Kurt Van Dender, Centre for Tax Policy and Administration
Pricing carbon is one of the surest policy means we know for curbing greenhouse gas emissions and meeting the targets of the Paris Climate Agreement agreed in 2015. Has there been any progress with its implementation since then? Not enough, is the verdict of some of the world’s leading experts.
Some 85% of global emissions are currently not priced, according to a report issued in May 2017 by a High-Level Commission on Carbon Prices, co-chaired by Joseph Stiglitz and Lord Nicholas Stern, both respected figureheads in the fight against climate change. Moreover, about three quarters of the emissions covered by a carbon price are priced below USD 10 per tonne of CO2 (tCO2).
That price is much too low, since according to the report, if we are to achieve the Paris temperature target the explicit carbon-price level should be at least USD 40-80/tCO2 by 2020 and USD 50-100/tCO2 by 2030.
One gap in these numbers is that they do not take into account excise taxes on the likes of transport fuel, heating and energy use more widely, that have virtually the same behavioural impacts as more narrowly defined carbon taxes, and should therefore also lead to reduced emissions.
If these rather commonplace excise taxes on energy use are added into the mix, we can form a broader view of how carbon emissions are currently being priced. To gauge this, we have developed “effective carbon rates”, which are made up of all specific taxes on energy use, carbon taxes, and prices of tradable emission permits. This database, which we presented in our 2016 OECD report on Effective Carbon Rates , calculates effective carbon rates for 41 OECD and G20 countries, covering 80% of global energy use and the associated carbon emissions.
In one sense, the picture that effective carbon rates depict is a little brighter than that presented by Messrs Stiglitz and Stern, as it includes a broader range of taxes, so higher rates. In another and more fundamental sense, the picture actually is a little darker, as effective carbon rates show the enormous size of the challenge we face in battling down greenhouse gas emissions, even when taking a broader view of carbon pricing.
Indeed, according to our database, 60% of emissions from energy use in the 41 countries are currently not priced (compared with 85% in the commission’s report). However, some 78% of emissions are priced at less that EUR 10/tCO2, which is no less discouraging. So while our more comprehensive estimates indicate that carbon pricing is more widespread than the High Level Commission’s report suggests, they nevertheless reinforce the Commission’s main point that carbon pricing still only plays a very limited role, and that we are a far cry from what is required to reach the Paris Agreement objectives.
The High Level Commission estimates that carbon prices should range between EUR 40 and EUR 80/tCO2 in 2020 for the Paris Agreement targets to have a chance of being met. Currently, effective carbon rates are below EUR 40/tCO2 for 93% of emissions, and are below EUR 80/tCO2 for 95% of emissions. Omitting road transport (where excise taxes are relatively high) from the calculation increases these shares to 99%.
In short, almost no emissions from energy use are priced at levels required to keep global temperature increases below 2 degrees Celsius limit, beyond which climate change could spin out of control. The world’s leaders understood the gravity of this prospect by signing up to the Paris Climate Agreement. It is now critical that they take the policy action needed to meet those goals, and that means increasing carbon prices now.
COP23 side event: Carbon pricing for the low-carbon transition, 15 November 2017, Bonn, Germany: http://www.oecd.org/tax/tax-and-environment.htm#COP23-tax-env-event.
More about the OECD at COP23: http://www.oecd.org/environment/cc/cop23.htm.
References and links
High-Level Commission on Carbon Prices (2017), Report of the High-Level Commission on Carbon Prices, World Bank, Washington, DC. License: Creative Commons Attribution CC BY 3.0 IGO, https://static1.squarespace.com/static/54ff9c5ce4b0a53decccfb4c/t/59b7f2409f8dce5316811916/1505227332748/CarbonPricing_FullReport.pdf.
OECD (2016), Effective Carbon Rates: Pricing CO2 through Taxes and Emissions Trading Systems, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264260115-en.
OECD (2017), Investing in Climate, Investing in Growth, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264273528-en.
Anthony Cox, Director, OECD Environment Directorate
“National governments must take the lead and do so with a recognition that they are part of a global effort.” Speaking last week at the Munk School of Global Affairs in Toronto, OECD Secretary-General Angel Gurría urged countries not to retreat behind their national borders in dealing with climate change. A purely inward-looking approach to climate change is clearly inadequate as we see signs that short-term national self-interest is increasingly seeping into the global debate on climate action. This is especially a risk as a number of countries continue to try and escape from low growth traps. Effective climate action needs ambition and action at both national and global levels.
We are now in the middle of the UN COP23 climate conference in Bonn which aims for “Further, Faster Ambition Together”. Two years after the historic Paris Climate Agreement at COP21, there are encouraging signs of progress, but there is a huge amount left to do. We have known for some time that the commitments to Nationally Determined Contributions (NDCs) beyond 2020 made under the Paris Agreement would be insufficient in limiting temperature increase to below 2 degrees Celsius, and that more ambition and action would be needed. The Paris Agreement gives us an international legal instrument that measures up to the scale and urgency of the climate challenge, with mechanisms that can increase the ambition of action over time. The negotiators in Bonn are looking to refine and clarify the “rulebook” on how to achieve this.
Each country must do its part by implementing their existing climate change plans using the range of policy levers available to address climate change. But the politics of activating them are daunting right now as they compete with the pull of some countries to retreat behind national borders. And yet, strong climate action should not be seen as a threat to growth. Rather it is the foundation for our future economic well-being and prosperity. This point is backed by a growing body of evidence, as the OECD’s 2017 report, Investing in Climate, Investing in Growth clearly shows. Thinking of climate policy as an integral part of the policy landscape, alongside fiscal policy and structural reforms, is the only way forward.
A number of countries are leading the way and showing it can be done. Take Canada as a prime example. It is a major OECD country with its fair share of challenges in overcoming carbon entanglement and remedying the problems of limited progress during the last decade of climate policy. But Prime Minister Trudeau’s election in October 2015 and his progressive climate agenda has led to a political sea-change that underpinned the success of COP21. In a recent interview with the Financial Times, Environment Minister Catherine McKenna demonstrated not only Canada’s strong commitment to tackling climate change, but also a keen awareness of the transitional challenges that Canada faces.
The OECD will be launching its Environmental Performance Review of Canada in a few weeks’ time. The Review highlights the progress that Canada has made on its climate agenda. At the top is the carbon pricing mechanisms that four provinces have already implemented, as well as the new Pan-Canadian Framework on Clean Growth and Climate Change, which includes a proposal for country-wide carbon pricing by 2018.
There is no cause for complacency. Climate action needs to accelerate around the world. Without the vision, ambition and resolve demonstrated by countries such as Canada, more countries may pull up their national drawbridges, which would do nothing for climate change and, on the contrary, jeopardise human, fiscal, financial and environmental security. We have no choice but to work together towards the far more positive future of a sustainable, prosperous and inclusive world that still lies within our grasp.
References and links
To read the OECD Secretary-General’s lecture on Climate Action, see: http://www.oecd.org/environment/munk-school-climate-action-time-for-implementation-canada-2017.htm.
For more information on the report Investing in Climate, Investing in Growth, see: http://www.oecd.org/environment/cc/g20-climate.
For more information on OECD climate change work see: http://www.oecd.org/environment/action-on-climate-change.
Romain Despalins, OECD Directorate for Financial and Enterprise Affairs
In 2016, private pension assets reached their highest-ever level at over USD38 trillion in OECD countries, according to Pensions Markets in Focus. Investment losses resulting from the financial crisis have been recouped in almost all reporting OECD countries. However, the low-interest rate environment continues to exert pressure on pension providers through lower yields on the bond portion of their portfolio investments, which may affect their ability to maintain promises to plan members. This has given rise to concerns that pension providers could increase their exposure to riskier investments in a search for potential higher yield.
Funded and private pension arrangements continued to expand in countries such as Australia, Canada, Denmark and the Netherlands where pension assets exceeded the size of the GDP. This reflects a trend which has seen pension assets grow faster than GDP in most countries over the last decade. This trend is most pronounced in countries with large private pension markets.
Pension providers experienced positive real investment rates of return, net of investment expenses, in 2016 in 28 of the 31 reporting OECD countries and 25 of the 32 reporting non-OECD jurisdictions. These rates of investment return were above 2% on average both inside and outside the OECD area. Annual returns were also positive over the last decade in most countries, with the highest average annual real investment rates of return (net of investment expenses) observed in the Dominican Republic (6.3%), Colombia (5.8%) and Slovenia (5.2%).
This new OECD report on trends in the financial performance of private pension plans covers 85 countries. It assesses the amount of assets in funded and private pension plans, describes the way these assets are invested in financial markets, and looks at how investments have performed, both in the past year and over the past decade.
References and links
Read the report at www.oecd.org/pensions/pensionmarketsinfocus.htm
Read the OECD Observer’s roundtable on pensions at http://oe.cd/25M
Cynthia Ohayon, West Africa analyst, International Crisis Group
The question of the place and influence of religion on society and politics is delicate. In Mali, a West African country in which 95% of the population is Muslim, Islam is a fact of life. Fears are growing in some quarters that religion could expand to occupy more space as a driver of social norms and wield undue influence. It does not have to be so, for rather than being a danger, religion can serve as a stabilising force in this crisis-ridden country.
Mali is still reeling from the 2012 crisis when self-proclaimed jihadi armed groups took centre stage. The 2012 events, compounded by other atrocities committed in West Africa and further afield, have quite understandably heightened the debate about the place of Islam in the state and society. Some Muslim leaders insist they have the right, and even the duty, to engage in major public debates and even to get involved in politics, including giving voting instructions and standing for office. This is causing concern among some Malians and certain Western partners too.
For now, the perception that Muslim leaders have an excessive influence over political life in Mali is somewhat exaggerated. Religious groups undeniably have become powerful lobbyists, using their important role within society and capacity to mobilise to their advantage. Their motives are diverse, from promoting moral values to defending financial interests in a quest for power or influence. But so far, religious leaders have not taken Malian politics hostage, and the country’s political class and non-Islamic civil society show little or no sign of ceding too much political space to religious groups.
Mali’s collapse in 2012 calls for serious rebuilding of the state, which the country has so far failed to engage. Defining the place of religion in society and politics is a delicate challenge but one that must be faced up to in this endeavour. The crisis highlighted the lack of regulation of religious activities, which many Malians deplore. But the need to better regulate religion’s role should be balanced against heavy-handed government involvement as this could backfire. Official religions that co-operate with a state perceived as being in the pay of the West could find themselves discredited. It could drive more support behind informal, non-regulated, religious movements.
Instead, the answer may lie in minimum regulation of the religious sphere, focusing on two areas where there appears to be consensus: outlawing hate speech and improving the training received by imams. The government should also work towards a more constructive partnership with religious authorities by bringing their representatives into Mali’s reconstruction in the areas of social regulation and conflict resolution. With the credibility they enjoy among the population, religious leaders can play a mediation role, especially when social crises or intercommunal violence erupt. They can also help fight dangerous radical ideology: religious authorities should be viewed as partners, working not just alongside the authorities, but at the heart of strategies to counter extremism.
In Mali, the challenge is to define and delimit the place of Islam in the state and society so that it can serve as a force for stability and progress. It is up to Mali’s people to work together and find ways to meet the challenge.
The views expressed are the author’s only, and do not necessarily reflect the views of the OECD or the Sahel and West Africa Club.
Links and references
See the International Crisis Group’s report, “The Politics of Islam in Mali: Separating Myth from Reality”, published on 18 July 2017 at https://www.crisisgroup.org/africa/west-africa/mali/249-politics-islam-mali-separating-myth-reality
International Crisis Group, (2016), “Central Mali: An Uprising in the Making?” at https://www.crisisgroup.org/africa/west-africa/mali/central-mali-uprising-making
International Crisis Group (2016), “Burkina Faso: Preserving the Religious Balance” at https://www.crisisgroup.org/africa/west-africa/burkina-faso/burkina-faso-preserving-religious-balance
The Social Roots of Jihadist Violence in Burkina Faso’s North https://www.crisisgroup.org/africa/west-africa/burkina-faso/254-social-roots-jihadist-violence-burkina-fasos-north
Visit the Sahel and West Africa Club at www.oecd.org/swac/
Charlotte Petri Gornitzka, Chair, OECD Development Assistance Committee (DAC)
I often wonder how to best show the impact of our combined efforts to eradicate poverty. Having worked on development issues for many years, I have seen the results first-hand. I have listened to women sharing how improved maternal care has improved their family’s lives, and I have seen how access to financial services has turned unemployed youngsters into entrepreneurs who now employ others. While we all have examples of development co-operation that works, we sometimes lack the hard evidence, the facts, the data. When confronted with scepticism, our stories often become anecdotal examples of little value.
Solid data is essential in showing progress towards the UN Sustainable Development Goals (SDGs). We are in the midst of a data revolution where the combination of big data, open data and the rapid proliferation of information technology will radically boost our knowledge and understanding. But what will happen in the least developed and conflict-ridden countries where there are huge data gaps, or data of very poor quality?
While many members of the OECD’s Development Assistance Committee (DAC) provide support for the collection and processing of statistics in developing countries, there is more work to be done. DAC donor countries are only just tapping into the potential of big data for development co-operation.
To focus this year’s report on data for development is both timely and important. We must invest more in data. The global 2030 Agenda for Sustainable Development requires facts and figures to show what works and what doesn’t. We all need statistics to show successes and setbacks in development.
I also like to think that we, by putting the focus on data for development, are paying tribute to Hans Rosling, a legendary professor and statistician. Sadly, Hans passed away earlier this year. No one has shown the importance of combining data sets to uncover new insights better than he did. No one has ever brought statistics to life in the way Hans did. I was fortunate enough to have had the opportunity to discuss development issues with Hans. He was straight-forward. He asked questions like, “Why do you spend so much money on these human rights and democracy programmes when you have no data to show they’re working?” He argued that we should invest more in children’s and women’s health because he could show the data that proved these had the best return on investment. He was also very encouraging and constructive when Sweden embarked on its open data journey (though he thought we should have broken down costs in more detail).
One of Hans’ most poignant messages, which I believe to be both very true and very easy to forget, was, “What you think you know may be wrong because the world is constantly changing. Check the data!” We all tend to stick to what we know and seek information to confirm our beliefs. Data therefore serves as a reality check as numbers do not lie.
We are two years into the implementation of the boldest and most far-reaching development agenda ever. We will end extreme poverty and at the same time stop climate change and the degradation of bio-diversity so that humans and nature can find a new balance. To monitor this, we have agreed to follow progress on more than 200 indicators in every single country even though we still lack much of the data today.
So, we need to keep modernising and improving aid statistics and data on financing for sustainable development. We need to increase our support for statistical capacity where it is needed and make better use of results data for policy and feedback to citizens. From my experience, the hardest part will be getting more investment to boost statistical capacity in partner countries. Donors know this is important but NGOs are not pressuring governments to spend more on this; neither is this an effort ministers will get media attention for.
The challenge is great, but the opportunities and gains are even greater. With more and better data we can show the much needed progress girls, boys, women and men are making around the world. With more and better data we can make better and more informed decisions on how to support families who strive for a decent life. With more and better data we can come closer to what Hans Rosling’s son Ola calls a world of “factfulness”, where opinions, however passionately held and articulated, are supported by facts.
* Hans Rosling was a Swedish physician, academic, statistician, and public speaker. He was Professor of International Health at Karolinska Institutet and co-founder and chairman of the Gapminder Foundation, which promotes the use of data to understand global development. Rosling passed away on 7 February 2017 at the age of 68.
References and links
OECD (2017), Development Co-operation Report 2017: Data for Development, OECD Publishing, Paris. http://dx.doi.org/10.1787/dcr-2017-en
Share article at http://oe.cd/25h
Catherine Bremer, OECD Public Affairs and Communications Directorate
The OECD’s just-published Development Co-operation Report 2017 calls on donor countries to invest more aid in improving statistical systems in developing countries, many of which are unable to produce reliable data in even basic areas such as records of births and deaths. A lack of good data makes it hard to measure the impact of development co-operation and see where best to focus future investments.
The report says that channelling just USD 200 million a year in additional development aid into building up poor countries’ statistical systems would make a big difference–a small sum compared to the USD 15 billion of foreign aid that was spent in 2016 hosting refugees in donor countries.
Good quality statistics are vital both to steer government policy in developing countries and to measure progress on the UN Sustainable Development Goals (SDGs). Yet with developing country statistics agencies all too often underfunded and understaffed, 77 countries are found to have inadequate poverty data and there are no data yet for two-thirds of the 232 SDG indicators. Even where data is available it is often not broken down in a way that enables comparisons between different population groups.
Aid providers should help developing countries to adopt digital technologies and non-traditional data sources to collect better statistics, the report says, noting that using computer tablets has improved census and survey data in Ethiopia, South Africa, Sri Lanka and Uganda and anonymised big data helped Brazil overcome the Zika crisis. To get more out of digital data, countries will need to build up digital infrastructure and enforce legal, ethical and quality standards.
A survey in the new report finds that many donor countries are uncomfortable planning development assistance around data that is old, approximate or incomplete. They often resort to conducting their own unilateral and uncoordinated data collection to assess the impact of aid programmes.
A recent report by Open Data Watch, “The State of Development Data Funding 2016” says that, ideally, USD 3 billion should be invested annually for developing countries to meet SDG data demands. According to the “Partner Report on Support to Statistics 2016” by PARIS21, an international partnership hosted by the OECD that helps developing countries improve their statistical data, the amount of official development assistance (ODA) spent on building up poor countries’ statistical capacity was around USD 250 million a year over 2013-2015, less than 0.3% of total ODA.
You can read the report online here.
References and links
OECD (2017), Development Co-operation Report 2017: Data for Development, OECD Publishing, Paris. http://dx.doi.org/10.1787/dcr-2017-en
Open Data Watch (2016), The State of Development Data Funding 2016, http://opendatawatch.com/the-state-of-development-data-2016/
PARIS21 (2016), Partner Report on Support to Statistics, http://www.paris21.org/node/2371
Valerie Frey, OECD Directorate for Employment, Labour and Social Affairs
Though there has been progress, gender equality is still a long way off. That is the key message in our latest report, The Pursuit of Gender Equality: An Uphill Battle, released 4 October. As I write in this OECD Observer article, policies are changing for the better, but much more improvement is needed to close gender gaps in all areas of social and economic life. No country is immune. The challenges are varied: more women should be encouraged to study science, technology, engineering, and mathematics (STEM), for instance, and more men should be encouraged to do their fair share of unpaid caregiving. Women should be better represented as entrepreneurs, in public life, and at the highest levels of the private sector.
There’s a lot to do, but we believe there is cause for optimism. Many countries now understand the importance of fathers in caregiving roles, for example, and now offer paid paternity and parental leave for dads for the time around childbirth. Fathers’ caregiving is crucial for reducing women’s unpaid work obligations and freeing them up to reach their full potential in society and in the economy. Women in the labour force still earn nearly 15% less than their male counterparts in every OECD country, but about two-thirds of OECD countries have introduced new pay equity policies since 2013. Pay transparency tools are being adopted to help nudge more employers towards equal pay between women and men.
But perhaps looming above all these issues is the imperative of preventing and ending violence against women. In fact, our survey data show that violence against women is widely reported by governments as the most urgent gender equality issue among countries adhering to the OECD Gender Recommendations (see chart). Anti-harassment laws are being introduced or reinforced in several countries, and awareness-raising campaigns about sexual harassment and its different manifestations have been launched, but more governments need to tackle violence against women with a multifaceted, whole-of-government approach. Violence affects multiple aspects of victims’ lives – including their education, employment, income, social protection, justice, security, and health – and must be targeted accordingly.
You can read about these issues in more detail in our new book. How can we win the uphill battle for gender equality? We’d love to hear your views on this important challenge.
References and links
Frey, Valerie (2017), More effort needed to make the grade on gender equality, OECD Observer, http://oe.cd/24r
OECD (2017), The Pursuit of Gender Equality: An Uphill Battle, OECD Publishing, Paris.
OECD (2016), 2015 OECD Recommendation of the Council on Gender Equality in Public Life, OECD Publishing, Paris.
OECD (2017), 2013 OECD Recommendation of the Council on Gender Equality in Education, Employment and Entrepreneurship, OECD Publishing, Paris.