Death and taxis: Why the Green Growth and Sustainable Development Forum matters

GGSD Forum 2014
Click to go to the Forum website

The Electric Flats was the name given to a group of houses on the corner of the street in what’s now called North Lanarkshire, Scotland, where I grew up. It’s not that the rest of us didn’t have electricity (we even had indoor toilets) but the Electric Flats had a radiator in every room. Nowadays, you often see images of these blocks of 1960s and 70s social housing being dynamited to make way for something nicer. But at the time they were built, they were a great improvement on the picturesque slums the tenants had lived in before. Very few houses had central heating (look at how much clothing people wear indoors in old films) and when the first Scottish winter in their new flats arrived, the chosen few basked in the glow of modern home comfort. Then, as Glasgow writer James Kelman described it, it was as if somebody had thrown a giant switch and all the heating snapped off on the same day. The day the electricity bills arrived.

That’s the “fuel poverty” the February 2013 OECD survey of the UK economy mentions, so the problem obviously hasn’t gone away. It sounds incredible, given that GDP per capita has risen from less than $15,000 to over $35,000 in real terms since the Electric Flats were built. However, the expansion of the economy hasn’t benefited everybody equally and while many have done well, inequality is actually growing worldwide according to our latest figures. That’ll be the first thing discussed at the Green Growth and Sustainable Development Forum taking place at OECD headquarters on 13-14 November. This year’s theme is “Addressing the social implications of green growth”.

Looking at the agenda of big meetings like these, you can get the feeling that they’re abstract. But when I started writing this article, I was only going to use my neighbourhood as the intro, until I realised that that in fact you could use it as a microcosm of everything that’s being discussed at the Forum, and how it matters to “real” people in “real” life.

The inequality discussion looks at “multi-dimensional living standards and inclusive growth”, meaning not just income, but access to education, public services and so on. The next session looks at the impact of energy sector reform on households. The issues here vary considerably from one country to another. In OECD countries, the debate tends to focus on whether renewables can offer a reliable, reasonably-priced alternative to fossil fuels (and nuclear in countries such as Germany that are phasing out or reducing nuclear energy programmes). In a developing country, the issue may be building an energy infrastructure. The kind of energy supplied could also be an issue. The IEA, co-organising this session, calculate that developing countries spend over half a trillion dollars a year subsidising fossil fuel consumers.

The Forum includes “sustainable growth” in the title and other IEA work provides a grim example of why the vague-sounding “environmentally friendly” growth is, literally, vital. Research with the WHO on energy poverty reported in the 2010 World Energy Outlook shows that cooking will soon kill more people in developing countries than malaria, tuberculosis or HIV/AIDS. Indoor air pollution from burning biomass in inefficient stoves causes over 1.5 million premature deaths per year, over 4000 a day, especially young children. The IEA point out that 1.4 billion people don’t have access to electricity (other than costly batteries). That number will drop by 2030 thanks to general economic expansion, but only to 1.2 billion. Electricity also makes a whole range of other activities from studying to shopping in the evening easier.

Governments play a key role, which is why the Forum flyer says that the event is designed for “those with hands-on experience of shaping policy and advising policy makers in national and local government.” Here’s an example of how policy can make a difference. To go back to old films again, one standard shot of London used to be a double-decker bus poking its way across Westminster bridge in thick fog. The buses are still there, but the “pea soup” fogs like that of 1952 that caused 12,000 deaths (and even caused cinemas to cancel shows because you couldn’t see the screen) are a thing of the past, because the 1956 Clean Air Act made “smokeless” fuels mandatory in certain urban areas.

But let’s leave the big city behind and return home. Across the road from the Electric Flats was the Ravenscraig. It sounds like the setting of a romantic novel, but it was in fact one of the biggest steel works in Europe. It’s no longer there. It was shut down in 1992, then dismantled and sent to Malaysia. The environmental benefits of closing the Craig were immediate and long-lasting – no more sooty rims on flowers, no more racing pigeons dropping dead after flying too close to the smoke stacks… But what about the 800 or so men who worked there and the 10,000 other people whose jobs depended on the plant indirectly?

For some reason, huge numbers of them bought taxis, and the local train station had as many cabs as a major international airport until the implacable law of supply and demand that destroyed their salaried jobs destroyed their business too. The unemployment rate is still 20% above the Scottish average. A joint session at the Forum with the ILO will look specifically at what kind of skills policies can ensure this kind of thing doesn’t happen, and the Forum will examine the labour market implications of green growth more generally.

In North Lanarkshire, other indicators of “inclusiveness” like life expectancy are worse too, so let’s hope that the Forum organisers are right when they claim that “Green growth’s combination of strong economies and a clean environment could increase the well-being of all citizens” and that the Forum helps those attending to make sure that “the right policy mix is applied.”

Useful links

OECD work on green growth and sustainable development

Sustainable Development: Linking economy, society, environment OECD Insights

Making obsolescence obsolete: design to reduce waste

Imagine throwing away 21,000 of these
Imagine throwing away 21,000 of these

Today’s post is by Maroussia Klep of the OECD Environment Directorate

Let’s be honest, waste reduction doesn’t have much of a ring to it. To many, it’s a complex policy issue without much hope if consumers keep throwing their cans away in the street. Yet, designers are taking a different view, looking at reducing waste from a business angle.

The amount of material being extracted and wasted today is scary. In recent decades, the high consumption levels in developed countries, combined with rapid industrialisation in emerging economies, have led to unprecedented levels of demand for raw materials. In just thirty years, the quantity of materials extracted for consumption has increased by 60%. Even more worrying is that a fifth of these materials end up as waste. This represents over 12 billion tonnes of waste per year; the equivalent in weight of more than 21,000 Airbus A380s. Considering that the global economy is expected to quadruple by 2050, and that the world population keeps increasing, one might wonder how, and for how long our planet will be able to keep providing supplies.

In this context, one solution to avoid a collapse of natural resources is to break the link between economic growth and material extraction. A number of OECD countries have already demonstrated that this works: they manage to increase production, while at the same time reducing resource exploitation. These efforts are conducive to a “circular economy” approach. This new model aims to move away from the traditional, linear economic model, under which materials are extracted, consumed, and finally thrown away. With a circular economy, old products are re-used and remanufactured into new ones for as long as possible in order to preserve existing resources and to minimise extraction. When products finally reach their end of life, material is recovered and fed back into the economy, instead of being discarded. If this approach is handled efficiently, the notion of waste could one day become obsolete!

Designers have an important role to play in supporting a circular economy. In addition to studying the aesthetic and practicality of a product, they now have to cope with the threat of resource scarcity, and to somehow create an opportunity from it. In order to encourage re-use and recycling of a product or parts of it, designers can make used products easy to disassemble for example. Think of the quantity of valuable material lost in your old phone abandoned in the cupboard! Designers can also promote the use of recyclable materials in production. In Japan, a green tea company changed the design of its bottles to make them thinner and transparent instead of green-coloured, which facilitated recycling, and reduced costs. The global fashion retailer H&M also jumped on board recently: a few months ago, they launched their first trousers and skirts made out of textiles fibres recycled from used clothing collected from consumers.

These examples show that good design can be good for business – by reducing the quantity of materials purchased and used in production – and, at the same time, diminish pressure on the environment.

Policy makers can encourage and support firms and designers in many ways. First, in order to make the most efficient use of materials, designers need data and guidance on the availability and recyclability of resources. OECD work on Sustainable Materials Management and on Material Flow Analysis support these efforts, by promulgating measures aimed at preventing and reducing waste generation and managing residues in an environmentally sound manner. In addition, policy makers can promote the use of certain materials by setting requirements for green public procurement and product standards. Instruments such as taxes and standards can also be used to encourage recycling and material recovery. Finally, policy makers should ensure the good functioning of recycling markets, and encourage the entry of efficient recycling operators in order to make it a profitable business.

Of course, recycling and re-use efforts are undermined if consumers treat nature like a big garbage dump. Not only continents but even our oceans are starting to resemble giant dustbins. Awareness campaigns and communication efforts towards consumers are thus essential for closing the loop, and require joint efforts by corporations and municipalities. Those are but a few examples whereby public bodies can stimulate efforts by the private sector on the preservation of resources.

We live in interesting times. The planet is being exploited as never before, and there is no sign that global consumption will stop rising. On the other hand, some new trends provide hope. Businesses are starting to worry about the shortage of critical resources and are joining efforts by policy makers to move towards a circular economy. Amidst this paradox, a new, unexpected actor comes on stage: designers. By connecting financial and environmental interests from the point of production, design has indeed the potential to help reduce much damaging waste.

Useful links

OECD work on resource productivity and waste

OECD work on green growth and sustainable development

The right kind of green growth

Green growth indicators 2014It’s the kind of scene travel agents love. A quiet beach where the only sound is the lapping of the waves. Then, the beat of a horse’s hooves, slowly becoming louder. A rider gallops into view, reining in his mount. But then, the horse drops dead and the rider is saved by chance because a worker sees him and manages to drag him to safety in time. The killer is a thick green slime bubbling on the sands. We’re not in some 1950s sci-fi movie. This really happened in Brittany, France, in August 2009.

The horseman, Vincent Petit, is a vet, and he had a toxicology lab carry out some tests. The cause of the horse’s death was probably intoxication by hydrogen sulphide escaping from rotting algae. When these plants wash up on land, a white crust forms and traps the gases. The putrefying algae eventually turn the sand into black sludge, sometimes over a metre deep, containing pockets of poison gas. Vincent Petit’s horse broke the crust trapping these gases.

An official report confirmed the part played by the poisonous gases, and says that the solution is to collect the algae. Some Breton towns spend over 100,000 euros a year clearing away the slime. For environmental groups, the problem should be eliminated, not managed. They argue that the upsurge in recent years is due to nutrients washed off farms into rivers and then into the sea, causing the algae to proliferate.

In any case, that’s not what the OECD means when it says it wants to encourage green growth. Writing in OECD Green Growth Indicators 2014, Rintaro Tamaki, the Organisation’s Deputy Secretary-General, explains that it is about “fostering economic growth and development while ensuring that natural assets continue to provide the resources and environmental services on which well-being relies.” So how are we doing?

It’s a mixed picture. Global CO2 emissions are growing, but OECD countries are “decoupling” emissions from growth, meaning either that emissions are actually declining (absolute decoupling) in a third of the countries, or that GDP is growing at a faster rate than emissions (relative decoupling). OECD countries don’t do so well if you look at final demand though. Some of the reductions are due importing goods with a high carbon footprint rather than making them in the country.

Energy productivity is improving too (the amount of energy needed to produce a given unit of output), but a person living in an OECD economy still uses 78% more energy on average than someone in an emerging economy. Moreover, 80% of our energy still comes from fossil fuels and low-carbon energy technologies haven’t progressed much – an average unit of energy produced today pollutes just as much as 20 years ago. And OECD countries are still subsidising fossil fuels to the tune of $50-90 billion a year, with developing countries giving half a trillion more. Air pollution now kills twice as many people as HIV/AIDS according to an OECD report, The Cost of Air Pollution: Health Impacts of Road Transport.

Global resource extraction is rising, and a lot of these resources are thrown away. In OECD countries each person generates over half a tonne (530 kg) of municipal waste a year on average, which is 30 kg less than in 2000 but 30 kg more than in 1990.

The overall pressure on natural resources remains high and Green Growth Indicators reveals a series of worrying trends. “Biodiversity rich areas are declining and many ecosystems are being degraded. Many animal and plant species are endangered; one third of the world’s fish stocks are overexploited, and many forests are threatened by degradation, fragmentation and conversion to other land types. Pressures on water resources remain high; in some cases local water scarcity may constrain economic activity.”

There are some glimmers of hope. Environmental goods and services are becoming more important for the economy and government policies are starting to support a transition to green growth, for example through environmental taxes or reducing subsidies to environmentally harmful farming activities. International finance is starting to explore the potential of green growth through green bonds, while export credit agencies are facilitating private investment in projects that undergo an environmental impact assessment.

Overall though, the impression I got from reading the report was, to misquote a favourite OECD conclusion, that not much has been done and much remains to be done. On the other hand, last July a French court did say the state was to blame for the green algae since it wasn’t diligent enough in applying national and European norms on agricultural runoff. It awarded Vincent Petit 2000 euros for his horse and about the same for his lawyer, although they did say it was his own fault for going near that beach in the first place.

Useful links

As part of its Green Growth Strategy, the OECD is developing a set of indicators for agriculture. A Preliminary Assessment has just been published, and a selection of indicators has been identified to capture key aspects of a low-carbon, resource-efficient agricultural sector. You can read the report below.

Climate: The Doha Round

Bob Dylan’s new album gets released. Another Star Trek film gets released. Lindsay Lohan gets released. All major events at one time, in certain media anyway, but now nobody really cares that much. I get the impression it’s the same with the COP climate conference. Who can remember what it did after the Kyoto Protocol? Where and when was the last one? Where and when is the next one? The answers to the last two questions are Durban last year and Doha today.  Any media coverage tends to be about the fact that it’s in Qatar which, as even the state-sponsored Al Jazeera admits, has the worst CO2 emissions rate per person in the world: 53.4 tonnes a year, three times more than the US.

So what is COP 18 hoping to achieve? At COP 16 in Cancun two years ago, governments agreed that emissions needed to be reduced so that global temperature increases could be limited to below 2 degrees Celsius. Fans of treaty talk will have noticed that they agreed that emissions “needed to be reduced”, not “agreed to reduce emissions”.  As we wrote here a couple of weeks ago when the International Energy Agency’s new World Energy Outlook was published, there’s no chance of hitting the 2 degrees target the way things are going.  Global energy demand is expected to grow by more than one-third by 2035 in the IEA’s central scenario, with emissions corresponding to a long-term average global temperature increase of 3.6 degrees C. Even the “Efficient World” scenario talks about a rise of “under 3 degrees” rather than 2.

The OECD Environmental Outlook to 2050 is even more pessimistic, projecting that without a significant change in policies, global greenhouse gas emissions will increase by 50%, primarily due to a 70% growth in energy-related CO2 emissions. Global average temperature would then be 3 to 6 degrees C above pre-industrial levels by the end of the century according to the Environmental Outlook.

Nobody expects the world to wake up and take action as a result of the Doha meeting, but the OECD will be presenting ideas and analyses on issues that have to be addressed. An event on November 30 will showcase new work by the OECD/IEA Climate Change Expert Group on the design and governance of carbon market mechanisms. The Environmental Outlook suggests that curbing GHG emissions by putting a price on carbon through carbon taxes or emission trading schemes can help raise significant revenues. For example, if industrialised countries implement the emission reduction actions they pledged at COP 2009 in Copenhagen through a carbon tax or a cap-and-trade scheme with fully auctioned permits, they could generate more than $250 billion extra revenue.

On December 4 the spotlight will be on other forms of “climate finance”. Transitioning to a low carbon and climate-resilient economy, and more broadly, “greening growth”, takes money, but public finance and traditional sources of private capital such as banks are unlikely to have the means, or the will, to finance the investment needed because of the impacts of the crisis on budgets and financial sector performance. The OECD has launched a project on long-term investment focusing on the role of institutional investors as a source of direct financing for green infrastructure projects. This builds on numerous networks of experts in financial markets, insurance, pensions and environment and ongoing work on institutional investors and long-term investment.

The COP event will emphasise the need to scale-up and shift infrastructure finance, to avoid lock-in of carbon-intensive and climate vulnerable development pathways in developed and developing countries alike. A major part of the infrastructure required to meet development goals is still to be built in areas where climate change mitigation and adaption action is needed, such as transportation, energy, water, or urban development.

Maybe COP 18 will surprise us all. After all, Lindsay Lohan has just made a film.

Useful links

OECD work on climate change

OECD work on green growth and sustainable development

UN Framework Convention on Climate Change


Click to find out more about OECD work of relevance to Rio+20

Today we publish the third in a series of articles on the OECD’s contribution to the  RIO+20 UN Conference on Sustainable Development

Many politicians “cannot resist the power of the Invisible Demons, because they Secretly Serve the Invisible Demons”, according to one comment on the Rio+20 outcome document on the blog of Kumi Naidoo, Executive Director of Greenpeace International. I had a more lurid image of Satan and his minions, but it’s true that an eternity spent affirming, acknowledging, underscoring, stressing, recognising and recalling the need for holistic and integrated approaches to this and that would qualify as a reasonable definition of Hell in most religions.  And speaking of definitions, Greenpeace’s political director Daniel Mittler described Rio+20 as an “epic failure … developed countries have given us a new definition of hypocrisy”. Other civil society organisations agree, including Oxfam, WWF, and the International Trade Union Confederation (ITUC).

How about the OECD? The document you can click on at the top of this article opens with a message from OECD Secretary-General Angel Gurría saying that 20 years on from Rio 1992, sustainable development  remains a powerful message but it still isn’t a reality. It’s unlikely to become a reality unless we start changing what can be changed now, but as Gurría points out,  “even the best policies are nothing without the political will to implement them”.

It’s not that the political will for change doesn’t exist. On the contrary, governments are always looking for new ways to develop the economy, but what we’ve seen since Rio 1992 is that economic growth on its own isn’t enough to address problems such as inequality, and it can even make environmental and other problems worse. And as we saw with Rio+20, countries at different stages of development and with different natural resources do not share a common view as to what the best policies are, even when they agree on the scale and causes of environmental degradation and climate change.

There’s also a problem of time scales and a related one of habit. It’s a bit like the character played by Marcello Mastroianni in Fellini’s 8½ (or 8.5 as the OECD Style Guide would have it). Somebody tells him about this great method to quit smoking in a fortnight. “It’s taken me 40 years to get up to two packets a day,” he replies, “So why do you think I’d want to quit in two weeks?” Our current model of economic growth has brought enormous progress to billions of people, and we’re hooked, even though the costs keep growing. Today’s technologies and ways of doing things will be expensive and difficult to replace, and many of the benefits may not appear for some time, or be so diffuse that the impact on individual people (or businesses) may not be very noticeable. The effects of the crisis and anything that would slow growth are, however, immediate.

The OECD proposes green growth as a way to meet the challenges. A report prepared with the World Bank and UN for the G20 summit that preceded RIO+20 starts from the fact that structural reform agendas exist already, so green growth and sustainable development policies could be incorporated into them. The main elements of a “green” policy package are those of any structural reform – investment, tax, regulation, innovation and so on, but the report is accompanied by a toolkit of policy for different national situations. For example in many OECD countries, the main energy issue may be reducing greenhouse gas emissions, whereas in a developing country, access to electricity supplies may be the priority.

The report provides a good overview of the main questions, but even if you’re familiar with the subject, take a look at the last section on the strengths, weaknesses and conditions for using the various market-based policies and non market-based policies, for example if you want to compare taxes on pollution with stricter technology standards.

Finally, what do you think Rio+40 will be? A shout of triumph or a cry of despair?

Useful links

OECD’s contribution to Rio+20

OECD work on green growth

Not just for the rich: Green growth and developing countries

Click to find out more about OECD work of relevance to Rio+20

Today we publish the second in a series of articles on the OECD’s contribution to the  RIO+20 UN Conference on Sustainable Development

A few years ago, I was invited to present the OECD’s International Futures Programme at a meeting on long-term issues organised by the UK’s Foresight project. Each of us outlined our group’s approach to strategic questions, explaining why we chose a particular time horizon. Mostly it was what you’d expect (50 years at least in the energy business, a minute or less for financiers). The most surprising contribution, for me at least, was from the chief economist of a big mining group who said that they didn’t bother with strategic planning and that, in essence, when the price of a mineral went up they got out their shovels and started digging and when it dropped, they leaned on their shovels until the price rose again. If there was nothing left worth digging out, they looked at their geological surveys and moved elsewhere.

That’s one of the factors behind the so-called “resource curse”, the idea that countries with abundant natural resources are less successful than others. The argument has its critics, but the price volatility of international commodity markets is clearly a problem for countries relying heavily on commodity exports. According to Green Growth and Developing Countries that’s the case for many non-OECD countries. The report identifies three “clusters”: fuel exporters, non-fuel commodity exporters and manufacturing exporters. Fuel exporters are strongly represented among high-income countries. The non-fuel commodity exporters are relatively over-represented in the low and lower middle-income groups. Manufacturing exporters are strongly represented among the middle-income countries.

Green growth is proposed for all three clusters as a way towards more balanced development that would also include the many people in the informal sector and who see little benefit from the economic progress of these past few years. It’s important for developing countries because the potential economic and social impacts of environmental degradation are particularly serious for them. Natural capital accounts for an estimated 26% of total wealth in low-income countries, compared with 2% of wealth in advanced economies.

As well as depending more than advanced economies on the exploitation of natural resources, many developing countries face severe economic, social and ecological threats, ranging from energy, food and water insecurity to climate change and extreme weather risks. They also face risks from premature deaths due to pollution, poor water quality and diseases associated with a changing climate.

There are international implications too. Although today most developing countries contribute only minor shares to global greenhouse gas emissions compared to the OECD and major emerging economies, they will increase their emissions if they follow conventional economic growth patterns. Green growth has emerged as a new approach to reframe the conventional growth model and to re-assess many of the investment decisions in meeting future needs.

OECD defines green growth as: “a means to foster economic growth and development while ensuring that natural assets continue to provide the resources and environmental services on which our well-being relies”. Green Growth and Developing Countries identifies three dimensions a national government should examine: a national green growth plan to create enabling conditions; green growth mainstreaming mechanisms to ensure opportunities are explored through existing economic activities; and green growth policy instruments to tap specific opportunities.

However, developing countries interpret green growth in different ways and the concept has generated some concerns. For example, the high initial costs for the transition to green growth appear to be beyond the reach of many, and even basic technologies are still lacking in most developing countries, particularly in wastewater treatment, waste management, energy efficiency and integrated water resource management. There is concern too that developing countries’ own technologies, including indigenous approaches, will not be able to compete, and they will need to import technologies from other countries.

Despite this, the majority of developing country governments are looking at different elements of a green growth strategy, such as carbon taxes, green energy funds, payment for ecosystem services, renewable energy, sustainable public procurement, and natural resource management. However green growth is rarely addressed in mainstream economic, budget and fiscal policies, and with a few exceptions, including Cambodia’s Green Growth Road Map and Ethiopia’s National Development Plans, there are few holistic policies, strategies and institutional systems in place.

That said, we started this article talking about time horizons, and we shouldn’t forget how recent the concept of green growth is and the fact that it is part of a long-term strategy seeking to change ways of doing things that have been used for decades if not centuries. Uncertainty and disagreement are to be expected at this stage and the OECD insists on the need for discussion and sharing of experiences.

A first consultation jointly organised by the OECD and the Global Green Growth Institute took place in Seoul, Korea in May 2012. The over-riding message was that unless green growth can speak clearly to poverty reduction and social and economic development in the near to medium term, it will make little progress. Most reaction was pragmatic – green growth should be seen as improving mainstream policies rather than as some radically new paradigm.

The next consultation with developing countries will take place at the Rio +20 conference on June 17th, and this effort will guide the articulation of a report that should be available by the end of 2012 and further refine the elements needed for a green growth policy framework.

Useful Links

Consultation with developing country policy makers, civil society and academia on the OECD Green Growth and Developing Countries Report, 17 th June, Pontificia Universidade Catolica do Rio de Janeiro

Discussion of the outcomes of the consultation on 17th June on adapting the proposed green growth framework to developing countries

OECD work on green growth

OECD work on improving development policy

The arithmetick of green growth

Click to find out more about OECD work of relevance to Rio+20

Today we publish the first in a series of articles on the OECD’s contribution to the  RIO+20 UN Conference on Sustainable Development

Here’s one of the best ever openings to a paper in any academic discipline you care to name: “The economic changes that occurred in this country during recent years are sufficiently striking to be apparent to any observer without the assistance of statistical measurements. There is considerable value, however, in checking the unarmed observation of even a careful student by the light of a quantitative picture of our economy.” That’s Simon Kuznets in his unremarkably entitled 1934 paper National Income, 1929-1932. Three years later, he would present a report to the US Congress that formulated such a “quantitative picture”: GDP, a single measure of the size of a nation’s economy.

Before GDP was invented (and it seems such an obvious, natural measure it’s hard to believe both that it was invented and invented so recently) governments did have some objective data on the state of the economy on which to base policy. In the 17th century already, William Petty established the bases of national accounting, essentially for tax purposes, although his Political Arithmetick also has many other lessons that are still relevant today, for example on how “a small Country and few People, by its Situation, Trade, and Policy, may be equivalent in Wealth and Strength, to a far greater People and Territory”.

Despite the centuries separating them, Petty and Kuznets were responding to a similar need to understand a changing situation. Petty’s concern was that although money rather than barter was starting to dominate economic transactions, national wealth was still counted as it had been for centuries in terms of gold and silver. In Kuznets’ time, the US government’s role in the economy was growing after the Great Depression, but as Richard T. Froyen points out, its interventions were being guided by a sketchy set of indicators such as freight car loadings or stock price indices.

The beauty of GDP was that it included so many different things in a single figure, and despite the suspicion and even outright hostility any innovative approach attracts, it became the standard measure of national economies following the 1944 Bretton Woods conference. The main criticism was, and still is, that it is not a measure of well-being since production can increase while leaving most people no better off in any way. Kuznets himself insisted that GDP was a quantitative measure and not meant to describe the quality of growth.

Speaking to the OECD Observer in 2005, François Lequiller, head of National Accounts work at the OECD, also defended GDP as doing very well what it was designed for, but admitted that it left out a number of key topics such as environmental degradation. However, as he pointed out, it’s probably impossible to design a single GDP-like figure for a wider application that would reflect the many different aspects in any meaningful way, and including them in GDP would damage its usefulness as a measure of output. A suite of indicators is more appropriate in these cases.

The OECD’s Better Life Index follows this logic to allow citizens to establish their own measure of well-being. Users “weigh” 11 topics – community, education, environment, governance, health, housing, income, jobs, life satisfaction, safety, and work-life balance – to generate their own Index from a collection of 20 indicators. But even if growth is what’s being measured, a single figure may be misleading or too vague.

When OECD governments asked the Organisation to develop tools to support policy analysis and monitor the progress of green growth strategies, it was clear that by its very nature green growth is not easily captured by a single indicator, and a set of measures would be needed as markers on a path to greening growth and seizing new economic opportunities.

A database of green growth indicators has just been launched by the OECD, structured around four groups to capture the main features of green growth:

  • Environmental and resource productivity, to indicate whether economic growth is becoming greener with more efficient use of natural capital and to capture aspects of production which are rarely quantified in economic models and accounting frameworks.
  • The natural asset base, to indicate the risks to growth from a declining natural asset base.
  • Environmental quality of life, to indicate how environmental conditions affect the quality of life and wellbeing of people.
  • Economic opportunities and policy responses, to indicate the effectiveness of policies in delivering green growth and describe the societal responses needed to secure business and employment opportunities.

Colombia, the Czech Republic, Korea, Mexico and the Netherlands have already applied the OECD’s preliminary set of green growth indicators to assess their state of green growth, and Costa Rica, Ecuador, Guatemala and Paraguay are now doing so.

Apart from providing data on what we know, compiling the database also reveals a number of gaps in our information relevant to green growth, for instance on biodiversity, what’s happening at industry level, or monetary values to reflect prices and quantities of stocks and flows of natural assets.

Even where enough data exists, it may be difficult to combine them due to differences in classifications, terminology or timeliness, to allow cross-country comparisons for example. The system of national accounts pioneered by Petty allows such comparisons for national economies, and provides the inspiration for the System of Environmental-Economic Accounts (SEEA), internationally agreed standard concepts, definitions, classifications, accounting rules and tables for producing internationally comparable statistics on the environment and its relationship with the economy.

We can only guess what William Petty would have thought of such an exercise. As for Simon Kuznets, he anticipated it in his 1971 Nobel lecture, pointing out over 50 years ago that “the conventional measures of national product and its components do not reflect many costs of adjustment in the economic and social structures…” going on to cite “clearly important costs, for example, in education as capital investment, in the shift to urban life, or in the pollution and other negative results of mass production.”

Useful Links

OECD work on green growth indicators

OECD work on green growth

Why measure subjective well-being? Richard Layard, Director of LSE’s Wellbeing Programme, argues in the OECD Observer that the search for measures of progress that might replace GDP is a timely and necessary one, but only a single metric will do the trick.