OECD work on climate action
Contents OECD work on climate action
1
Climate action and the economy
2
International climate negotiations
4
Moving to low-emissions pathways 6 Climate resilience and adaptation Green finance and investment
8 10
Land-use, ecosystems and agriculture 13 Cities and climate change
15
Further reading
17
For further information: oe.cd/climate-action
b . OECD WORK ON CLIMATE ACTION
OECD work on climate action 2015 was an historic milestone, with the adoption of the Addis Ababa Action Agenda on financing for development, the Agenda 2030 for Sustainable Development Goals, and the Paris Agreement. Developed and developing countries need now to focus on implementation, in order to deliver on the commitments and contributions that they have entered into. In terms of climate, an unprecedented global infrastructure and technological transformation is needed in just a few decades to achieve the low-emissions, climate-resilient development pathways consistent with keeping global average temperature increase well-below 2°C, with efforts to limit it to 1.5°C. The vast majority of countries are taking action, but aggregate efforts to reduce GHG emissions, in either absolute or relative terms, set out in the Nationally Determined Contributions (NDCs) to 2030 are not sufficient to put us on a cost-effective path to achieve the Paris temperature goal. Action therefore needs to be scaled up and accelerated. As well as supporting the international climate negotiations over many years, more recently the OECD has increased its efforts to help both OECD members and non-OECD countries move towards low-emissions, climate-resilient development pathways and to deliver on their national and international commitments and contributions. OECD work has focused on the social, environmental, economic and financial dimensions that are central to the success of a low-carbon transition: integrating the climate and economic growth agenda; operationalising and implementing the Paris Agreement; tracking climate finance; designing more effective and efficient core climate policies; aligning policy, financial and planning frameworks with climate and other environmental goals; strengthening the adaptive capacity of our economies; enhancing finance and investment in low-carbon, resilient infrastructure; and promoting a just low-carbon transition, including in cities. This brochure provides further details.
“Strong climate action is not a threat to, but the foundation of, our future economic well-being”. Angel Gurría – OECD Secretary-General SECTION TITLE RUNNING FOOT . 1
OECD work on climate action
Climate action and the economy Meeting climate objectives and achieving sustainable economic growth are critical to ensure resilience, improving productivity and reducing inequalities. Many advanced economies around the world are caught in a low-growth trap. Low economic growth has persisted since the financial crisis, with recession in some countries. Chronic underinvestment has left its mark on infrastructure and productivity growth has slowed down in many economies. Global trade growth has been stalling and increasing inequality is prevalent. At the same time, countries are seeking to accelerate
Transitioning to a low-carbon economy later on will be costly with a 2% GDP loss if climate action is delayed until 2025.
an urgent low-carbon economic transformation, spurred by the Paris Agreement on climate change and rapid advances in technology. The urgency, scale and speed of the required economic transformation are unprecedented, and infrastructure choices made over the next few years will be crucial. Yet the national plans put forward for the Paris Agreement are collectively insufficient to meet the global goals that have been agreed. This disconnect is in part due to concerns over the implications of climate action for economic growth and development. A key step in escaping from the low-growth trap is implementing proactive policy to stimulate investment. But going for the wrong sort of growth would be to miss a major window of opportunity. Pro-growth reform measures, combined with measures to mobilise investment in low-emission and climate-resilient infrastructure, can spur growth and improve well-being while also achieving climate goals. Rather than adding to economic challenges, decisive action to accelerate the transition could form an integral part of effective economic growth plans.
A decisive transition to spur growth while limiting climate change
growth in the short term, in addition to securing longer-term growth and well-being for all citizens. Governments can not only build strong growth but also avoid future economic damage from climate change if they collectively act for a “decisive transition” towards low-carbon economies. This requires combining climateconsistent, growth-enhancing policies with well-aligned policy packages for mobilising investment in low-carbon infrastructure and technologies. New OECD modelling work presented in this report suggests that such a collective “decisive transition” can boost long-run output by 2.8% on average across the G20, when comparing a current policies trajectory to a pathway set to hold warming below 2°C with a probability of 50%. Importantly, the net effect on growth is also positive in the short term. The modelled growth effect is driven by a combination of investment in: l low-emission, l an
additional fiscal initiative to fund climate-
consistent non-energy infrastructure l pro-growth
The OECD report Investing in Climate, Investing in Growth, delivered to the German G20 Presidency and noted by G20 Leaders in their Declaration, shows how action on climate change can generate inclusive economic 2 . OECD WORK ON CLIMATE ACTION
climate-resilient infrastructure
reform policies to improve resource
allocation l technology l green
deployment
innovation.
Positive growth effects for the G20 by combining climate action with economic reforms in a decisive transition (50% probability of achieving 2°C)* Average across G20, GDP difference to baseline, %
2021
2050 2.07
4.73 -0.88 2.83
1.25 0.07
-0.42
0.93 1.02
0.71
0.12
Effect of net Additional fiscal Structural Energy prices, Net growth initiative reforms & stranded assets investment to effect green decarbonise supportive of & regulatory the transition innovation settings
Effect of net Additional fiscal investment to initiative decarbonise supportive of the transition
Structural reforms & green innovation
Energy prices, stranded assets & regulatory settings
Net growth Total net growth effect including effect estimated avoided climate damages
Source: OECD (2017), Investing in Climate, Investing in Growth, http://dx.doi.org/10.1787/9789264273528-en.
The benefits of combined growth and climate policies
A just transition
more than offset the impact of higher energy prices, tighter regulatory settings, and high-carbon assets that
The transition is unlikely to succeed, however, unless
may become economically stranded before the end of
the low-carbon economy includes and provides
their economic life. Carbon-tax revenues are assumed
opportunities to all actors. The transition will affect
to be used to lower public debt in most countries. The
everyone, from central and local governments to the
overall macroeconomic benefits of the modelled policy
private sector, the labour force and citizens, whose
package therefore also include substantial reductions in
divergent interests and influence will come into play.
most countries’ public debt-to-GDP ratios.
Creating opportunities for workers most affected by the low-carbon transition will be essential. The aggregate
Avoided climate damages can bring additional economic gains
effect of the transition on jobs may be modest, but reallocation across sectors and activities will be necessary and in some sectors significant.
There are also significant costs involved in delaying action to reduce emissions. If more stringent policies
Climate change is clearly an urgent challenge. But
were introduced later they would affect a larger stock of
meeting that challenge is an opportunity to create new
high-carbon infrastructure built in the intervening years,
sources of growth by placing the climate imperative at
leading to higher levels of stranded assets across the
the core of national growth and development strategies.
economy.
Adopting such an inclusive, low-emission and climateresilient growth agenda could be an opportunity to
Investment in modern, smart and clean infrastructure
reorient G20 growth objectives.
in the next decade is hence a critical factor for the lowcarbon transition and sustainable economic growth. The OECD report estimates that USD 6.3 trillion of investment in infrastructure is required annually on average between 2016 and 2030 to meet development needs globally. An additional USD 0.6 trillion a year over the same period would make these investments climate compatible, a relatively small increase considering the short and long-term gains in terms of growth, productivity and well-being.
KEY PUBLICATION OECD (2017), Investing in Climate, Investing in Growth: www.oecd.org/environment/investing-in-climate-investing-ingrowth-9789264273528-en.htm KEY WEBSITE http://www.oecd.org/environment/cc/g20-climate/ CONTACT Anthony Cox – Anthony.Cox@oecd.org CLIMATE ACTION AND THE ECONOMY . 3
OECD work on climate action
International climate negotiations
The OECD-IEA Climate Change Expert Group (CCXG) is engaging directly with Parties to improve the understanding of methodological and procedural elements arising from the Paris Agreement. In these areas, the CCXG is undertaking analytical work to
Climate negotiations post-COP21: a focus on operationalising and implementing the Paris Agreement
identify gaps, draw lessons from existing practice and present options for future arrangements. The CCXG provides a neutral, non-negotiating platform for experts from a wide range of countries and other organisations
The adoption at COP21 and earlier-than-expected entry
to facilitate a dialogue and improve understanding
into force of the Paris Agreement provides both Parties
around the technical issues feeding into the UNFCCC
and non-Party stakeholders greater impetus to act on
process. It has an excellent track record of providing
climate change. The focus is now to operationalise
technical input to the UNFCCC negotiations that has
and implement the Paris Agreement. An immediate
resulted in improved outcomes.
priority of the climate negotiations is to finalise the Paris rulebook by COP24 in 2018. This work is expected to
Tracking public and private climate finance
provide details on rules and guidelines for a number of provisions including an enhanced transparency framework,
Tracking climate finance is key to building trust
accounting for the progress towards and achievement of
and accountability when monitoring progress in
nationally determined contributions (NDCs), accounting
the international effort to address climate change.
for internationally transferred mitigation outcomes, and
Tracking can further inform the effective design of
periodic review processes such as the Global Stocktake. In
public interventions to mobilise finance for climate
addition, Parties are progressing in their discussions on the
action, including in the broader context of making
2018 facilitative dialogue whose mandate was established
financial flows consistent with climate objectives as
at COP21 to support the assessment of collective efforts
stated in Article 2.1 c of the Paris Agreement. The OECD
in relation to progress towards the long-term goal defined
is working to help address these issues based on its
in the Paris Agreement. Such work will be crucial in
established expertise in tracking public and private
facilitating the efforts of Parties and non-Party stakeholders
climate finance.
in preparing, communicating and implementing NDCs.
In the 2015 report Climate Finance in 2013-14 and the USD 100 billion Goal, public and private finance mobilised by developed countries for climate action in developing countries was estimated at USD 62 billion in 2014, up from USD 52 billion in 2013, making it an average of USD 57 billion annually over the 2013-14 period.
4 . OECD WORK ON CLIMATE ACTION
Timeline of key events related to climate negotiations Paris Agreement adopted
Submission of new or updated NDCs; Climate finance commitment of USD 100 billion per year to be mobilised by 2020; Second commitment period of Kyoto Protocol ends
Paris Agreement enters into force 2015
2016
2020 2018
Submission of new or updated NDCs; New collective quantified climate finance goal to be agreed by 2025
Submission of new or updated NDCs
2025
2030
2023
2018 facilitative dialogue; IPCC report on 1.5 degrees Celsius; Proposed finalisation of Paris rulebook
2028
First Global Stocktake (GST)
Second Global Stocktake (GST)
The Creditor Reporting System (CRS) of the OECD
methods for estimating publicly mobilised private finance
Development Assistance Committee (DAC) provides
for climate action in developing countries. The OECD
a robust system for monitoring climate-related
DAC and the Research Collaborative, in co-operation with
development finance provided by its members, a few
public finance providers, have made significant progress
non-DAC members and climate-specific funds and
on developing methods and collecting data for measuring
programmes. Since 2013, seven multilateral development
the direct mobilisation of private finance by public climate
banks (MDBs) have also reported project-level data on
finance (Benn et al., 2017). Estimating the effects of public
their climate-related development finance into the CRS.
capacity building and policy interventions on private finance
This provides consolidated activity-level data for bilateral
is more challenging. Further work is being conducted in this
and multilateral climate-related development finance
area for identifying suitable methodologies and possible
via the so-called “Rio markers”, that are considered
reporting formats (e.g. McNicoll et al., 2017).
descriptive rather than strictly quantitative. Many OECD DAC members use this data as a starting point for their
These developments have in particular made it possible
financial reporting to the UNFCCC.
for the OECD to produce first assessments of progress made by developed countries towards the goal of
The OECD-led Research Collaborative on Tracking Private
mobilising USD 100 billion a year by 2020 for climate
Climate Finance aims to develop and assess data and
action in developing countries.
KEY PUBLICATIONS CCXG Vaidyula, M. and J. Ellis (2017), “2018 facilitative dialogue: Identifying options for outputs and outcomes and key questions for modalities”, OECD/IEA Climate Change Expert Group Papers, OECD Publishing, Paris.
McNicoll, L., R. Jachnik, G. Montmasson-Clair and S. Mudombi (2017), Estimating publicly-mobilised private finance for climate action: A South African case study, OECD Environment Working Papers, No. 125, OECD Publishing, Paris. DOI: http://dx.doi.org/10.1787/a606277c-en
Hood, C. and C. Soo (2017), “Accounting for mitigation targets in Nationally Determined Contributions under the Paris Agreement”, OECD/IEA Climate Change Expert Group Papers, OECD Publishing, Paris. Link for downloadable CCXG papers on several aspects of the Paris Agreement: http://dx.doi.org/10.1787/2227779X Climate finance Benn, J., C. Sangaré and T. Hos (2017), Amounts Mobilised from the Private Sector by Official Development Finance Interventions: Guarantees, syndicated loans, shares in collective investment vehicles, direct investment in companies, credit lines, OECD Development Co-operation Working Papers, No. 36, OECD Publishing, Paris. DOI: http://dx.doi.org/10.1787/8135abde-en
KEY WEBSITES CCXG – www.oecd.org/environment/cc/ccxg.htm Research Collaborative – www.oecd.org/env/ researchcollaborative/ OECD Statistics on External Development Finance Targeting Environmental Objectives Including the Rio Conventions – http://oe.cd/RioMarkers CONTACTS Climate Change Expert Group: Jane Ellis – Jane.Ellis@oecd.org Research Collaborative on Tracking Private Climate Finance: Raphaël Jachnik – Raphael.Jachnik@oecd.org Development Assistance Committee: Nicolina Lamhauge – Nicolina.Lamhauge@oecd.org and Giorgio Gaulberti – Giorgio.Gaulberti@oecd.org
INTERNATIONAL CLIMATE NEGOTIATIONS . 5
OECD work on climate action
Moving to low-emissions pathways Climate change mitigation: What is at stake? Understanding the consequences of climate impacts on the economy and ecosystems plays a key role in building up momentum for policy action. The OECD has found that while the economic impacts of climate change spread across all sectors and regions, the largest negative consequences are projected in the health and agricultural sectors. Regionally, damages are especially strong in non-OECD countries in Africa and Asia. By 2060, global
Early and ambitious mitigation action can help economies avoid half of the macroeconomic consequences by 2060 and could reduce projected global damages from 2-10% to 1-3% of global GDP by the end of the century (OECD, 2015).
macroeconomic costs of climate change are projected to be in the range of 1.0% to 3.3% of GDP, although uncertainties
notably Mexico, India, and Indonesia – have eliminated
are large. Recent analysis also highlights that changes in
all or most of their consumer price support for transport
international competitiveness are driven by the relative
fuels. Several member economies of the Gulf Cooperation
impacts of climate change vis-à-vis competitors, rather
Council have started bringing their domestic fuel prices
than by the sign of the impacts themselves. Climate
into line with international prices. However, production
change also makes other environmental concerns – such
of fossil fuels continues to be supported through tax
as water availability – worse.
incentives in many countries, and policies that keep consumer prices artificially low persist in others. In order
Early policy action is warranted to avoid the lock-in of large
to reduce fossil fuel use and avoid locking in fossil-fuel
damages in the short and medium run, and to avoid the
based capacity, reforms need to be accelerated.
high risks of crossing climate tipping points. Governments should align policies for adaptation and mitigation, and
Taxes or emissions trading systems should result in
take sectoral damages into account, to avoid the largest
carbon prices that reflect the social cost of carbon
negative consequences and reap the most cost-effective
emissions, estimated very conservatively at EUR 30/tCO2.
opportunities to confront climate change.
Across 41 countries, only 10% of carbon emissions from energy use are priced above EUR 30/tCO2, and these are
Pricing carbon for effective climate mitigation
emissions from road transport, where much higher rates are needed to reflect non-climate damages. Of the 90%
The world will need to get to zero net emissions before
of emissions priced below EUR 30/tCO2, two thirds are
the end of this century to limit the global temperature
not subject to a price at all. There is at present a major
rise to below 2°C. Removing fossil fuel subisidies and
carbon pricing gap.
pricing carbon are an essential part of the solution, a necessary part of a larger package of policies that can
Aligning policies for a low-carbon transition
reduce greenhouse gas emissions. OECD work, however, highlights that many national climate strategies have
Core climate policies must be complemented and
not yet integrated these key principles. Fossil fuel
supported by governments ensuring that policies
support needs to be removed and the carbon pricing gap
and regulatory frameworks are aligned with climate
closed urgently to drive the low carbon transition.
policy goals. OECD work has identified a number of misalignments in investment, fiscal and innovation
Countries are increasingly removing fossil fuel subsidies
policies, which, if corrected, could help countries
for consumers. Several large emerging economies –
increase their ambition, improve the effectiveness of
6 . OECD WORK ON CLIMATE ACTION
climate policies, as well as contribute to other policy
KEY PUBLICATIONS
objectives consistent with green and inclusive growth.
OECD (2016), Effective Carbon Rates: Pricing CO2 through Taxes and Emissions Trading Systems, OECD Publishing, Paris.
These include the need to scale up and shift
http://dx.doi.org/10.1787/9789264260115-en
infrastructure investments away from fossil fuels. Continued investment in carbon-intensive infrastructure will result in a carbon lock-in. Economic policies – particularly those linked to taxation – should be tailored
OECD (2015), The Economic Consequences of Climate Change, OECD Publishing, Paris. http://dx.doi.org/10.1787/9789264235410-en
to push consumers into making low-carbon choices.
OECD (2015), Aligning Policies for a Low-carbon Economy, OECD
Taxation favouring carbon-intensive products (e.g.
Publishing, Paris.
favourable personal tax treatment of company cars)
http://dx.doi.org/10.1787/9789264233294-en
should be revised. Policies focusing on innovation,
OECD (2015), Climate Change Mitigation: Policies and Progress, OECD
support for green technology deployment as well as on international trade also have a considerable role to play in achieving climate mitigation goals.
Publishing, Paris. http://dx.doi.org/10.1787/9789264238787-en KEY WEBSITES
In the years to come, the OECD will deepen and
www.oecd.org/site/tadffss/
expand its work to help governments move to low-
www.oecd.org/tax/effective-carbon-rates-9789264260115-en.htm
emissions, climate resilient development pathways.
www.oecd.org/environment/action-on-climate-change/
It will provide tools to diagnose misalignments and
www.oecd.org/env/indicators-modelling-outlooks/circle.htm
prioritise and phase climate action across sectors and time. Understanding the political economy
CONTACTS
factors surrounding the transition (e.g. identifying
Mitigation:
communities at risk of being stranded; revenue losses
Virginie Marchal – Virginie.Marchal@oecd.org
for governments; benefits of climate action on air quality) will be a key component of a successful low-
Effective Carbon Rates:
carbon transition. The OECD’s upcoming contribution in
Kurt Van Dender – Kurt.VanDender@oecd.org
this field aims to be decisive in order to help countries
Economic Cost of Climate Change:
heighten their mitigation ambition set out in their
Rob Dellink – Rob.Dellink@oecd.org
nationally-determined contributions and ultimately achieve the Paris Agreement mitigation goal.
Effective carbon rates of OECD and select partner countries on energy use, all energy, road transport, and non-road transport, EUR/tCO2 All energy
Road
Non-road
2% 4%
3%
10% 15% 20% 11%
46%
60%
70%
48%
10%
EUR 0
EUR 0-5
EUR 5-30
EUR >30
Source: OECD (2016) Effective Carbon Rates: Pricing CO2 , Taxes and Emissions Trading Systems, http://dx.doi.org/10.1787/9789264260115-en.
MOVING TO LOW-EMISSIONS PATHWAYS . 7
OECD work on climate action
Climate resilience and adaptation Climate change poses risks to people, ecosystems and every sector of the global economy. Significantly reducing greenhouse gas emissions is not enough – impacts of climate change are increasingly being felt today and need to be met with co-ordinated action to increase resilience. Climate adaptation polices reduce the adverse consequences of climate impacts that are already underway and help societies proactively prepare for the future. How do we make the right decisions in the face of uncertainty and long-term time horizons? What needs to be in place or be overcome to implement adaptation? What does success look like? The OECD is working with countries to address these and other key issues and put in place the right policies to prepare for the effects of a changing climate.
Adaptation planning
provides an iterative process for managing the risks from climate change, gives an overview of costs and benefits of adaptation at the national and regional scale and discusses adaptation finance in OECD countries.
Sectoral Action Adaptation challenges, opportunities and constraints vary by sector. The OECD is supporting the implementation of adaptation at the sectoral level through targeted recommendations. l Climate
change is leading to shifts in the water
cycle, which requires managing the resulting risks of scarcity, floods, degraded water quality and disruption of freshwater ecosystems. Water and Climate Change Adaptation: Policies to Navigate Uncharted Waters (2013) surveys the policies for adapting water management in a changing climate across OECD countries and sets out policy guidance to improve the efficiency and effectiveness of adaptation responses. l Reliable,
adequate and cost-effective infrastructure
underpins economic activity. By building resilience into The characteristics of risks are increasingly difficult to
decisions both to upgrade existing systems and build
predict over long time-horizons. Proportionate, flexible and
new networks, there is the scope to enhance overall
iterative approaches are required to manage these risks.
resilience to climate change and avoid the risk of costly retrofitting in future. “Climate-Resilient Infrastructure:
l The
policy response should improve knowledge about
Getting the Policies Right” (2017) provides a framework
the risks from climate change through national
for action aimed at national policymakers in OECD
assessments and use these assessments to plan for a
countries to help them ensure new and existing
range of possible outcomes rather than one “most likely”
infrastructure is resilient to climate change.
projection. It will not be possible to eliminate risks entirely, so effective response and recovery systems are
l Developing
countries are disproportionately affected
needed to address those that remain. Climate Change
by the rising trend of losses from extreme weather
Risks and Adaptation: Linking Policy and Economics (2015)
events, which is due both to increased exposure of
8 . OECD WORK ON CLIMATE ACTION
Climate change costs from urban floods by 2080 (Billions of USD, 2005 PPP exchange rates)
Below 0 From 0 to 1 From 1 to 10 From 10 to 100 Above 100 N/A Source: OECD (2015), The Economic Consequences of Climate Change, http://dx.doi.org/10.1787/9789264235410-en.
Supporting learning and accountability Given the scale of the adaptation challenge, it is essential
assets and the changing climate. Effective policies are
that effective approaches are being adopted, implemented,
needed to reduce the accumulation of risk, combined
and lessons are shared to continue to build on success.
with instruments and tools to help retain, share or transfer financial losses if an extreme event occurs.
l Robust
monitoring and evaluation is needed to inform
These tools and instruments, collectively known as
policy development. Monitoring and evaluation can
financial protection, can help cope with the impacts of
improve policy learning and strengthen accountability
climate-related disasters, reduce costs of recovery and
by tracking how resources are spent and whether the
reconstruction, and encourage risk reduction. “Climate
policy or project is delivering as expected. National
Change Adaptation and Financial Protection Synthesis
Climate Change Adaptation: Emerging Practices in
of Key Findings from Colombia and Senegal” (2017)
Monitoring and Evaluation (2015) draws upon emerging
identifies priorities for development co-operation
monitoring and evaluation practices across developed
providers in supporting financial protection against
and developing countries to tools that countries can
climate risks.
draw upon for their climate adaptation policies.
KEY PUBLICATIONS Climate-resilient infrastructure: Getting the policies right, Environment Working Paper, April 2017 http://dx.doi.org/10.1787/19970900
KEY WEBSITES www.oecd.org/environment/cc/adaptation.htm www.oecd.org/env/cc/developmentandclimatechange.htm www.oecd.org/water/
Climate change adaptation and financial protection: Synthesis of key findings from Colombia and Senegal, Environment Working Paper, April 2017 http://dx.doi.org/10.1787/0b3dc22a-en
CONTACT Michael Mullan – Michael.Mullan@oecd.org
National Climate Change Adaptation – Emerging Practices in Monitoring and Evaluation, April 2015 http://dx.doi.org/10.1787/9789264229679-en CLIMATE RESILIENCE AND ADAPTATION . 9
OECD work on climate action
Green finance and investment
among other areas. It also provides a global platform for engaging with key players and harnessing the marketplace intelligence of private sector partners. The flagship event of the Centre is the annual OECD
Investment in the green economy needs to take place on
Forum on Green Finance and Investment, (formerly
a far greater scale over coming decades to achieve the
know as the Green Investment Financing Forum),
Sustainable Development Goals (SDGs) and the ambition
which has been held since 2014. This event brings
of the Paris Agreement. This will require the demand
together leading actors from the green finance
for, and supply of, financing (e.g. debt, equity and other
and investment community to promote effective
channels) to significantly increase while its cost (i.e. the
engagement, collaboration and action on green finance
return financiers demand) to significantly decrease.
and investment, including institutional investors, asset managers, ministries of finance and central banks,
Green finance and investment addresses these and other
financial regulators, commercial and investment banks,
issues relating to the transition to a green, low-emissions
international climate funds, multilateral development
and climate-resilient economy. To help catalyse and
banks, green investment banks, corporations, civil
support this transition through the development of
society, philanthropic sectors and more.
effective policies, institutions and instruments for green finance and investment, the OECD established in
A range of recent OECD publications contributing to the
2016 a Centre on Green Finance and Investment. The
Centre been developed on topics relating to renewable
OECD Centre provides a focal point for developing new
energy investment and innovation; investment channels,
OECD work on green finance and investment within
interventions and institutions for a low-carbon transition;
and across several directorates, drawing on expertise in
green finance and investment in developing countries;
finance, environmental policy, development and cities,
and tracking and measuring private climate finance.
Since 2010 50% of private finance in infrastructure (USD 1.3 trillion) has been directed to renewable energy (Investing in Climate, Investing in Growth, OECD 2017).
10 . OECD WORK ON CLIMATE ACTION
Renewable energy investment and innovation
“Mobilising finance for the transition”. Additionally, the report Mobilising Bond Markets for a Low-Carbon
The newly released working paper “The Empirics of
Transition (2017) demonstrates the contribution that
Enabling Investment and Innovation in Renewable
bond markets can make to a low-carbon transition.
Energy” (2017) assesses empirically how the investment
Further, Green Investment Banks: Scaling up private
environment and climate policies impact investment in
investment in low-carbon, climate-resilient infrastructure
renewable power in G20 and OECD countries. It provides
(2016) provides the first comprehensive study of green
empirical evidence about the importance of core climate
investment banks, analysing the rationales, mandates
policies and an enabling investment environment (see
and financing activities of this relatively new category of
for example, Policy Guidance for Investment in Clean Energy
public financial institution. Further work in 2017-18 will
Infrastructure [2015]). A follow-up paper examines the
explore the role of green investment banks in fostering
issue of “State-Owned Enterprises and the Low-Carbon
investment opportunities and sustaining new markets.
Transition” (Prag et al., 2017 forthcoming). To plug the knowledge gap on pipeline of bankable
Investment channels, de-risking interventions and institutions for a low carbon transition
infrastructure projects and enable countries to effectively implement NDCs, the Centre is developing a report on the role of project pipelines in supporting
Transitioning to a low carbon economy will require
the delivery of low-carbon strategies. The first phase
institutions, instruments and market designs that
will explore design elements of project pipelines and
efficiently allocate capital to zero emission, energy
their utility in mobilising and scaling-up investment,
efficient infrastructure and technologies. The OECD
while the second will undertake case studies to identify
report for the German G20 Presidency, Investing in
emerging examples of the use of the design elements.
Climate, Investing in Growth (2017), highlights the changing role of public and private finance in its chapter
Potential for low-carbon bond issuance ranges between USD 620 billion and USD 720 billion per year by 2035 USD billions
Amount outstanding
Issuance
5 500
1 700
4 500
1 500 3 500
1 300 1 100
2 500
900 1 500
700
Annual bond issuance in the four regions
Bonds outstanding in the four regions
1 900
500 500 300
0 -500
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035
100
Source: OECD (2017), Mobilising Bond Markets for a Low-Carbon Transition, DOI: http://dx.doi.org/10.1787/9789264272323-en.
GREEN FINANCE AND INVESTMENT . 11
OECD work on climate action
OECD Policy Perspectives “Blended Finance: Mobilising resources for Sustainable Development and Climate Action in developing countries” collates the latest OECD work on this topic. With a focus on green investment in developing countries, a working paper entited “Engaging the Private Sector for Green Growth and Climate Action” (2017) takes stock on the role of development finance in mobilising the private sector. New work on “Development banks and development finance institutions: scaling up green investment in developing countries” will have a complementary focus on enabling institutions, highlighting the critical and changing role of development banks as well as national, regional, bilateral and multilateral development finance institutions (DFIs) in promoting sustainable infrastructure in developing countries.
Promoting green finance and investment in developing countries
Tracking and measuring private climate finance: Country specific case studies for practical insights
Blended finance, an approach to mix different forms
The OECD-led Research Collaborative on Tracking
of capital in support for development, is emerging as
Private Climate Finance together with Trade & Industrial
an important solution to help meet the infrastructure
Policy Strategies (TIPS), in collaboration with the
investment gap in developing countries by using
South African National Treasury and Department of
public support to mobilise commercial finance. OECD
Environmental Affairs, has jointly led a case study
Blended Finance Principles have been endorsed by the
on “Estimating Publicly-Mobilised Private Finance for
Development Assistance Committee and will guide the
Climate Action” (2017).
use of development finance in blended approaches going forward. The new OECD report, Making Blended Finance
In addition, building on the OECD’s Financing Climate Action
Work for the SDGs (forthcoming) is a comprehensive
in Eastern Europe, the Caucasus and Central Asia, an OECD
assessment of the state and priorities for the use of
project on green finance mobilisation in Georgia supports
blended finance in developing countries, and a new
increasing current levels of finance for green projects.
KEY PUBLICATIONS Ang, G., D. Röttgers and P. Burli (2017). “The empirics of enabling investment and innovation in renewable energy”, OECD Environment Working Papers, No, 123, OECD Publishing, Paris. http://dx.doi.org/10.1787/67d221b8-en
KEY WEBSITES Centre on Green Finance and Investment: www.oecd.org/cgfi/ OECD Blended Finance: www.oecd.org/dac/financing-sustainabledevelopment/development-finance-topics/blended-finance.htm
Crishna Morgado, N. and B. Lasfargues (2017), “Engaging the private sector for green growth and climate action: An overview of development co-operation efforts”, OECD Development Co-operation Working Papers, No. 34, OECD Publishing, Paris. OECD (2017), Mobilising Bond Markets for a Low-Carbon Transition, OECD Publishing, Paris. http://dx.doi.org/10.1787/9789264272323-en 12 . OECD WORK ON CLIMATE ACTION
CONTACTS Green Finance and Investment: Robert Youngman – Robert.Youngman@oecd.org; Private Finance for Sustainable Development: Paul Horrocks – Paul.Horrocks@oecd.org
Land-use, ecosystems and agriculture
programmes and biodiversity offsets, are also relevant for climate change mitigation (OECD, 2016). Climate change also impacts on water quality and quantity (droughts and floods), with potentially adverse impacts on aquatic ecosystems and agricultural productivity. The Water Risk
Land-use systems play a crucial role in achieving
Hotspots for Agriculture report (2017) identifies and proposes
a number of the Sustainable Development Goals,
targeted responses to address these issues. OECD Green
including those relating to climate, biodiversity, water,
Growth Indicators (2017) provides new indicators on land
sustainable energy, food security, and ending poverty.
use and land use conversion across a range of OECD and G20 countries, data that can help to ensure more
Land use, including agriculture and forestry, is also
informed policy-making.
critical for meeting climate goals under the Paris Agreement, with 24% of global greenhouse gas emissions
Climate change and marine ecosystems
stemming from agriculture, forestry and land use change (see Figure on page 14). Effective climate change
Climate change is also rapidly impacting marine
mitigation and sustainable land use and management
ecosystems and species. As highlighted in Marine Protected
practices are also crucial for meeting the biodiversity
Areas: Economics, Management and Effective Policy Mixes
goals under the Aichi Targets of the Convention on
Policy (2017), it is estimated that climate change has
Biological Diversity. The linkages and interactions
already resulted in either loss or degradation of 50% of
between climate change, land use, ecosystems and
salt marshes, 35% of mangroves, 30% of coral reefs and
agriculture are inextricable, offering both opportunities
20% of seagrass worldwide. The report highlights the key
for synergies and the need to reconcile trade-offs when
pressures on oceans and examines how instruments such
devising policies. The OECD conducts multiple areas of
as marine protected areas and blue carbon payments for
work across this diverse nexus of issues.
ecosystem services can be scaled up to help to mitigate climate change and enhance ecosystem resilience.
Climate change, land use and terrestrial ecosystems
The need for coherent policy responses
Climate change is a key pressure on biodiversity and
As highlighted in OECD/IEA/NEA/ITF (2015), Aligning
ecosystem services, with the OECD Environmental Outlook
Policies for the Low-Carbon Economy, sustainable land-
to 2050 modelling showing that this pressure is projected
management practices – reduced deforestation,
to increase in the future. OECD (2013), Scaling Up Finance
restoring degraded land, better agricultural practices
Mechanisms for Biodiversity, highlights that various land-use
and increased carbon sequestration in soils and
related climate mitigation strategies, such as Reducing
forests – could make a large contribution to the global
Emissions from Deforestation and Degradation (REDD+),
climate change effort while delivering the productivity
as well as ecosystem-based climate adaption strategies,
improvement needed to respond to growing food
can also offer significant co-benefits for biodiversity and
demands. The economic potential of options for
ecosystems. Moreoever, biodiversity policy instruments
reducing agricultural GHG emissions is highly dependent
that help ensure the conservation and sustainable use
on their cost-effectiveness. The OECD paper “Cost-
of forests, such as payments for ecosystem services
effectiveness of greenhouse gas mitigation measures LAND USE, ECOSYSTEMS AND AGRICULTURE . 13
OECD work on climate action
for agriculture” reviews the international literature and
mitigation and agricultural productivity” (2017,
discusses barriers to their adoption. The OECD paper
forthcoming) highlights that many agricultural policy
“Overcoming barriers to the adoption of climate-friendly
instruments send inconsistent signals across the three
practices in agriculture” examines options to deliver
objectives of adaptation, mitigation and productivity
both mitigation and adaptation benefits.
enhancement and that there is a need for improved policy coherence. More coherent policy frameworks
Sustainable land-management practices can also
will therefore be needed to address the multiple and
improve the resilience of our economies to a changing
overlapping challenges. On-going OECD work on Land
climate by protecting ecosystems. OECD analysis
use, climate mitigation, ecosystems and food: aligning policies
on Land use and ecosystem services in agriculture (2017,
in the land use sector is examining the interactions,
forthcoming) illustrates that market and agricultural
potential synergies and trade-offs across these areas.
policy drivers have significant impact on ecosystem
The work will draw on insights from a selection of
services and that there is room for improving the design
OECD and non-OECD countries, with a focus on
of the policy mix in OECD countries to address the
those that have high GHG emissions from the land
provision of ecosystem services linked to agriculture.
use sector, or have made progress in reducing these.
Overall, achieving sustainable land use will require
Another strand of on-going OECD work on Deepening
an integrated approach which breaks down the silos
the sustainable productivity framework by strengthening
between climate change, agriculture, food security,
policy coherence examines the coherence of government
forestry and biodiversity policies. The OECD Synthesis
policies in enhancing productivity growth and several
report “Synergies and trade-offs between adaptation,
environmental sustainability dimensions.
Greenhouse gas emissions by sector (2010) Global GHG emissions, 2010
Breakdown of AFOLU emissions, 2010 10 000
Buildings 6%
AFOLU 24%
Other energy 10% Transport 24%
Other land use
8 000
Industry 21%
Other agriculture Mt CO2 - eq
Electricity & heat 21%
6 000
N2O from manure CH4 from enteric fermentation
4 000
2 000
0
CO2 from land use
2010
Source: Adapted from IPCC (2014) and FAOSTAT (2017). Prepared for OECD (forthcoming), Land Use, Climate Mitigation, Ecosystems and Food.
KEY PUBLICATIONS OECD (2016), Biodiversity Offsets: Effective Design and Implementation. OECD Publishing, Paris. OECD (2016), Mitigating Droughts and Floods in Agriculture: Policy Lessons and Approaches, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264246744-en.
14 . OECD WORK ON CLIMATE ACTION
KEY WEBSITES www.oecd.org/env/resources/biodiversity www.oecd.org/cc/redd www.oecd.org/tad/sustainable-agriculture/agriculture-andclimate-change CONTACTS Katia Karousakis – Katia.Karousakis@oecd.org Jane Ellis – Jane.Ellis@oecd.org
Cities and climate change
Growth initiative in March 2016, the OECD has created a coalition of more than 50 mayors from around the world committed to tackle inequalities and promote more inclusive economic growth. By signing the Seoul Implementation Agenda for Inclusive Growth in Cities,
Cities are home to more than half of the world’s
Mayors recognised the importance of bridging strategies
population (54.5% in 2016), consume 70% of the world’s
for climate change and inclusive growth as one of the
energy, and account for a roughly equivalent share of
two key priorities.
global greenhouse gas emissions. Given the way in which they concentrate physical, human and financial assets,
The OECD helps cities identify knowledge gaps, advance
cities are also disproportionately vulnerable to climate
research, and ultimately promote best practices
impacts. Cities also compete for human talent and inward
and policy solutions for achieving more inclusive,
investment. Quality of life and quality of infrastructure
sustainable cities. The OECD Case study of Inclusive Growth
are critical and will have major consequences for our
in Seoul, a first of its kind, diagnoses inequalities in Seoul
ability to manage and adapt to climate risks.
and assesses key dimensions of its Inclusive Growth policy framework, including the interaction between
Inclusive climate action in cities
climate change and inequalities.
Cities will be key to the “just” low-carbon transition.
Water and cities
Cities are in the frontline of climate action, and in the search for concrete solutions to ensure that
Cities face emerging water-related challenges, such as
climate strategies effectively respond to major social
more-stringent health and environmental standards,
and economic challenges such as rising inequality,
diffuse pollution, competition to access water resources,
unemployment, poverty and unequal access to
increased intensity and frequency of extreme weather
opportunities. While many cities have put climate
(affecting precipitation and evaporation), and higher
change and rising inequalities at the top of their policy
uncertainty about future water availability and demand.
agendas, climate change and inclusive growth have
Cities in OECD countries face a particular challenge in
been addressed through separate policy portfolios, with
that most are locked-in to specific technical trajectories
limited attention paid to the trade-offs or synergies
and retrofitting existing infrastructure to address new
between these two areas.
and emerging pressures is particularly expensive and technically difficult.
The OECD is supporting local governments in delivering on both the climate and inclusion agendas. By
The report Water and Cities: Ensuring Sustainable Futures
launching the OECD Champion Mayors for Inclusive
explores policy responses at both the central and local CITIES AND CLIMATE CHANGE . 15
OECD work on climate action
government levels and focuses on four mutually dependent dimensions: finance, innovation, urban-rural linkages, and governance. The report builds on OECD work on water economics and governance. Ten cities provided detailed case studies on the water challenges they face, the innovative responses they are putting in place, and the barriers that had to be overcome to implement these responses. New information was collected through two surveys, on water governance in cities and on the governance of water regulators.
KEY PUBLICATIONS Inclusive climate action in cities OECD (2016), Making Cities Work for All: Data and Actions for Inclusive Growth, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264263260-en OECD 2014, All on Board. Making Inclusive Growth Happen, OECD Publishing, Paris. www.oecd.org/inclusive-growth/All-on-Board-MakingInclusive-Growth-Happen.pdf.
dedicated reports.
Water and cities OECD (2013), Water and Climate Change Adaptation: Policies to Navigate Uncharted Waters, OECD Publishing, Paris. http://dx.doi.org/10.1787/9789264200449-en
Spatial Planning Instruments and the Environment (SPINE)
OECD (2015), Water and Cities: Ensuring Sustainable Futures, OECD Publishing, Paris. http://dx.doi.org/10.1787/9789264230149-en
SPINE is an ongoing OECD project to assess the
SPINE OECD 2018 forthcoming, A new perspective on urban sprawl
The detailed results of the surveys are presented in
environmental effectiveness and economic efficiency of spatially-related policy instruments, such as those focusing on land-use and urban transport. SPINE examines the urban form patterns in OECD countries to identify how the organization of built environment affects the energy needs of modern cities, their dependency on private modes of transportation and, in turn, their CO2 footprint. The above work is carried out with city case studies and cross-country comparative analyses. Every city case study aims at deriving evidence-based conclusions regarding the long run effect of relevant policy instruments on the shape of future cities and their carbon footprint. These instruments involve, but are not limited to: road pricing, parking fees, incentives for the adoption of electric vehicles, zero-emission zones, density regulations and property taxation. Case studies are currently underway for a series of cities, including Auckland and Santiago with full-blown results expected in 2018. In parallel, SPINE has undertaken the largest comparative analysis for the evolution of urban sprawl ever attempted. Using data from satellite images, urban sprawl indicators were constructed for 1156 OECD urban areas for different years (1975, 1990, 2000, 2014). An important finding of the study is that many cities continue to sprawl in ways not reflected in their average population density. In the future, these cities may be trapped in car dependency, as the provision of public transport in them will be more expensive. 16 . OECD WORK ON CLIMATE ACTION
Cárdenas Rodríguez, M., L. Dupont-Courtade and W. Oueslati (2015), “Air Pollution and Urban Structure Linkages: Evidence from European Cities”, OECD Publishing, Paris. http://dx.doi.org/10.1787/5jrp6w9xlbq6-en KEY WEBSITES Inclusive climate action in cities www.oecd.org/regional/greening-cities-regions/ Seoul Implementation Agenda – www.oecd-inclusive.com/ champion-mayors-doc/seoul-implementation-agenda.pdf OECD Case Study of Inclusive Growth in Seoul – www.oecd-inclusive.com/champion-mayors-doc/seoul-policyhighlights.pdf Champion Mayors platform – www.oecd-inclusive.com/ champion-mayors/ Water and cities The Roundtable on financing water – www.oecd.org/ environment/resources/roundtableonfinancingwater.htm SPINE project www.oecd.org/env/tools-evaluation/spine-spatial-planninginstruments-and-the-environment.htm CONTACTS Inclusive climate action in cities: Marissa Plouin – Marissa.Plouin@oecd.org Virginie Marchal – Virginie.Marchal@oecd.org Water and cities: Xavier Leflaive – Xavier.Leflaive@oecd.org SPINE project: Walid Oueslati – Walid.Oueslati@oecd.org
Further reading Climate action and the economy IEA (2017), Chapters 1 and 2 in Perspectives for the Energy Transition: Investment Needs for a Low-Carbon Energy System, International Energy Agency/OECD Publishing, Paris, www.energiewende2017.com/wpcontent/uploads/2017/03/Perspectives-for-the-EnergyTransition_WEB.pdf. OECD (2015), Aligning Policies for a Low-carbon Economy, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264233294-en.
Vallejo, L., S. Moarif and A. Halimanjaya (2017), “Enhancing mitigation and finance reporting”, OECD/IEA Climate Change Expert Group Papers, OECD Publishing, Paris, http://dx.doi.org/10.1787/2227779X. Moving to low-emissions pathways Dellink, R., et al. (2017), “International trade consequences of climate change”, OECD Trade and Environment Working Papers, No. 2017/01, OECD Publishing, Paris, http://dx.doi.org/10.1787/9f446180-en.
International climate negotiations Moarif, S. (2017), “Information needed for the clarity, transparency and understanding (CTU) of mitigation contributions”, OECD/IEA Climate Change Expert Group Papers, No. 2017/01, OECD Publishing, Paris, http://dx.doi.org/10.1787/2227779X.
OECD (2015), OECD Companion to the Inventory of Support Measures for Fossil Fuels 2015, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264239616-en.
OECD (2017), OECD DAC Rio Markers for Climate: Handbook, OECD, Paris, www.oecd.org/dac/environment-development/ Revised%20climate%20marker%20handbook_FINAL.pdf.
Climate resilience and adaptation Kato, T. and J. Ellis (2016), “Communicating progress in national and global adaptation to climate change”, OECD/IEA Climate Change Expert Group Papers, No. 2016/01, OECD Publishing, Paris, http://dx.doi.org/10.1787/5jlww009v1hj-en.
OECD (2016), 2020 Projections of Climate Finance Towards the USD 100 Billion Goal: Technical Note, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264274204-en. Vaidyula, M. and J. Ellis (2017), “Information needs for the 2018 facilitative dialogue: issues and options”, OECD/IEA Climate Change Expert Group Papers, OECD Publishing, Paris, http://dx.doi.org/10.1787/2227779X.
OECD (2015), Climate Change Risks and Adaptation: Linking Policy and Economics, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264234611-en. Land-use, ecosystems and agriculture OECD (2017), The Land-Water-Energy Nexus: Biophysical and Economic Consequences, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264279360-en.
“Ambitious climate policy is simply good policy.” Angel Gurría – OECD Secretary-General
FURTHER READING