Internalise
externalities?
Induce
competition
?
Boost
investment
?
Track
progress
?
Align policies
?
Engage
people
? Make use of new
technologies
?
Tackle social
aspects
?

3. Tonnes of carbon per PPP equivalised unit of GDP (EUR)
ImplicittaxratepertonneofCO2
USA
Estonia
Switzerland
Source: OECD (2013), Taxing Energy Use: A Graphical Analysis.
Higher implicit tax rates on carbon are
associated with a lower-carbon economy
Prices work!
Czech
Rep.
Put a price on carbon

4. Taxation of energy in the OECD area
based on carbon content
Source: OECD (2013), Taxing Energy Use: A Graphical Analysis.
Tax on a carbon basis

5. Sources: OECD (2013), Inventory of Estimated Budgetary Support and Tax Expenditures for Fossil Fuels; IEA (2014),
World Energy Outlook; IEA (2013), Tracking Clean Energy Progress Report; OECD (2013), Effective Carbon Prices.
Reform fossil fuel subsidies Send the right signal!

6. Existing, emerging and potential ETS’s
6Source: World Bank (2014), The State and Trends of Carbon Pricing
Comply with ETS
39 national and 23 sub-national

8. 1% of large OECD pension fund assets
invested directly in infrastructure
LARGE OECD
PENSION FUNDS
ASSETS
USD 10 trillion
* based on large OECD pension funds, covering $10+tn
* * BNEF estimates
<1%
INFRASTRUCTURE
INVESTMENT
(direct)
*
<3%
.
**
GREEN INFRASTRUCTURE
INVESTMENT
(direct)
GREEN
INFRASTRUCTURE
INVESTMENT
(direct)
Biomass
and
waste
Geothermal
(0.3%)
Wind
Solar
Unlock investment barriers

10. OECD research: Stricter environmental
policies do not harm productivity growth
10
* Pooled across 1990-2012 for 25 OECD countries
Source: OECD (2014) Working Paper by Albrizio, Botta, Kozluk, Zipperer: “Do Environmental Policies Matter for
Productivity Growth?“
Boost productivity growth
A. MFP growth and EPS levels B. MFP growth and EPS change (3-year moving average)
-0.25
-0.2
-0.15
-0.1
-0.05
0
0.05
0.1
0.15
0 1 2 3 4 5
EPS indicator - level
MFP growth
-0.25
-0.2
-0.15
-0.1
-0.05
0
0.05
0.1
0.15
-0.4 -0.2 0 0.2 0.4 0.6 0.8
EPS indicator - change (3 year average)
MFP growth
EPS indicator of environmental stringency
Multifactor productivity growth
No evident link
But:
In countries with high policy
stringency, low-polluting firms
outperform high-polluting ones
(and reverse)
… and when looking at causal links, then market-based environmental
policy instruments support more productivity growth
0
102030
Density
-.05 0 .05
Residuals
low pollution ind. in high stringency countries
low pollution ind. in low stringency countries
kernel = epanechnikov, bandwidth = 0.0090
Low-pollution
industries tend
to be closer to
the frontier in
high-stringency
countries

12. Address social aspects
Job churning – destruction, creation and reallocation
Source: ENV Linkages Model; Chateau, J., A. Saint-Martin and T. Manfredi (2011), “Employment Impacts of Climate
Change Mitigation Policies in OECD: A General-Equilibrium Perspective”, OECD Environment Working Papers, No. 32,
OECD Publishing.
Job destruction Job creation
OECD simulation results: Sectoral composition of job creation and destruction

13. High-income households spend more
than twice as much as low-income ones
Source: Living Costs and Food Survey 2014, UK ONS
Proportion of total expenditure spent on fuel in the UK, 2012
(by gross income decile group)
Address social aspects

15. Israeli economic efficiency
of agricultural water use, 1986-2008
Source: OECD (2010), OECD Review of Agricultural Policies: Israel, 2010 .
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)
Create incentives …

16. Israeli patents in selected
env. & climate-related technologies
0
10
20
30
40
50
60
70
80
90
100
1995 1997 1999 2001 2003 2005 2007
General environmental management
technologies, 1995-2008
Total patents
Water pollution abatement
number of
patents
Patent counts are based on the priority date, the inventor’s country of residence and use fractional counts on PCT
filings at international phase (EPO designations).
Source: OECD (2011), OECD Patent Statistics Database; OECD, Environment Directorate
… to innovate

18. International
organisations
Advisory Body to the
French Minister of
Environment, Sustainable
Development and Energy
Researchers
Professors
Civil society
Businesses
International
organisations
Source: Conseil Economique pour le Développement Durable (CEDD):
http://www.developpement-durable.gouv.fr/Rapports,13175.html.
Work together

20. Measure and communicate
?
F
E
OECD
Latin America and Carribbean
Eastern Europe, Caucasus and Central Asia
Asia
Applications of green growth indicators

22. ECONOMIC
Climate policy comes on top of existing
policy frameworks and goals
SOCIAL
COMPETITION
FISCAL
DEVELOPMENT COOPERATION
TRADE
INVESTMENT
CLIMATE
Align policies

24. Thank you for your attention!
www.oecd.org/env
@OECD_ENV
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