Green and growing, or ripe and rotting?

Towards green growthNathalie Girouard, OECD Environment Directorate

In a recent lecture on climate change, the OECD Secretary-General stated that “Tomorrow’s societies engineered around yesterday’s solutions won’t get us there.” The OECD’s work on green growth is just one example of where the Organisation is working towards the development of solutions for today.

The OECD’s 2011 Green Growth Strategy set out a framework for governments to foster economic growth and development, while ensuring that natural assets continue to provide the resources and environmental services necessary for human well-being. To ensure the OECD’s advice on green growth did not become a solution for the past, the Organisation recently prepared the Towards Green Growth? Tracking Progress report. The report takes stock of country experiences and challenges in implementing green growth. It reviews and strengthens the green growth strategy based on the lessons from country efforts, as well as advances in OECD work – including more than 130 green growth publications and over 115 country surveillance reviews containing more than 300 green growth recommendations. Lastly, it assesses the green growth mainstreaming efforts that have been made within the OECD, as these experiences are relevant and instructive for governments and organisations going through the same process. The aim of the report is to accelerate countries’ implementation of green growth policies by providing more targeted and coherent policy advice. In other words, provide relevant solutions that are effective for today’s green growth challenges.

The analysis of country experience shows that countries are making progress, but more work is needed. Thus far, 42 countries have signed on to the OECD’s declaration on green growth. Roughly a third of OECD member countries and a number of OECD partner countries have adapted, or are adopting the Green Growth Strategy’s indicator framework. Examples of green growth policies include China’s 12th 5-year plan on green development, Portugal’s Green Growth Commitment, and Ireland’s framework for sustainable development. Yet to date, no country has comprehensively linked environmental and economic reform priorities. The analysis of the OECD’s green growth recommendations identified that common challenges facing countries relate to the implementation of market instruments to price pollution; orienting tax systems to advance green growth; designing environmentally relevant subsidies; and gearing sectoral policy towards green growth.

This analysis, along with the assessment of OECD’s work on green growth allowed for the development of several key findings and recommendations. First, direct pricing of environmentally harmful activity is indispensable to green growth, but political opposition remains a challenge. To respond to this opposition, more effort is required to tackle the social challenges of reform (e.g., labour market and household impacts). In addition, where constituencies are strongly against tax increases or shifts, governments may need to consider policy mechanisms other than direct pricing.

Misalignments in government policy are also acting as a major hurdle to meaningful reform. Two prominent examples are that governments spend roughly $640 billion per year on environmentally-harmful fossil fuel subsidies and that diesel fuel is taxed at a lower rate than gasoline in 33 out of 34 OECD countries – despite the fact that diesel emits higher levels of harmful local air pollutants and CO2.

The analysis of the mainstreaming process for green growth at the OECD showed that it is proceeding rapidly, but unevenly. Around 70% of OECD country policy surveillance documents contain green growth recommendations. This accomplishment is in part driven by the OECD’s Economic Surveys, where over 80% include green growth recommendations. The elements driving this successful mainstreaming include: high-level leadership and clear accountabilities; formal structures for collaboration; clear articulation of how green growth links to other policy priorities; and dedicated human resources. Nevertheless, more work is needed to better integrate green growth into the OECD’s work on investment and innovation. The forthcoming Green Growth and Sustainable Development Forum on Systems Innovation for Green Growth is one mechanism that can be used to advance work in this important area.

To ensure that the OECD’s green growth strategy remains relevant, the report also outlines a series of improvements. These are intended to modernise the strategy and outline work priorities for governments, the OECD and others. These include enhancing the understanding of complementarities and trade-offs between economic and environmental goals; enhancing public trust in green growth by addressing the social impacts of reform; and ensuring that policies are coherent and aligned within and across sectors. Further developing and considering the ocean economy and mining in gearing sectoral policies for green growth. Lastly, using green growth indicators to raise awareness, measure progress and identify opportunities and risks as well as factoring in the challenges and opportunities that green growth represents for developing and emerging economies.

2015 needs to be a big year for green growth. The Tracking Progress Report is just one of the many contributions to continue to advance work in this field. While governments and international organisations endeavour to green growth through the forthcoming Sustainable Development Goals and the COP21 negotiations, it is important to remember that solutions for today can also come from individuals. As George Eliot said, “The strongest principle of growth lies in human choice.”

Useful links

To explore the findings of the report, a publication launch webinar will be hosted by the Green Growth Knowledge Platform (GGKP) on 27 July, featuring Carlo Carraro (Co-Chair of the GGKP Advisory Committee), the OECD’s Chief Economist Catherine L. Mann and Kevin Urama (Managing Director, Quantum Global Research Lab) as the lead discussants.

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Green Growth and Sustainable Development: Key OECD documents

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