OECD Work on Green Growth - January 2023

OECD WORK ON GREEN GROWTH

OECD WORK ON GREEN GROWTH

1 OECD at a glance

2 What is green growth and why do we need it?

9 SPOTLIGHT—Navigating the twin transitions: Going green and digital

11 Green growth indicators

15 Green growth in country policy surveillance

19 Fiscal policy and green growth

23 Environmental policies and economic outcomes

27 A green transition that leaves no one behind

35 Behavioural insights for green growth

37 Greening SMEs

39 Green finance and investment

45 Trade and green growth

49 Innovation for green growth

53 SPOTLIGHT—Green innovation and the impacts of economic shocks

54 Green growth of key sectors: energy, transport, agriculture, industry, tourism and the ocean economy

69 A nature-positive economy: biodiversity, ecosystem services and water

75 Greening regions, cities and communities

OECD at a glance

What is the OECD? The letters stand for Organisation for Economic Co-operation and Development. Those words, broadly speaking, sum up what the Organisation does. For more than 60 years, the OECD has been providing a forum in which governments work together to seek solutions to common problems, share experiences and identify best practices to promote better policies for better lives.

The OECD has helped forge global standards, international conventions, agreements and recommendations in areas such as governance and the fight against bribery and corruption, corporate responsibility, development, international investment, taxes, environment, agriculture, to mention a few. The OECD also looks at issues that directly affect the lives of ordinary people, such as school and health systems and jobs. Co-operation, dialogue, consensus and peer review drive the OECD as it seeks to fulfil its vision of a stronger, cleaner, fairer world economy and society. The OECD is a source of advice on almost all areas of policy making and implementation, and one of the world’s most trusted sources of comparable statistical data. It carries out its mission thanks to over 200 committees and working groups of national experts and decision makers, and a high-quality permanent Secretariat.

The OECD currently includes 38 member countries. Brazil, Bulgaria, Croatia, Peru and Romania are accession candidate countries. Brazil, the People’s Republic of China, India, Indonesia and South Africa are OECD Key Partners. The OECD also collaborates with more than 100 other economies, many of which participate in its committees and adhere to its instruments.

Member countries

www.oecd.org/about

Australia

Austria

Belgium

Canada

Chile

Colombia

Costa Rica

Czech Republic

Denmark

Estonia

Finland

France

Germany

Greece

Hungary

Iceland

Ireland

Israel

Italy

Japan

Korea

Latvia

Lithuania

Luxembourg

Mexico

Netherlands

New Zealand

Norway

Poland

Portugal

Slovak Republic

Slovenia

Spain

Sweden

Switzerland

Türkiye

United Kingdom

United States

What is green growth and why do we need it?

Global momentum toward sustainable development has been renewed by the adoption of the 2030 Sustainable Development Agenda, the Glasgow Climate Pact, the Kunming-Montréal Global Biodiversity Framework, and the UN mandate to negotiate a legally binding global instrument to end plastic pollution. At the same time, the effects of Russia’s large-scale unprovoked aggression against Ukraine have been severe and came on top of an already fragile and heterogeneous recovery from the COVID-19 pandemic. Across the world, people are concerned about energy and food security and affordability, restarting and “building back” domestic economies, and inequality. With the 2030 deadline for the SDGs on the horizon and the window to meet the 1.5 degree target of the Paris closing quickly, it has never been more important to align policies for environmental protection, economic prosperity and social equity.

Russia’s invasion of Ukraine has resulted in a number of immediate and longer-term policy challenges. The increase in energy prices and food prices is taking a heavy toll on the world economy. Growth has slowed down in several OECD and non-OECD countries. Monetary policy is being tightened with the aim containing the inflationary impulse of higher energy and food prices. The risks of debt distress in low-income countries is increasing while the impacts of higher costs of living are disproportionately affecting people on low incomes.

Global material use projections

Source: OECD (2019) Global Material Resources Outlook to 2060. https://doi.org/10.1787/9789264307452-en

*BRIICS: Brazil, Russia, India, Indonesia, China, South Africa

At the same time, the urgency to act to address environmental degradation has not subdued. Climate change, biodiversity loss, worsening resource bottlenecks, and life-shortening air pollution continue to pose great systemic risks to the wellbeing of current and future generations. Without stronger action to improve the environmental performance of our economies, the impacts of environmental degradation will undermine development prospects and the progress in well-being achieved in the past 50 years for at least three reasons:

• Human well-being is inherently liked to the environment. For example, air pollution is projected to cause 6-9 million premature deaths globally by 2060 and there is increasing evidence that it reduces labour productivity. Land-use change and wildlife exploitation increase the risk of emergence of new infectious diseases.

• Changes to ecosystems do not necessarily follow a smooth, foreseeable trajectory. For example, overshooting the Paris Agreement target of keeping increase in temperature to 1.5°C may push the earth over several tipping points, leading to irreversible and severe changes in the climate system.

• It is becoming increasingly costly to substitute physical capital for natural capital. For instance, if water becomes more polluted, it is more costly to ensure water access because more transport and purification infrastructure is needed.

Evolution of GHG emissions by region: Baseline projection 2010 to 2060

Global plastic pollution under different policy scenarios to 2060

Consistency of actions across all policy domains (e.g. trade, labor, fiscal policies) is necessary to ensure that longer-term environmental, social and economic goals can be met. Building on its Green Growth Strategy and the OECD Secretary General’ Strategic Orientations presented at the OECD Ministerial Council in 2022, the OECD leverages its multidisciplinary reach to provide policy advice and identify best practise for an inclusive green transition. For instance, the OECD’s horizontal project Net Zero+: Climate and economic resilience in a changing world draws on expertise from across the OECD to deliver impactful policy advice to members on how policies that address near-term challenges can also be aligned with building longer-term resilience.

Productivity growth, green growth and inclusive growth are three key aspects of the OECD efforts to help countries sustain economic growth and improve wellbeing in the context of sustainable development.

Wellbeing

Productivity Growth Green Growth Inclusive Growth

The Green Growth Strategy

Following the 2008-2009 crisis, OECD countries have adopted the Green Growth Strategy, which aims at “fostering economic growth and development, while ensuring that natural assets continue to provide the resources and environmental services on which our well-being relies”. To do this, it must catalyse investment and innovation that will underpin sustained growth and give rise to new economic opportunities for all in inclusive ways. Since then, the OECD Green Growth strategy has provided a green lens for more than 20 OECD Committees’ and bodies’ activities.

The world is currently experiencing a situation very similar to that of 2009. The Russian aggression against Ukraine and the COVID-19 pandemic have brought about an unprecedented global crisis. At the same time, there is an increasing global consensus that responses to these crises must also accelerate action to address environmental degradation. Many countries, including developing ones, have introduced measures to cushion impacts of these crises while also supporting the transition towards a green and resilient economy. Green growth policies can help to achieve these intertwined objectives.

Inclusive Forum on Carbon Mitigation Approaches (IFCMA)

The Inclusive Forum on Carbon Mitigation Approaches (IFCMA) is an initiative designed to help improve the global impact of emissions reduction efforts around the world through better data and information sharing, evidence-based mutual learning and inclusive multilateral dialogue. It brings together all relevant policy perspectives from a diverse range of countries from around the world, participating on an equal footing basis, to take stock of and consider the effectiveness of different carbon mitigation approaches. As of 30 January 2023, 133 countries around the world, representing around 91% of global GDP and covering around 83% of global emissions, have adopted net-zero carbon emissions targets.

Consistent with the principles of the multilateral climate policy architecture as set out in the Paris Agreement, countries use or plan to use a widely varied set of emissions reduction policies – both price-based and non-price-based – as tailored to different national circumstances. To achieve the shared global objective of net zero emissions, the key challenge is to optimise the combined global impact of all these individual emissions reduction efforts. This is what the IFCMA will help to facilitate through data and information sharing, mutual learning and inclusive multilateral dialogue.

• www.oecd.org/climate-change/inclusive-forum-on-carbon-mitigation-approaches/

The OECD horizontal project Net Zero+: Climate and economic resilience in a changing world is a major step in mainstreaming climate change across the work of the OECD.

Action on climate has never been more urgent. The threat of crossing climate system tipping points means overshooting 1.5oC will likely result in catastrophic consequences – accelerated climate action, on both mitigation and adaptation, is essential.

At the same time, the social and economic vulnerability exposed in different ways by COVID-19 and the war in Ukraine have underscored the importance of making sure that approaches to climate policy are designed to be resilient. Equally, these global disruptions have also offered opportunities to enhance climate policy efforts, in particular for accelerating the energy transition. This has provided important lessons for designing effective and long-lasting climate policies that take into account the profound economic and social implications of the net-zero transition – e.g., on public finances, labour markets and income distribution

Launched in 2021, the Net Zero+ project brings together findings from across the OECD’s multidisciplinary expertise to support governments in designing climate policies that are effective, long-lasting and resilient to changing circumstances. website

• www.oecd.org/climate-change/net-zero-resilience/

Contact for more information

Andrew Prag

Environment Directorate

Email: Andrew.Prag@oecd.org

Klian Raiser

Environment Directorate

Email: Kilian.Raiser@oecd.org

Mainstreaming the Green Growth Strategy

The OECD continues to support strategies for greener growth through its core advice in country-specific and multilateral surveillance. The main outcomes include a more systematic account of green growth issues in its Going for Growth flagship reports, Economic Surveys, Environmental Performance Reviews, Investment Policy Reviews, Innovation Policy Reviews and Multi-dimensional Country Reviews of OECD countries and emerging economies. Green growth and climate change are also integrated into the OECD’s sector and issue-specific work in key areas such as taxation, innovation, investment, trade, industry, energy (with IEA), transport (with ITF), food and agriculture, tourism, skills and jobs, biodiversity and water management, rural and urban development.

The framework of the OECD Green Growth Strategy provides a ‘green lens’ for looking at growth, development, and human wellbeing. It aims to identify mutually reinforcing aspects of economic and environmental policy as well as synergies with the inclusiveness agenda. It recognises the full value of natural capital as a production factor along with other commodities and services. It focuses on cost-effective ways of reducing environmental pressures, to achieve a transition towards new patterns of growth that will avoid crossing critical local, regional and global environmental thresholds. Mainstreaming green growth in social policies needs to aim to enhance equity and inclusiveness.

While there is no “one-size-fits-all” prescription for implementing green growth, the OECD’s analytical work over the past years resulted in the ability to provide concrete targeted advice to member and partner countries in mainstreaming green growth and climate change into national and multilateral policies.

Green growth and the Sustainable Development Goals (SDGs)

Green growth is a subset of sustainable development. It entails an operational policy agenda that can help achieve concrete, measurable progress at the interface of the economy and the environment. It fosters the necessary conditions for innovation, investment and competition that can give rise to new sources of economic growth that are consistent with resilient ecosystems.

Green growth strategies need to pay specific attention to the social issues and equity concerns that can arise as a direct result of greening the economy. This means that strategies should be implemented in parallel with initiatives focusing on the broader economic, social and environmental pillars of sustainable development. At the same time, it should be recognised that lack of action to green economies creates equity concerns as disadvantaged households are often more exposed and vulnerable to pollution and climate change.

The Agenda 2030 for Sustainable Development and the SDGs are today the norm for all countries, developed and developing alike. The OECD supports the United Nations in ensuring the success of the 2030 Agenda by bringing knowledge and expertise to inform policies through; data and evidence-based analysis, best practices identified through developing and developed countries’ own approaches, and guidance and lessons on innovative ways to implement green growth strategies.

Key Publications and website

• The inequalities-environment nexus: Towards a people-centred green transition (2021)

• Towards Green Growth? Tracking Progress: Four years of the Green Growth Strategy (2015)

• Towards Green Growth? Tracking Progress: Key Findings and Recommendations (2015)

• What we have learned from attempts to induce green growth policies? (2013)

• Towards Green Growth (2011)

• Tools for Delivering Green Growth (2011)

• www.oecd.org/greengrowth

Contact for more information

Enrico Botta

Environment Directorate

Email: Enrico.Botta@oecd.org

SPOTLIGHT—Navigating the twin transitions: Going green and digital

The multiple intersections between the digital and green transitions will generate both opportunities and challenges for the societal efforts to shift economies to more sustainable development trajectories. For instance, smart meters and artificial intelligence may support progress towards net-zero power systems, local sensing and earth observation techniques may improve environmental monitoring and enforcement, and digitally-enabled business models could contribute to the adoption of more circular production and consumption practices. Yet at the same time, the growing carbon footprint of computing and increasing e-waste are key challenges, while the need for increased reparability of digital devices may require substantial change to their design. Furthermore, both transitions are likely to drive substantial changes in skills demand and economic structure with important implications for certain households, workers, communities and regions.

Under the overarching theme of Navigating the twin transitions: Going green and digital, the 2023 Green Growth Sustainable Develompment Forum (Paris, November 28-29 November 2023) will discuss the synergies and trade-offs between the digital and green transitions, and policies to help accelerate the sustainability transformation that takes advantage of digitalisation while leaving no one behind.

What opportunities does digitalisation create for the green transition, and how to mitigate its potentially negative environmental impacts, including for SMEs? What is the joint impact of the twin transitions on competitiveness of sectors and regions, labour conditions and migratory flows, and how to ensure that certain workers, social groups, e.g. youth, older people and the most disadvantaged communities are not left behind? What role do subnational governments need to play? Which policies can govern the two transitions systematically rather than in piecemeal approaches also considering the implications of the war in Ukraine and the complexity of value chains? How can smart data support better environmental policy-making and greener business practices? Evidence on how digital technologies can improve environmental democracy (e.g. access to information, participation in policy-making, and access to justice) for a green, digital and inclusive society could also be addressed, as well as their role in strengthening, monitoring & enforcement activities.

...Is an OECD initiative to provide a dedicated space for multi-disciplinary dialogue on green growth and sustainable development. The GGSD Forum brings together experts from different policy fields and disciplines, facilitates the exchange of knowledge and identifies potentials for cross-fertilisation. It is a valuable supplement for the work undertaken in individual government departments and ministries by addressing the horizontal, multi- disciplinary aspects of green growth and sustainable development. In 2023 and 2024, the GGSD Forum will provide a venue to discuss key findings and identify knowledge gaps in the context of the Horizontal Project on "Building Climate and Economic Resilience in the Transformation to a Low-carbon Economy".

The GGSD Forum operates as annual conferences, focusing each year on a different cross-cutting issue related to sustainable development and green growth. The GGSD Forum is open to stakeholders and experts from OECD Committees, government ministries and agencies, academia, businesses civil society and other international organisations.

The GGSD Forum is also a meeting point for policy makers and experts from OECD and partner countries to exchange experiences and identify policy tools and best practices that respond to their specific country circumstances.

Learn more on the past GGSD Forums at: www.oe.cd/ggsdForum

The Green Growth and Sustainable Development Forum (GGSD Forum)...

Green growth indicators

Moving towards green growth requires appropriate information and reliable indicators that support policy development and analysis while tracking progress. The OECD framework for monitoring progress towards green growth includes indicators in four areas: (1) the environmental and resource productivity of the economy; (2) the natural asset base; (3) the environmental dimension of quality of life; and (4) economic opportunities and policy responses. A small sub-set of six headlines indicators has been identified to facilitate communication with policy makers, the media and citizens:

The proposed indicator set is neither exhaustive nor final, and has been kept flexible so that countries can adapt it to different national contexts. It is integrated into OECD work, including country reviews and policy analysis.

Carbon productivity

Non-energy material productivity

Environmentally-adjusted, whole-economy (multi-factor) productivity

Natural resource index

Land cover and use

Population exposure to air pollution (PM2.5)

The OECD continues advancing the measurement of green growth indicators (definitions, calculation methods, underlying data). Currently, the focus is on measuring changes in land cover and people’s exposure to air pollution, greening the multifactor productivity measure, accounting for carbon emissions and raw materials embodied in trade, creating a natural resource index, as well as further development of indicators of economic opportunities and policy responses (such as environmentally related taxes and innovation). This is supported by OECD work on the implementation of the System of Environmental Economic Accounting (SEEA), carried out jointly by the OECD Environment Directorate and the OECD Statistics and Data Directorate. It includes work on air and greenhouse gas emission accounts, natural assets and material flow accounts, as well as work to improve data and accounts on environmental expenditure and tax revenue.

The OECD work also draws on Earth observation and other geospatial data to fill gaps in environmental data and improve its information base.

The OECD designed the Green Growth Indicators to help countries assess and compare their progress. The measurement framework combines the main features of green growth with the basic principles of accounting and the pressure-state-response (PSR) model. The indicators provide an important building block for monitoring progress towards several SDGs, and for the International Programme for Action on Climate (IPAC) that harmonises and fills the gaps of existing data sources, and on key aspects of climate change policymaking, such as climate-related hazards.

Green growth indicators are regularly used in OECD country reviews that help countries improve their policies and practices and share their experience. OECD experts contribute to development and refinement of methodologies for global SDG indicators and to related global data collection. The OECD is an observer to the UN Inter-Agency and Expert Group on SDG indicators.

Highest overall improvements towards green growth, 2015-2020

CO₂ productiv ty (demand-based)

CO

CO₂ productiv ty (production-based)

Ma

Low air pol ut on exposure

Environmental y related innovat on

CO₂ product v ty (product on-based)

ly re

CO₂ productiv ty (demand-based)

CO₂ product v ty (demand-based)

CO₂ productiv ty (production-based)

Ma erial productiv ty (production-based)

Env ronmen al y re ated

Low air pol ut on exposure

Environmenta y related nnovat on

Note: Improvements shown here are determined by comparing results in 2020 (or last available year) to 2015 («distance to the leader»). The black dashed line indicates no change; values below that level indicate deterioration.

Source: OECD Green Growth Indicators (database), World Bank (2022). https://stats.oecd.org/Index.aspx?DataSetCode=GREEN_GROWTH

CO₂ product v ty (product on-based)

Mater a product v ty (product on-based)

Env ronmenta ly re a ed taxa ion GDP per capi a

Green growth indicators framework

GREEN GROWTH MEASUREMENT FRAMEWORK

SOCIO-ECONOMIC CONTEXT AND THE CHARACTERISTICS OF GROWTH

inputs

PRODUCTION

outputs

CONSUMPTION

ECONOMIC OPPORTUNITIES AND POLICY RESPONSES

taxes

labour

capital

+ Recycling re-use, remanufacturing, substitution

ENVIRONMENTAL AND RESOURCE PRODUCTIVITY

income goods & services

residuals resources

INVESTMENTS

ENVIRONMENTAL QUALITY OF LIFE

subsidies regulations

investment innovation trade education training jobs

energy and raw materials

water, land, biomass, air

pollution and waste

amenities, health

sink functions

resource functions

NATURAL ASSET BASE

service functions

Icons from TheNounProject.com

Key Publications and websites

• OECD Environment Statistics (2022)

DID YOU KNOW?

… that the Green Growth Indicators Database brings together the data needed for calculating the OECD’s green growth indicators and contains selected indicators to support economic and environmental policy analysis for monitoring progress towards green growth.

Countries like the Czech Republic, Denmark, Germany, Korea, the Netherlands, Slovenia and the Slovak Republic have already applied the OECD green growth measurement framework. Mexico produced a draft report and work is underway in LAC countries (Colombia, Costa Rica, Ecuador, Guatemala, Paraguay and Peru) and in Eastern Europe, the Caucasus and Central Asia (Azerbaijan, Moldova and Kazakhstan).

• Environment at a Glance (2022)

• Green Economy Transition in Eastern Europe, the Caucasus and Central Asia Progress and Ways Forward ( 2022)

• Land Cover Change and Conversions (2018)

• Towards Global SEEA Air Emission Accounts (2018)

• Green Growth Indicator s (2017)

• www.oecd.org/site/envind

• http://oe.cd/ggi-data

• www.oecd.org/environment/environment-at-a-glance/

• www.oecd.org/climate-action/ipac/dashboard

Contact for more information

Nathalie Girouard

Environment Directorate

E-mail: Nathalie.Girouard@oecd.org

Myriam Linster

Environment Directorate

E-mail: Myriam.Linster@oecd.org

Ivan Haščič

Environment Directorate

E-mail: Ivan.Hascic@oecd.org

Rodrigo Pizarro

Environment Directorate

E-mail : rodrigo.pizarro@oecd.org

Sarah Barahona

Statistics and Data Directorate

E-mail: Sarah.Barahona@oecd.org

Green growth in country policy surveillance

Having the institutional and governance capacity to implement wide-ranging policy reform is an essential condition for greening growth and achieving sustainable development. Governments need to be able to integrate green growth objectives into broader economic policymaking and development planning.

The OECD is mainstreaming green growth in national policy surveillance exercise such as Economic Surveys, Environmental Performance Reviews, Innovation Reviews, Investment Policy Reviews and Multi-dimensional Country Reviews. This approach offers opportunities for an in-depth appraisal of whether and how policies are working to drive green growth. Experience gained through country reviews and general policy assessment also based on cross-country analysis leads to identify good practice, and to the development of better analytical tools to address countryspecific policy priorities.

Environmental Performance Reviews include a chapter on green growth, which looks at the country’s policy mix for mainstreaming environment considerations into economic and fiscal policies, as well as at the employment and distributional implications of the transition towards green growth. All OECD member countries have been reviewed, most of them for the third time. Partner countries, such as South Africa, Colombia, Brazil and Peru have been reviewed recently. A Green Growth Policy Review of Indonesia has been released in 2019.

Economic Surveys have been increasingly focusing on climate change and other environmental issues with the aim of identifying and assessing policy complementarities and tradeoff between environmental policies and other macroeconomic and structural polices while taking into account the specific circumstances each country faces. Surveys assessment of climate policy builds on the Framework to Decarbonise the Economy

The Framework highlights the need for developing decarbonisation strategies based on a wide policy mix consisting of three main components: 1) emission pricing policy instruments; 2) standards and regulations; 3) complementary policies to facilitate the reallocation of capital, labour and innovation towards low-carbon activities and to offset the adverse distributional effects of reducing emissions. However, there is no one-size-fits-all policy mix, as feasible policy choices depend on countries’ industrial structure, social preferences and political constraints. Some recent Economic Surveys that have addressed climate change in depth include the Survey of Denmark, Estonia, France, Greece, Iceland, Luxembourg, and the United Kingdom. Green growth features in every Survey’s key recommendations.

Since 2019, the Going for Growth report includes environmental sustainability as an additional dimension in the framework to identify economy-specific policy priorities.

As countries issued pledges for “building their economics back better” during the COVID-19 pandemic, the OECD Green Recovery Database collected and tracked information on COVID-19 recovery spending across the OECD and large economics with clear positive, mixed or negative environmental impact. The most recent data show that measures with a positive environmental impact amount to 33% of total recovery spending.

Focusing primarily on non-OECD emerging economies, the Multidimensional Country Reviews (MDCRs) address socioeconomic issues of relevance to green growth. For example, the MDCRs of Western Balkans (2022) and Vietnam (2020) include chapters, respectively, on green recovery and environmental management.

The Climate Actions and Policies Measurement Framework (CAPMF) provides a comprehensive internationally harmonised climate-related policy database for 52 countries and the period 2000-2020. In addition, the Inclusive Forum on Carbon Mitigation Approaches (IFCMA) was recently launched to support Paris Agreement goals by improving mutual understanding of the expected impact of a full range of policy approaches to reduce emissions. The IFCMA will collate the full range of mitigation policies (regulatory, incentive-driven, price-based etc.), first by preparing a typology, and then making an assessment of effectiveness in reducing emissions. It will involve the equal footing participation of OECD member and non-member countries.

The OECD Environmental Performance Reviews examine how countries’ environmental policy frameworks can support green growth, including through pricing mechanisms and transition measures. Recent reviews include United Kingdom (2022), Norway (2022), Finland (2021), Lithuania (2021), and Ireland (2021).

Fortcoming Environmental Reviews (2023) include: Israel, Portugal, Costa Rica, Germany and the United States.

The OECD Investment Policy Reviews seek to help countries improve domestic conditions for investment in support of green growth objectives. Review of Thailand (2021), Myanmar (2020), and Vietnam (2018) include a green growth focus.

Environmental challenges will also be addressed in the upcoming Investment Reviews (2023) on Bangladesh and the Economic Commumity of West African States (ECOWAS).

The OECD Economic Surveys encourage governments to focus on green growth issues, and periodically provide an assessment of how environmental and growth policy recommendations interact, with more and more surveys covering green growth and climate issues in depth, including Luxembourg (2022), the United Kingdom (2022) Estonia (2022), Denmark (2021), France (2021), and Iceland (2021). The upcoming Economic Surveys (2023) on Germany, Sweden and the European Union will also include a focus on environmental issues.

The Multi-dimensional Country Reviews aim to design policies and strategies that promote development in a holistic sense, identifying policies to remove constraints to sustainable development. The Western Balkans (2022) and Vietnam (2020) Reveiws focus respectively, on the green recovery and environmental management.

Contact for more information

Websites

• www.oecd.org/eco/surveys

• www.oecd.org/environment/country-reviews

• www.oecd.org/sti/inno/oecdreviewsofinnovationpolicy.htm

• www.oecd.org/investment/countryreviews.htm

• www.oecd.org/development/mdcr/

• www.oecd.org/climate-action/ipac/

• www.oecd.org/coronavirus/en/themes/green-recovery#green-recovery-database

Fatima Talidi

Economics Department

E-mail: Fatima.Talidi@oecd.org

Iris Mantovani

Directorate for Financial and Enterprise Affairs

E-mail: Iris.Mantovani@oecd.org

Nathalie Girouard

Environment Directorate

E-mail: Nathalie.Girouard@oecd.org

Jan Rielaender

Development Centre

E-mail: Jan.Rielaender@oecd.org

Fiscal policy and green growth

Looking at the whole range of fiscal policy instruments, including taxes, tradable permits, and subsidies, the OECD help countries to better assess the environmental implications of their fiscal policies. The 2021 OECD report Biodiversity, Natural Capital and the Economy estimates environmentally harmful support – which include fossil fuel support - at more than USD 800 billion a year. A report for 2023 reviews types and estimates of environmentally harmful subsidies across different sectors in order to identify priorities for reform.

The OECD develops in-depth and detailed analyses of the taxation of energy use and the pricing of greenhouse gas emissions, as well as support to the extraction, production and use of fossil fuels. The report on Pricing Greenhouse Gas Emissions: Turning climate targets into climate action, which covers 71 countries that account for approximately 80% of global GHG emissions, finds that more than 40% of GHG emissions were covered by carbon prices in 2021, and that the average Net Effective Carbon Price – the sum of explicit carbon prices and fuel excise taxes, minus fossil fuel subsidies – increased to EUR 17.

The OECD Inventory of Support Measures for Fossil Fuels provides estimates of government measures that encourage fossilfuel production or consumption relative to renewable alternatives. The latest edition of the Inventory includes around 1 500 support measures in 51 OECD, G20 and EU Eastern Partnership economies.

Recent analysis shows that a EUR 10 increase in carbon pricing would decrease CO2 emissions from fossil fuels by 3.7% on average in the long term. Broadening carbon pricing to currently unpriced emissions contributes to two thirds of the modelled effects on emissions and revenues. Also, dynamic simulations stress the importance of complementary policies, such as green technology support measures and regulations, since even large effective carbon rates (about EUR 1000 per tonne by late 2030s) will not suffice to meet net-zero emission targets.

Countries have increased their use of carbon pricing through taxes or emissions trading systems, with coverage increasing across sectors

Road transport (CO2)

Electricity (CO2)

Off-road transport (CO2)

Agriculture (CO2)

Buildings (CO2)

Industry (CO2)

All GHG (CO2e)

Note: All GHG includes both CO2 and non-CO2 emissions. Percentages are rounded to the first decimal place.

Source: OECD (2022) Pricing Greenhouse Gas Emissions: Turning climate targets into climate action, https://doi.org/10.1787/e9778969-en

The Agricultural Policy Monitoring and Evaluation report shows that half of support to agriculture in monitored countries is market distorting, inequitable and harmful to both the environment and global food security. Only one sixth of budgetary support to agriculture globally is spent in ways that are effective in promoting sustainable productivity growth and agricultural resilience.

The OECD is the only international organisation that measures and reports policy effort in the fisheries sector on an annual basis through its Fisheries Support Estimate (FSE) database. Work will be undertaken to better understand the impacts of support to fisheries on overfishing and overcapacity, the two overarching concerns of global action on fisheries subsidies.

Large difference among average tax rates on different fuels

The OECD Paris Collaborative on Green Budgeting aims at helping countries to embed climate and other environmental goals within national budgeting frameworks. Currently, more than 50% of OECD countries implement green budgeting and environmentally related tax revenues were at 1.35% of GDP on average among the 38 OECD economies in 2020.

https://doi.org/10.1787/e9778969-en

The report Green budgeting: A way forward identifies seven key areas to support the development of green budgeting practices in making progress toward climate and environmental goals. Furthermore, a database with firm-level information on environmentally harmful support to selected industrial sectors (e.g. aluminium, steel, cement, glass and petrochemicals) is also under development.

Source: OECD (2022) Pricing Greenhouse Gas Emissions: Turning climate targets into climate action,

Contact for more information

Key Publications and websites

• Pricing Greenhouse Gas Emissions: Turning climate targets into climate action (2022)

• Estimating the CO2 Emission and Revenue Effects of Carbon Pricing: New evidence from a Large Cross-country Dataset, OECD Economics Department Working Paper (2022)

• Agricultural Policy Monitoring and Evaluation (2022)

• Green budgeting: A way forward, OECD Journal on Budgeting (2022)

• Tax Revenue Implications of Decarbonising Road Transport: Scenarios for Slovenia, OECD/ITF (2019)

• Taxing vehicles, fuels, and road use: Opportunities for improving transport tax practice, OECD Taxation Working Papers (2019)

• Unintended technology-bias in corporate income taxation: The case of electricity generation in the low-carbon transition, OECD Taxation Working Papers (2018)

• https://www.oecd.org/fossil-fuels/

Kurt Van Dender

Centre for Tax Policy and Administration

E-mail: Kurt.Vandender@oecd.org

Nathalie Girouard

Environment Directorate

E-mail: Nathalie.Girouard@oecd.org

Andrew Blazey

Public Governance Directorate

E-mail: Andrew. Blazey@oecd.org

Claire Delpeuch

Trade and Agriculturate Directorate

E-mail:Claire.Delpeuch@oecd.org

Environmental policies and economic outcomes

Ongoing empirical work sheds light on the economic effects of environmental policies

The effects of environmental policies on economic performance are a subject of heated debate. On the one hand, environmental policies have been argued to burden economic activity, as they raise costs without increasing output and restrict the set of production technologies and outputs. On the other hand, the Porter Hypothesis claims that well-designed environmental policies can encourage innovation and gains in efficiency and profitability, which can outweigh the costs of compliance.

The EPS indicator had been used in empirical analysis to gauge the effects on multifactor productivity growth, trade and competitiveness, investment and innovation at the macroeconomic, industry and firm levels. The work shows that environmental policies need not be bad for productivity and that in practice some aspects of their design can be made more friendly to entry and competition without compromising the stringency of the policy signal.

Joint work between the OECD Environment Directorate and the Economics Department on environmental policies and productivity growth has laid the ground for empirical analyses of the economic effects of environmental policies. It provided quantitative proxies measuring the stringency and competition - friendliness of environmental policies. In particular, the recently updated indicator of Environmental Policy Stringency (EPS) provides a comparable, cross-country and over-time measure of the aggregate stringency of selected environmental policy instruments.

The stringency of environmental policies has been increasing across countries

Source: Kruse, T., et al. (2022), "Measuring environmental policy stringency in OECD countries: An update of the OECD composite EPS indicator", https://doi.org/10.1787/90ab82e8-en

Further empirical analysis shows that more stringent environmental policies are effective at inducing innovation in low-carbon technologies in the directly regulated sectors, though not along the whole supply chain. In addition, increases in energy prices and in EPS increase the probability of firm exit from energy intensive sectors but have a positive effect on the employment level of surviving firms. Accelerated firm exit allows surviving firms to expand, boosting firm-level employment.

Also, evidence shows that higher energy prices are not key drivers of overall trade in manufactured goods, but were associated with tilting the comparative advantage away from pollution intensive industries. At the same time, a corresponding advantage in cleaner industries could be identified. Similarly, higher energy prices could indeed be associated with higher outwards FDI stock at the firmlevel. However, the effects were small with respect to other drivers of FDI.

Greener growth requires stringent environmental policies that are flexible and that minimise barriers to entry and competition.

International evidence, as captured by the indicator of the Design and Evaluation of Environmental Policies (DEEP), shows that the extent to which environmental policies create barriers to competition (i.e. administrative burdens and discrimination between entrants and incumbents) and the consideration given to their economic effects in their design vary notably across countries. Hence, stringent environmental policies can – and should - be designed in order to minimize barriers to entry and competition.

The DEEP indicator and measures of environmental policy stringency

Using a new indicator of Climate Policy Uncertainty, recent work shows that uncertainty in climate policy making can reduce firms’ investments, in particular in carbon-intensive industries. Clear policy trajectories are important to encourage investments into much needed low-carbon technologies.

Source: Berestycki, C. and A. Dechezleprêtre (2020), "Assessing the efficiency of environmental policy design and evaluation: Results from a 2018 cross-country survey" https://doi.org/10.1787/482f8fbe-en

Contact for more information

A priority for future work is to better understand if segments of society that share joint characteristics beyond income are more exposed to environmental or local climate hazards or to the costs associated with environmental policy measures. The paper Managing the distributional effects of environmental and climate policies: The narrow path for a triple dividend reviews the literature on the distributional effects of environmental and climate policies, and decomposes the distributional effects into the main dimensions to understand which policy packages are more likely to achieve a triple dividend of environmental effectiveness, economic efficiency and equity.

Mauro Pisu

Economics Department

E-mail: Mauro.Pisu@oecd.org

Tobias Kruse

Economics Department

E-mail: Tobias.Kruse@oecd.org

Filippo Maria D’Arcangelo

Economics Department

E-mail: FilippoMaria.Darcangelo@oecd.org

Key Publications and websites

• A framework to decarbonise the economy, OECD Economic Policy Papers (2022)

• Measuring and assessing the effects of climate policy uncertainty, OECD Economics Department Working Papers (2022)

• Assessing the Economic Impacts of Environmental Policies: Evidence from a Decade of OECD Research (2021)

• Managing the distributional effects of environmental and climate policies: The narrow path for a triple dividend, OECD Environment Working Papers (2021)

• http://oe.cd/eps

• www.oecd.org/environment/tools-evaluation

• www.oecd.org/environment/greeneco/framework-to-decarbonisethe-economy/

Shardul Agrawala

Environment Directorate

E-mail: Shardul.Agrawala@oecd.org

Nicolina Lamhauge

Environment Directorate

E-mail: Nicolina.Lamhauge@oecd.org

Olof Bystrom

Environment Directorate

E-mail: Olof.Bystrom@oecd.org

A green transition that leaves no one behind

A fair transition for households and communities

The transition towards a green economy can help to address existing inequalities in our societies. Vulnerable groups and households are more exposed to the impact of environmental degradation, such as climate change and air pollution, and more vulnerable to its consequences. At the same time, greening measures may negatively affect economic activities in certain regions or increase the prices of basic services (e.g. water, energy) with negative implications especially for lower income households. With the right policy packages, the green transition can benefit all and ensure that no one is left behind.

OECD work has looked at the distributional effects of energy taxes as well as the potential distributional consequences related to the phasing out of fossil fuel subsidies. Carbon pricing reforms that cut CO2 emissions may mean higher energy prices, which is a particular threat to poor households as they typically spend a large share of their income on energy bills. OECD analysis reveals that transferring a third of the additional revenues from an energy pricing reform to poor households, by means of an income-tested cash transfer, would be sufficient to increase their ability to pay for their energy needs.

Spatial planning instruments have long been used to organise and alter the distribution of human settlements and economic activity, and balance tensions between economic, social and environmental objectives. The OECD Spatial Planning Instruments and the Environment (SPINE) project investigates the role played by spatial planning and land use policies in managing the trade-offs between environmental, economic and social objectives. The case studies dedicated to Auckland and Santiago use the MOLES model to provide a holistic welfare evaluation of decarbonisation and air pollution mitigation policies, to assess their environmental effectiveness, economic efficiency and their impact on fiscal

balance and housing affordability. Ongoing work for the Greening Mobility and Transport project takes stock of the distributional impacts of policies discouraging car use. Among others, the study examines whether road pricing, distance-based charges, the fuel tax and parking fees impose a higher burden on low-income groups, and the degree to which this may be context-specific. The study identifies complementary measures that can increase the inclusiveness and public acceptability of transport policies that are key to the transition to net zero.

Beyond energy, also water policies can have distributional implications if they raise water tariffs. Investment needs and more stringent environmental and health standards can increase the costs of water supply and sanitation services globally. A review of financing needs and capacities in 27 European Member States projects that, while these services remain affordable for the vast majority of the population, fully reflecting additional costs into tariffs would bring average bills at 3-5% or more of households’ budgets for the lowest decile of the population in several OECD countries. This would raise affordability concerns for these groups.

The OECD Environmental Performance Reviews of individual countries also regularly assess public participation in decision making, as well as citizens’ access to information, justice and environmental education. Ease of access to information, education and justice is instrumental to ensure that (environmental) polices are fair.

OECD work also focused on specific demographics that are most vulnerable to the impact of environmental degradation. Youthwise, which is the OECD’s Youth Advisory Board, was established to bring the youth perspectives in OECD work. Youthwise members are contributing to shaping OECD action on the green transition by providing inputs to projects and joining the debate with highlevel government officials. Youthwise members participated to the OECD events at COP26 and COP27, the plenary session of the 2022 OECD Environmental Ministerial Meeting alongside the SecretaryGeneral and OECD Ministers, and contributed to the OECD’s Horizontal Project on Climate and Economic Resilience.

Gender equality and environmental goals intersect and can be mutually reinforcing but insufficient attention has been paid into breaking the silos. The OECD report on Empowering Women in the Transition towards Green Growth in Greece provides a framework for assessing environmental and climate policies through a gender lens, and gender equality policies through an environmental lens. The OECD report on Supporting women’s empowerment through green policies and finance finds that, even if the interlinkages that shape the gender-environment nexus are starting to be acknowledged, further efforts are needed to foster synergies between gender and environmental goals in policy design, sustainable finance approaches as well as in infrastructure planning and implementation.

Climate change can have complex and far-reaching impacts on migration across regions and countries. The OECD is planning a foresight exercise on migration and environmental change, with particular focus on examining the policy options of anticipated scenarios and the role of diaspora communities to support resilience. In addition, the Equitable Framework and Finance for Extractive-based Countries in Transition (EFFECT) provides a toolbox for policy makers to chart just, realistic, and sustainable low-carbon pathways, consistent with development priorities.

Climate change will also have significant implications for countries’ health services, in the form of new and different demands for health care arising from changing patterns of disease or acute events associated with extreme weather. Lower income households are often more vulnerable to such impacts because of lower baseline health condition, ability to invest in adaptation technology, and access to good quality healthcare. The Health Committee is investigating the complex relationships between health and climate change, including through the development and strengthening of indicators to measure both climate change’s impact on health, and the contribution of the health system to climate change.

The report The inequalities-environment nexus Towards a people-centred green transition analyses jointly the consequences of the environmental degradation and of environmental policies on several well-being dimensions. The report concludes that policy packages for an inclusive green transition should aim at: (i) mitigating the possible regressive impact of pricing environmental externalities, (ii) investing in human capital and upgrading skills to facilitate labour reallocation, (iii) addressing systemic inequalities with sectoral and place-based policies, (iv) ensuring efficient and responsive governance.

Key Publications and websites

• Equitable Framework and Finance for Extractive-based Countries in Transition (2022)

• Empowering Women in the Transition towards Green Growth in Greece (2022)

• Supporting women’s empowerment through green policies and finance, OECD Environment Policy Papers (2022)

• The inequalities-environment nexus: Towards a people-centred green transition, OECD Green Growth Papers (2021)

• Managing the distributional effects of environmental and climate policies: The narrow path for a triple dividend, OECD Environment Working Papers (2021)

• “Air pollution and environmental degradation”, in Health at a Glance 2021: OECD Indicators (2021)

• Decarbonising Urban Mobility with Land Use and Transport Policies - The Case of Auckland, (2020)

• The Environmental and Welfare Implications of Parking Policies, OECD Environment Working Paper (2019)

• Multi-objective local environmental simulator (MOLES 1.0): Model specification, algorithm design and policy applications, OECD Environment Working Papers (2017)

• www.oecd.org/health/healthy-people-healthy-planet.htm

• www.oecd.org/environment/tools-evaluation/spine-spatial-planning-instruments-and-the-environment.htm

• www.oecd.org/gender/

Contact for more information

Shardul Agrawala

Environment Directorate

E-mail: Shardul.Agrawala@oecd.org

Enrico Botta

Environment Directorate

E-mail: Enrico.Botta@oecd.org

Ioannis Tikoudis

Environment Directorate

E-mail: Ioannis.Tikoudis@oecd.org

Nicolina Lamhauge

Environment Directorate

E-mail: Nicolina.Lamhauge@oecd.org

Dimitra Xynou

Environment Directorate

E-mail : Dimitra.Xynou@oecd.org

Lahra Liberti

Development Centre

Email: Lahra.Liberti@oecd.org

Francesca Colombo

Employment, Labour and Social Affairs Directorate

Email: Francesca.Colombo@oecd.org

Jobs and skills for a just transition

Green policies can trigger job creation in a number of ‘green’ economic sectors, while job destruction could occur in ‘brown’ sectors. In addition, existing jobs are likely to change and require new skills as well as awareness of sustainability issues. An effective transition to a low-carbon, resource- efficient and green economy will only be possible by ensuring that workers are able to adapt to new task and ways of working, transfer from areas of decreasing employment to other industries, and that human capital is maximised to develop new industries.

Active labour market and skills policies are crucial to help manage structural adjustments and minimise skills bottlenecks, including those that may be generated by the green transition. Vocational Education and Training (or VET) can help young people, as well as adults, to develop the technical and transversal skills need to thrive in greener economies and societies – especially when it provides opportunities for work-based learning (e.g. apprenticeships).

The inter-agency project Work-based Learning and the Green Transition describes how learning at the workplace can offer learners direct access to the innovative practices and technologies brought about by the green transition, while at the same time fostering collaboration and cross-fertilisation between employers and VET institutions that could lead to eco-innovations.

In developing countries, where the majority of jobs are in the agriculture sector, it is crucial that the greening of the agriculture sectors is accompanied by the promotion of local value chain development. Recent study by the OECD Development Centre shows that a transition towards a greener food production system could lead to decent employment creation in both low and high skilled-jobs, particularly for youth, in Africa and Southeast Asia.

Some of the economic activities that are most difficult to make climate neutral are regionally concentrated. Achieving the transition therefore requires a regional perspective. This is shown in the forthcoming report Regional industrial transitions to climate neutrality. Since regions differ in their socio-economic conditions, understanding the regional development implications is also necessary to prepare a just transition. This report describes how these activities are distributed across European regions, related zero-emission-consistent infrastructure needs, and socio-economic conditions of the regions most exposed to these transitions.

Education policies play a role to promote a sustainable growth model by empowering individuals with the knowledge to identify and resolve environmental challenges, and shape attitudes and behaviours. PISA data show varying levels of environmental knowledge and skills, attitudes and actions among 15-year-old students across countries/economies. Students need stronger scientific knowledge and skills in environmental issues than they currently have, especially in countries and economies where student

performance in science tends to be lower. Better performers in science have, on average, more pro-environmental attitudes than lower-performing students, and students with pro-environmental attitudes are more likely to take part in actions that benefit the environment. If schools help students find an environmental senseof-purpose, this can mobilise their knowledge and propel them into action. Environmental education initiatives that target school communities as a whole and not just individuals are promising.

Ongoing work will identify changes in skill demand arising from the climate transition with focus on the European Union 2030 targets as stated in the Fit for 55 policy package. It will combine Big Data analysis with projections based on the ENV-Linkages model. The OECD is also supporting countries in carrying out their own assessments and facilitating peer learning. The project Skills for the Green Transition is gathering information on how governments define green jobs and green skills and how they evaluate the skills requirements of the green transition and best prepare the adult learning systems to cope with the changes brought about by greening policies. Research on how this analysis of changing skill needs feeds into employment, education, training and migration policies is also being investigated.

Key Publications

• Towards a greener and more inclusive society in Southeast Asia, OECD Development Centre Studies (forthcoming)

• Are Students Ready to Take on Environmental Challenges?, PISA (2022)

• Teaching for climate action, Teaching in Focus (2022)

• Apprenticeships for greener economies and societies, CedefopOECD (2022)

• Embedding Values and Attitudes in Curriculum: Shaping a Better Future (2021)

• Jobs for Rural Youth: The Role of Local Food Economies, Development Centre Studies (2021)

• The jobs potential of a transition towards a resource efficient and circular economy, OECD Environment Working Papers (2020)

• A review of “Transition Management” strategies: Lessons for advancing the green low-carbon transition”, OECD Green Growth Papers (2019)

• SMEs: Key drivers of green and inclusive growth, OECD Green Growth Papers (2019)

• The distributional aspects of environmental quality and environmental policies: Opportunities for individuals and households, OECD Green Growth Papers (2019)

Contact for more information

Elisa Lanzi

Environment Directorate

E-mail: Elisa.Lanzi@oecd.org

Francesca Borgonovi

Centre for Skills

E-mail: Francesca.Borgonovi@oecd.org

Marieke Vandeweyer

Centre for Skills

E-mail: Marieke.Vandeweyer@oecd.org

Kateryna Obvintseva

Education Directorate

E-mail: Kateryna.Obvintseva@oecd.org

Behavioural insights for green growth

Environmental policies need to help individuals consider the environmental consequences of their activities. Insights from behavioural sciences and economics can help policy makers better understand the mechanisms driving individual decision-making and design policies that facilitate behavioural change.

The working paper Fighting climate change: International attitudes toward climate policies, which is based on survey of more than 40 000 respondents in twenty countries that account for 72% of global CO2 emissions, shows that support for climate policies hinges on three key factors: the perceived effectiveness of the policies in reducing emissions, their perceived impacts on lower-income households, and expected personal gains and losses. The research also shows that several socioeconomic and lifestyle factors, including education and political leanings, are correlated with both policy views and beliefs about climate policies. Support for carbon pricing strongly depends on the revenue use. It can receive majority support if the revenues are used to invest in green technologies and recycled to vulnerable households.

The OECD is also completing the third round of Household Surveys on Environmental Policies and Individual Behaviour Change (EPIC). The EPIC Survey benchmarks environmental attitudes, behaviours and support for policies related to energy use, transport, food consumption and circular economy practices across countries. Preliminary findings indicate that convenience and affordability remain key household priorities in all domains. Future work will assess the extent to which socio-economic, geographic and policy-related factors drive environmental behaviours and analyse hypothetical policy scenarios using four discrete choice experiments included in the survey.

Insights from behavioural sciences and economics have been used to strengthen policy impact, in interaction with regulatory and fiscal instruments, in country-specific OECD projects. The OECD worked with Israel to understand driving behaviours, anticipating responses to congestion charges design and foster more sustainable transport. Behaviourally informed instruments were considered in conjunction with investment and social policies to strengthen housing affordability in Latvia. The OECD BI team supported Italy in identifying opportunities to leverage behavioural economics to support a green transition within the tourism sector. Further OECD research in this area includes an ongoing project on the role of behavioural insights in driving the circular economy transition in Italy.

As part of the Public Governance directorate’s “Governing Green” initiative, the OECD Expert Group on Behavioural Insights is currently leading a working group of experts working in governments across 47 countries that focuses on three key areas; 1) public awareness and support of green reforms, (2) improving decision-making of policymakers to support green transition, and (3) tackling misinformation related to climate change.

Key Publications and websites

• Overview Report on the EPIC Household Survey (forthcoming 2023)

• Fighting climate change: International attitudes toward climate policies, OECD Economics Department Working Papers (2022)

• Policy Actions for Affordable Housing in Latvia (2020)

• Assessing Incentives to Reduce Traffic Congestion in Israel (2019)

• Leveraging the Smart Grid: The Effect of Real-Time Information on Consumer Decisions (2018)

• Tackling Environmental Problems with the Help of Behavioural Insights (2017)

• The Rebound Effect in Road Transport: A Meta-Analysis of Empirical Studies (2016)

• www.oecd.org/environment/consumption-innovation/households.htm

• www.oecd.org/environment/tools-evaluation/behavioural-experimentaleconomics-for-env-policy.htm

Contact for more information

Filippo Cavassini

Economics Directorate

E-mail: Filippo.Cavassini@oecd.org

Chiara Varazzani

Public Governance Directorate

E-mail: Chiara.Varazzan@oecd.org

Nicolina Lamhauge

Environment Directorate

E-mail: Nicolina.Lamhauge@oecd.org

Greening SMEs

Small and medium enterprises (SMEs) account for 60% of total employment and have significant footprint on aggregate in OECD economics. Furthermore, entrepreneurship is a key driver of growth and invention of new business models and technologies. Therefore, their greening is critical for green growth.

However, SMEs and entrepreneurs face a number of barriers in their greening efforts. In addition to complexity around business cases, a lack of awareness, information and knowledge on changing environmental requirements and needs represent additional challenges.

Current work focuses on better understanding the drivers and barriers for green entrepreneurship and the greening of SMEs, taking account of their different types of sectors, places, and business models.

In November 2021, the OECD established a Platform on Financing SMEs for Sustainability, bringing together key stakeholders, including public and private financial institutions, policy makers and SME representatives, with the aim to foster knowledge sharing on sustainable finance for SMEs and identify practical financial solutions to accompany SMEs on their journey to net zero.

Ongoing work examine the wide range of policies and schemes introduced by governments to stimulate and support green entrepreneurship in recent years with case studies on the approaches used in Canada, Germany and Israel.

FINANCING SME S FOR SUSTAINABILITY

Also, a dashboard of SME greening and green entrepreneurship indicators is being developed with the aim of addressing the lack of sound and comparable evidence on the magnitude and type of SME environmental impacts and greening efforts across countries.

Key Publications and website

• Financing SMEs for sustainability: Drivers, Constraints and Policies, OECD SME and Entrepreneurship Papers (2022)

• No net zero without SMEs: Exploring the key issues for greening SMEs and green entrepreneurship, OECD SME and Entrepreneurship Papers (2021)

• www.oecd.org/cfe/smes/financing-smes-sustainability.htm

Contact for more information

Celine Kauffmann

Centre for Entrepreneurship, SMEs, Regions and Cities

E-mail: Celine.Kauffmann@oecd.org

Lucia Cusmano

Centre for Entrepreneurship, SMEs, Regions and Cities

E-mail: Lucia.Cusmano@oecd.org

Green finance and investment

Achieving the Sustainable Development Goals (SDGs) and longterm climate objectives requires substantial investment globally. Given limited public budget, leveraging private capital will be crucial for addressing climate change and broader nature and sustainability challenges.

The OECD Centre on Green Finance and Investment helps catalyse and support the transition to a green, low-emissions and climateresilient economy through the development of effective policies, institutions and instruments for green finance and investment. The Centre provides cross-cutting analysis at the intersection of environment, sustainability and finance.

A number of countries have created official definitions of sustainable finance as well as more comprehensive classification systems, referred to as sustainable finance taxonomies. The OECD report on Developing Sustainable Finance Definitions and Taxonomies finds that, if appropriately designed, taxonomies can improve market clarity, bring confidence and assurance to investors, and facilitate the measurement and tracking of sustainable finance flows.

Scaling-up investment for the low-carbon transition will require mobilising both domestic and international private capital. The OECD 2021 Progress Update on De-risking institutional investment in green infrastructure catalogues tools and techniques used by public actors to mitigate project-level risks and attract private investment in infrastructure. The Green Infrastructure in the Decade for Delivery report provides guidance on policy levers and priorities to scale-up institutional investment in green infrastructure in OECD and G20 countries

Climate is also at the core of work on the Future of Investment Treaties initiative. The project is considering the Paris Agreement alignment of 2500+ investment treaties (including investment provisions in trade agreements) with regard their insurance-type coverage of finance flows (art. 2.1(c) Paris) and treaty impact on policy space for government climate policies.

Biodiversity and ecosystem services, and their related risks, impacts and dependencies are currently not integrated into financial valuations. In collaboration with the European Commission (DG REFORM) and the Hungarian Central Bank, the OECD has just launched a project on Developing a Supervisory Framework for Financial Risks Stemming from Biodiversity-related Losses The project will develop a supervisory framework to help the Hungarian Central Bank and other central banks assess biodiversityrelated financial risks in the financial system, including transmission channels for physical and transition risks.

Regions and cities can use their budget to bridge climate funding on financial gaps. The OECD Subnational Government Climate Finance Hub provides evidence and support along three main areas: climate-significant expenditure and investment, revenue for climate action, and green budgeting practices. The Hub aims to guide policymakers and their partners in enhancing international and national frameworks, programmes, and fiscal instruments that support subnational climate action, and to build the capacity of subnational governments to develop and implement their own climate action plans and policies.

The Clean Energy Finance and Investment Mobilisation (CEFIM) programme activities are designed to support finance and investment in clean energy according to the specific needs of each partner country. This includes the CEFIM Clean Energy Finance and Investment Review and Roadmap, various implementation support activities, investor dialogues and best practice sharing.

CEFIM programme activities

To provide a bridge across transition finance initiatives and frameworks in the private sector, and to increase transparency and help avoid greenwashing, the OECD Guidance on Transition Finance presents elements of credible corporate climate transition plans based on analysis, an industry survey and good practices.

The OECD also monitors developments in Environmental, Social and Governance (ESG) rating. A growing number of institutional investors and funds now incorporate various Environmental, Social and Governance (ESG) investing systems but challenges remain that hinder the efficacy of such approaches, including data inconsistencies and unclear ESG criteria.

The OECD Guidelines for Multinational Enterprises and the OECD Due Diligence guidance for Responsible Business

Conduct (RBC) are government backed recommendations to businesses on how to address environmental threats - both in their activities and supply chains - while also contributing to a just transition. The OECD is developing a number of tools to support the implementation of OECD due diligence recommendations in the context of climate change and other key environmental threats.

Promoting Sustainable Investment and Rethinking Infrastructure

The 9th edition of the flagship OECD Forum on Green Finance and Investment on Moving from commitments to actions in the decade for delivery: towards impactful green and sustainable finance (5-7 October 2022), explored how key stakeholders are responding to the urgent need to ensure that sustainable investments deliver the impact and progress required to achieve global environmental and development objectives. The Forum brought together the most influential global actors from both the public and private sector to discuss policies and changes required to foster transformative investments in the real economy and achieve low GHG emissions and climateresilient development while halting the loss of biodiversity and ecosystem services.

The Forum convened a series of high-level panels and parallel sessions on a wide range of pressing green and sustainable finance issues, ranging from the emergence of transition finance, the evolution of ESG investing, the integration of biodiversityrelated financial risks, to the genderenvironment nexus.

The Forum welcomed over 100 high-level speakers and 1800 attendees+ from 130 countries: the participation this year was higher than ever before.

Six transformative areas to align financial flows with low-emission, resilient infrastructure

Key Publications and websites

• Clean energy finance and investment roadmap of India (2022)

• Framework for industry’s net zero transition (2022)

• Blended finance guidance for clean energy (2022)

• Enabling conditions for bioenergy finance and investment in Colombia (2022)

• OECD Guidance on Transition Finance: Ensuring Credibility of Corporate Climate Transition Plans, Green Finance and Investment (2022)

• Financing a Water Secure Future (2022)

• Aligning Regional and Local Budgets with Green Objectives: Subnational Green Budgeting Practices and Guidelines (2022)

• Clean energy finance and investment policy review of Viet Nam ( 2021)

• Clean energy finance and investment policy review of Indonesia (2021)

• De-risking institutional investment in green infrastructure: 2021 progress update (2021)

• The role of OECD instruments on responsible business conduct in progressing environmental objectives (2021)

• Green Infrastructure in the Decade for Delivery: Assessing Institutional Investment (2020)

• Developing Sustainable Finance Definitions and Taxonomies (2020)

• www.oecd.org/cgfi

• www.oecd.org/finance/lti

• www.oecd.org/greengrowth/green-investment-banks.htm

• www.oecd.org/cefim/

• www.oecd.org/regional/sngclimatefinancehub.htm

Contact for more information

Robert Youngman

Environment Directorate

E-mail: Robert.Youngman@oecd.org

Cecilia Tam

Environment Directorate

E-mail: Cecilia.Tam@oecd.org

Green public procrurement

Public procurement represents 12% of GDP and nearly 30% of total government expenditures on average across OECD countries. This is a clear sign of public procurement’s potential to support broader policy objectives including that of green growth.

By using their purchasing power to choose goods, services and works with a reduced environmental impact, governments can make an important contribution towards sustainability goals. Green public procurement can be a major driver for innovation, providing industry with real incentives for developing green products and services, particularly in sectors where public purchasers represent a large share of the market (e.g. construction, health services, or transport). Public procurement could create lead markets for industrial and construction innovations beyond ongoing efforts to green public procurement.

Key Publications and website

• Mainstreaming strategic public procurement to advance regional development (2022)

• Life-Cycle Costing in Public Procurement in Hungary - Stocktaking of Good Practices (2022)

• Integrating Responsible Business Conduct in Public Procurement (2020)

• Sustainable Public Procurement in Norway (2020)

• Public Procurement for Innovation: Good Practices and Strategies, OECD Public Governance Reviews (2017)

• The Role of Public Procurement in Low-carbon Innovation (2016)

• Going Green: Best Practices for Sustainable Procurement (2015)

• www.oecd.org/gov/public-procurement/green

Trade and green growth

Achieving greener growth will require innovative goods and services to enable factories and buildings to use energy more efficiently, to reduce air and water pollution, to make the transition to more sustainable uses of energy, and to provide sanitation and clean drinking water. Many of these goods and services will be procured locally, but some will only be available, or become available more cheaply, from foreign suppliers. Trade can help the environment both through achieving a more efficient use of resources and by serving as a conduit for the transfer of environmental technologies. Trade can also help scale up sustainable business models and help economies shelter negative environmental shocks.

Circular economy policies, which largely take place domestically, have important interlinkages with international trade. OECD work explores how to make circular economy policies and trade policies mutually supportive by mapping out potential misalignments and identifying opportunities to align and strengthen both policy areas.

The report Securing reverse supply chains for a resource efficient and circular economy focuses on the opportunities and challenges for governments to facilitate cross-border reverse supply chains and reverse logistics to close material loops, such as recycling waste and scrap into secondary raw materials, and extending product life by promoting direct reuse, repair, refurbishment and remanufacturing.

The report Incorporating environmental provisions in regional trade agreements in chapters and articles dealing with trade in services explores ways in which RTAs can incorporate environmental objectives in chapters and articles related to: (i) non-tariff measures, technical-barriers to trade and regulatory cooperation, and (ii) trade in services, respectively.

The report Climate Policy Leadership in an Interconnected World: What Role for Border Carbon Adjustments? provides a broad and evidence-based analytical perspective of the debate around the possible role of a Border Carbon Adjustment (BCA) to deal with climate change. The paper provides an overview of different policy instruments that can limit carbon leakage, with a particular focus on the BCA option, and offers a technical review of the literature and of the legal specificities around BCA as well as of alternative instruments.

The OECD has also been at the forefront of international efforts to identify and analyse trade in environmental goods and services (EGS). Recent work provides evidence that trade in wind turbines provides access to technologies with a level of efficiency that cannot be replicated domestically in importing countries.

the volume of trade in environmentally- related goods; tariffs on environmentally-related goods; support measures for fossil fuels; enabling policy and regulatory environment for renewable energy; the volume of trade in waste and scrap; and nutrient balances of exported grains.

In an effort to better understand the relationship between domestic environmental regulations and international trade policies, the OECD has recently engaged in the construction of a set of policy indicators on trade and environment. This set of indicators aims to shed light on topical debates regarding the interactions between trade and environmental policies. Issues covered include: carbon emissions embodied in trade; embodied raw materials in trade;

A retrospective of OECD work on trade and environment was published in 2020. This report highlights the breadth and depth of the OECD analysis in this field and provides suggestions for future analysis.

Trade in environmental goods

Between 2003 and 2016 international trade in environmentally-related goods (EGs) more than doubled – from USD 531.10 billion to USD 1 261.24 billion – increasing its share in global trade from 7.2% to 8.1%. This robust growth was mostly driven by three categories of EGs: (i) components of renewable energy plants; (ii) equipment for wastewater management and treatment; and (iii) management of solid and hazardous waste and recycling systems.

A growing body of literature suggests this growth is partly the result of environmental policies which create markets for environmental goods and services, and which in turn improve the competitiveness of local firms operating in these industries. For instance, the more stringent the regulation of the municipal solid waste management sector, the stronger the trade comparative advantage in related environmental goods, lending support to the argument that a demand for these goods is created as a result of stricter environmental standards.

Trends in indicators on trade and environment developed at the OECD confirm these results, and suggests that a strong policy and regulatory environment for the deployment of renewable energy is associated with an increase in the net exports of equipment for renewable energy plants. Conversely, countries that spend a larger share of their GDP to support fossil fuels seem to harm the competitiveness of their domestic renewable industry. This effect is particularly strong in countries outside the OECD area.

Key Publications and websites

• Securing reverse supply chains for a resource efficient and circular economy, OECD Trade and Environment Working Papers (2022)

• Incorporating environmental provisions in regional trade agreements in chapters and articles dealing with trade in services, OECD Trade and Environment Working Papers (2022)

• International trade and circular economy - Policy alignment, OECD Trade and Environment Working Papers (2021)

• Trade as a channel for environmental technologies diffusion, OECD Trade and Environment Working Papers (2021)

• Climate Policy Leadership in an Interconnected World - What Role for Border Carbon Adjustments? (2020)

• Greening regional trade agreements on non-tariff measures through technical barriers to trade and regulatory co-operation, OECD Trade and Environment Working Papers (2020)

• Greening regional trade agreements on investment, OECD Trade and Environment Working Papers (2020)

• New digital technologies to tackle trade in illegal pesticides, OECD Trade and Environment Working Papers (2020)

• Greening regional trade agreements”, OECD Trade and Environment Working Papers (2020)

• The consequences of a more resource efficient and circular economy for international trade patterns: A modelling assessment, OECD Environment Working Papers (2020)

• Trends in policy indicators on trade and environment, OECD Trade and Environment Working Papers (2019)

• www.oecd.org/environment/envtrade

• www.oecd.org/trade/topics/trade-and-the-environment/

Contact for more information

Rob Dellink

Environment Directorate

E-mail: Rob.Dellink@oecd.org

Evdokia Moïsé

Trade and Agriculture Directorate

E-mail: Evdokia.Moise@oecd.org

Shunta Yamaguchi

Environment Directorate

E-mail: Shunta.Yamaguchi@oecd.org

Grégoire Garsous

Trade and Agriculture Directorate

E-mail: Gregoire.Garsous@oecd.org

Innovation for green growth

The world faces growing environmental pressures. The next decades are critical to ensure a transition to a greener economy, and innovation – the creation and diffusion of new ideas, products, processes and methods – is fundamental to this transition. Innovation covers not only technological innovation but also innovation in business models, economic and social systems, and changes in lifestyles.

The increase in the use of natural resources and materials in the last century has been unprecedented. Global raw material use rose at almost twice the rate of population growth. Digitalisation can contribute to decoupling economic activity from natural resource use and its environmental impacts. Digitalisation for the transition to a resource efficient and circular economy discusses the role of digital technologies in addressing market failures for scaling up circular activities and in the effective delivery of circular economy policies.

As the United Nations Decade on Ocean Science for Sustainable Development begins, the paper A new era of digitalisation for ocean sustainability? explores recent and likely future digital technologies - especially in the field of ocean observation - that could contribute to ocean sustainability. It examines advances that could lead to substantial improvements in data collection and analysis of the impact of climate change and human activity on marine ecosystems, while also contributing to the monitoring and reduction of the ecological footprint of ocean-related economic activity.

Inventive

activity in selected

environment-related technologies (High-value inventions (PF2), 3-year moving average, world total, indexed on 1990=100)

Source: Haščič, I. and M. Migotto (2015), "Measuring environmental innovation using patent data", OECD Environment Working Papers, No. 89, OECD Publishing, Paris, https://doi.org/10.1787/5js009kf48xw-en

Innovation is also key to reducing the environmental impacts of plastics. Quantifying environmentally relevant and circular plastic innovation: Historical trends, current landscape and the role of policy develops new metrics to measure environmentally relevant plastics innovation, derives trends over time and across countries and analyses empirical links with public policies.

The large emissions reductions needed to meet national net-zero pledges and the objectives of the Paris agreement require rapid and systemic transformation. Coordination across multiple policy areas and change in multiple “systems” (e.g. energy, transport, buildings) is needed to deliver this system-wide transformation. Mission-oriented innovation approaches (or MOIPs) can help to promote such systemic change because of their integrated nature.

The on-going program on Mission oriented Innovation Policies (MOIP) aims to assess the different ways in which mission-oriented innovation policies are used to tackle the specific challenge of reducing GHG emissions to combat climate change.

The use of agricultural feedstocks for fuel and chemicals, the so-called bioeconomy, is an area of great potential and need to integrate innovation with sustainability goals. Meeting Policy Challenges for a Sustainable Bioeconomy investigates: the use of biomass as feedstock; the design and building of biorefineries for the manufacture of fuels, chemicals and materials, and also for electricity generation; and the use of biotechnologies such as synthetic biology, metabolic engineering and gene editing. A major policy challenge remains the promotion of scale-up in better and more efficient bio-refining.

The OECD has been a pioneer in measuring the pace of innovation and diffusion through environment-related patents. Patent data have been used to empirically assess how public policies foster innovation and diffusion, including the effect of policy design characteristics on innovation rates, the interplay between environmental policy and multilateral environmental agreements and international markets for innovation. Ongoing OECD work aims at developing new families of metrics to measure environmental innovation beyond traditional patent metrics to better cover various types and stages of innovation. This new data can improve the basis for doing evidence-based assessment of environmental policies.

Additional on-going projects look at the relationship between green innovation, policies and competitiveness. Innovative small companies, often called “start-ups”, are crucial to the development of highly innovative idea, including for green technologies. Ongoing work aims at providing an in-depth analysis of the green start-up ecosystem across countries to understand the conditions needed for small innovative companies to succeed. Additional ongoing work aims at empirically assessing the economic returns of firms on innovation in cleaner technologies, and at developing practical policy recommendations to support the radical technological innovation that is necessary to reach climate neutrality.

Key Publications and website

• Will post-COVID-19 recovery packages acccelarate low-carbon innovation?, OECD Science, Technology and Industry Policy Papers (Fortcoming 2023)

• Digitalisation for the transition to a resource efficient and circular economy, OECD Environment Working Papers (2022)

• Quantifying environmentally relevant and circular plastic innovation: Historical trends, current landscape and the role of policy, OECD Environment Working Papers (2022)

• A new era of digitalisation for ocean sustainability?: Prospects, benefits, challenges, OECD Science, Technology and Industry Policy Papers (2021)

• Business Models for the Circular Economy (2019)

• Trends in water-related technological innovation. Lessons from patent data (2019)

• Rethinking Innovation for a Sustainable Ocean Economy (2019)

• Innovation policies for sustainable development: Low-carbon energy and smart-city initiatives (2019)

• www.oecd.org/innovation

• www.oecd.org/environment/indicators-modelling-outlooks/green-patents.htm

Contact for more information

Antoine Dechezlepretre

Directorate for Science, Technology and Innovation

E-mail: Antoine.Dechezlepretre@oecd.org

James Philp

Directorate for Science, Technology and Innovation

E-mail: James.Philp@oecd.org

Mario Cervantes

Directorate for Science, Technology and Innovation

E-mail: Mario.Cervantes@oecd.org

Philippe Larrue

Directorate for Science, Technology and Innovation

Email: Philippe.Larrue@oecd.org

Shardul Agrawala

Environment Directorate

Email: Shardul.Agrawala@oecd.org

SPOTLIGHT—Green innovation and the impacts of economic shocks

The economic shocks caused by the COVID-19 pandemic and Russia’s large-scale aggression against Ukraine are likely to reshape the science-policy interface with significant implications for netzero goals, green growth, and sustainable development. The recent experience from the government-supported acceleration for the development and deployment of vaccines and the renewed priority given to energy security have provided an impetus to mission-oriented innovation approaches to address environmental challenges. In addition, the pandemic has severely affected some vital actors of innovation ecosystems, such as start-ups and small and medium-sized enterprises (SMEs), which are also more exposed to the consequences of high energy prices.

The 2022 Green Growth and Sustainable Development (GGSD) Forum on Green innovation and the impact of economic shocks (22-23 November 2022) explored the consequences of these shocks for science, technology, and innovation policies. Focus themes included: mission-oriented innovation approaches to accelerate green innovation, lowcarbon hydrogen, bio-economy, green innovation in SMEs, and international cooperation in science and technology.

© OECD 2023

Reflecting the multidisciplinary nature of the event, many OECD Committees, bodies and initiatives participate in and contribute work to the 2022 GGSD Forum, including: Committee on Industry, Innovation and Entrepreneurship (CIIE), the Committee for Scientific and Technological Policy (CSTP), the Committee on SMEs and entrepreneurship (CSMEE), the Environmental Policy Committee (EPOC), and the Working Party No. 1 on Macroeconomic and Structural Policy Analysis. The Forum also drew on work of the International Energy Agency (IEA), as well as perspectives of Business at the OECD (BIAC).

Website: oe.cd/ggsd2022

Forum

Green growth of key sectors: energy, transport, agriculture, industry, tourism and the ocean economy

It is important to understand the implications of green growth for key sectors such as agriculture, energy, and transport. The main message arising from OECD sector-specific work to date is that, over the longer term, greening these sectors can reinforce environmental sustainability, economic growth and social well-being. Indeed, green growth is essential to meet the UN 20230 Agenda for Sustainable Development.

Priority areas where coherent action is required

• Adopt transformative policies: Green policy action could be more efficient and effective if focused on systems as a whole, so that – by design – systems require less energy and materials, and produce less emissions.

• Increasing productivity in a sustainable way. If resources are used more efficiently, production can be increased to meet the demands of an expanding population with changing dietary and consumption habits while natural capital is conserved. Higher priority needs to be given to research, development, innovation, education and information.

• Ensuring that well-functioning markets provide the right signals. Prices that reflect the scarcity value of natural resources will contribute to greater efficiency. Economically inefficient and environmentally harmful subsidies should be phased-out. The Polluter Pays Principle needs to be enforced through charges and regulations. Incentives should be provided for maintaining biodiversity and environmental services.

• Establishing and enforcing well-defined property rights. Over-exploitation can happen when marine resources, land and forests lack clearly defined rights and ownership.

• Addressing the political economy of reform. Addressing the distributional and competitiveness aspects of policy reform to meet green growth objectives is essential.

Energy is a fundamental input to economic activity. However, a major transformation is required in the way we produce, deliver and consume it. The current energy system is largely dependent on fossil fuels, which pollute the air, and contribute significantly to carbon emissions. Improving the environmental performance of energy transformation and consumption is a cornerstone of any attempt to promote green growth.

Due to its size, complexity, path dependency and reliance on long- lived assets, the energy sector presents particular challenges to achieving green growth. Relevant policies for the energy sector can achieve important outcomes including better resource management, innovation and productivity gains, creating new markets and industries, and reducing environmental damage. Broadly, the key policies that are required to set the framework for the transformation of the energy sector include: pricing externalities; eliminating fossil-fuel subsidies; radically improving energy efficiency; and fostering green innovation.

The OECD is working with countries to address misalignments between domestic green objectives and existing policies. In addition, the Clean Energy Finance and Investment Mobilisation (CEFIM) programme aims to strengthen domestic conditions to attract finance and investments in renewables, energy efficiency and decarbonisation of industries in emerging countries.

Websites

•

Transport

Transport underpins economic and social development, allowing more efficient allocation of resources. Yet, it is also a major contributor to greenhouse gas emissions and air pollution.

The ITF 2021 Transport Outlook shows that total transport activity will more than double and CO2 emissions will increase by 16% by 2050 compared to 2015 under current policies. However, more ambitious transport decarbonisation policies could reduce transport CO2 emissions by almost 70% in 2050 compared to 2015 and bring the goal of the Paris Agreement to limit global warming to 1.5˚C into reach. Better-targeted actions to reduce unnecessary travel, shift to more sustainable transport modes, improve energy efficiency, and rapidly scale up the use of low-carbon vehicles are needed. Under the theme of “A Just Transition”, the ITF Transport Outlook 2023 examines the impacts of different policy measures on global transport demand and emissions over the next three decades to 2050. As in previous editions, the analysis covers passenger and freight transport across all transport modes.

The report Redesigning Ireland’s Transport for Net Zero Towards Systems that Work for People and the Planet adopts a systemic approach to identify transformative policies to redesign passenger surface transport systems in urban, suburban and rural areas. The report calls for redefining the goal of transport systems as sustainable accessibility (a combination of mobility and proximity), and for the prioritisation of three transformative policies (often absent or at the margin of climate strategies): road space reallocation, the mainstreaming of shared on-demand transport modes (e.g. ebikes), and communication efforts to move away from car-centric mindsets. The report finds that vehicle electrification and carbon prices remain necessary, but that their scope is limited if implemented in isolation in car-dependent systems.

Users in cities across the globe are rapidly adopting new mobility forms, helped by digital connectivity and electrification technologies. The report Good to Go? Assessing the Environmental Performance of New Mobility examines the lifecycle performance of a range of new vehicles and services based on their technical characteristics, operation and maintenance, and compares it with that of privately owned cars and public transport.

Several OECD and ITF reports focused on the challenges to adopt more sustainable transport modes in specific cities. The report Shared Mobility Simulations for Lyon develops five different scenarios for shared mobility modes in the Lyon metropolitan area to weigh opportunities and challenges created by new shared transport services.

The report Decarbonising Urban Mobility with Land Use and Transport Policies: The case of Auckland, New Zealand provides an evidence-based assessment of policies aiming to decarbonise urban passenger transport. The study examines the environmental effectiveness and the economic implications of various instruments, such as subsidies to public transport and electric vehicles, and road pricing. The report also investigates the complementary role of planning policies fostering urban development patterns in which public transport and soft mobility can proliferate.

The paper Tackling Air Pollution in Dense Urban Areas: The case of Santiago, Chile expands the analysis to urban areas that are less dependent on car but face challenges in reducing transport-related air pollution.

Fuel efficiency of conventional private vehicles is a key input in the design of several economic and environmental policies. Ongoing work examines the evolution of fuel efficiency using data on cars entering the US market from 1984 to 2020 to isolate autonomous technical change from the impact of environmentally relevant policies. The study finds that 40% of the observed progress that occurred can be attributed to regulatory policies, such as CAFE standards, and to drastic increases in gasoline costs.

Beyond road transport, policy action focuses also on the greening of aviation and maritime transport. Maritime transport accounts for about 2.5% of global greenhouse gas emissions. The report on Shipbuilding Market Developments includes an analysis on how the new environmental regulation for the maritime sector is expected to impact ship retrofitting and replacement. The shipbuilding sector has started to produce greener ship in the future using alternative fuels such as hydrogen, ammonia and methanol.

Carbon Pricing in Shipping explores the effectiveness of carbon pricing, how it might be applied to the shipping sector and with what effects. It also evaluates recent proposals by countries to introduce a price on shipping’s carbon emissions and examines related policy issues.

The International Transport Forum (ITF) at the OECD is an intergovernmental organisation with 60 member countries. It acts as a think tank for transport policy and organises the Annual Summit of transport ministers. ITF is the only global body that covers all transport modes. Its mission is to foster a deeper understanding of the role of transport in economic growth, environmental sustainability and social inclusion and to raise the public profile of transport policy.

Aviation’s contribution to global greenhouse gas emissions (GHGs) is high and projected to grow. The OECD is improving and expanding publication of air emission accounts (AEAs), including of air emissions from air transport estimates, with statistics available on a monthly basis. The paper Greening international aviation post COVID-19 What role for kerosene taxes? highlights the contribution that kerosene taxes could make to strengthen the incentives for investment and innovation in clean aviation technologies. Where legal obstacles to taxing kerosene exist, these can be overcome by renegotiating the relevant air service agreements..

The project Decarboning Transport in Emerging Economies helps countries identify effective measures and pathways to reduce transport CO2 emissions. Focusing on Argentina, Azerbaijan, India, and Morocco, the initiative develops tailored quantitative assessment frameworks, enhances national capacity, and facilitates policy dialogues on the transport sector’s role in national CO2 reduction commitments.

Contact for more information

Key Publications and websites

• Carbon Pricing in Shipping ( 2022)

• Redesigning Ireland’s Transport for Net Zero: Towards Systems that Work for People

• and the Planet (2022)

• Shipbuilding market developments, first semester 2022, OECD science, technology and industry policy papers (2022)

• ITF 2021 Transport Outlook (2021)

• Greening international aviation post COVID-19: What role for kerosene taxes? OECD Taxation Working Papers (2021)

• Decarbonising Urban Mobility with Land Use and Transport Policies: The Case of Auckland, New Zealand (2020)

• Decarbonising Maritime Transport: Pathways to zero-carbon shipping by 2035, OECD-ITF (2018)

• The Cost of Air Pollution: Health Impacts of Road Transport (2014)

• www.oecd.org/environment/greening-transport

• www.itf-oecd.org

• www.itf-oecd.org/dtee

Elisabeth Windisch

International Transport Forum

E-mail: Elisabeth.Windisch@itf-oecd.org

Aimee Aguilar Jaber

Environment Directorate

E-mail:Aimee.AguilarJaber@oecd.org

Ioannis Tikoudis

Environment Directorate

E-mail:Ioannis.Tikoudis@oecd.org

Agriculture

Food systems around the world face the triple challenge of providing food security and nutrition for a growing global population; supporting livelihoods for those working along the food supply chain; and contributing to environmental sustainability.

The Trade and Agriculture Directorate leads work to strengthen policies to reinforce the positive impacts of agriculture on the environment, and to develop and collect agri-environmental indicators. Current work focuses on improving sustainability in food and agriculture, including: i) deepening the framework for analysing policies for innovation, productivity, sustainability and resilience in the food system by strengthening policy coherence; ii) analysing the environmental effects of agriculture policies; continuing the analytical work of the Network on Agricultural Total Factor Productivity and the Environment; updating the OECD agri-environmental indicators; and examining new policy challenges from emerging technologies in agriculture, including the implications of bioeconomy for the sustainability of the food system.

The OECD-FAO Agricultural Outlook 2022-2031 provides a consensus assessment of the ten-year prospects for agricultural commodity and fish markets at national, regional, and global levels. Projections suggest that overall agricultural productivity would need to increase by 28% over the next decade to oo achieve the Zero Hunger target while reducing direct greenhouse gas emissions by 6%.

Better policies and measurement are critical to making progress along all dimensions of the triple challenge. The report Agricultural Total Factor Productivity and the environment - A guide to emerging best practices in measurement provides an overview of the current practises in measuring sustainable productivity of the agricultural sector, and presents recommendations on how to improve the measurement of sustainable productivity beyond the traditional calculation of TFP, accounting for environmental outcomes. The report Characterising agri-environmental policies - towards measuring their progress proposes a taxonomy of policy design features for agri-environmental payment schemes.

Net soil carbon sequestration (SCS), which occurs when the difference between CO2 removals and CO2 emissions is positives, will likely need to play a key role in meeting the Paris agreement objectives. The OECD has reviewed practices available and highlighted policy package for enhancing net SCS in agricultural soils, including regulations and knowledge transfer policies.

Policies need also strengthening resilience of agricultural sector to climate change and biodiversity loss. Increasing weather variability, natural hazards, and news pests and diseases require public and private actors to place a greater emphasis on ex ante risk reduction measures and investments. The OECD framework for applying resilience thinking to risk management in agriculture has been applied to assess how four OECD countries are mainstreaming resilience into their agricultural risk management policy frameworks. An upcoming publication will focus on climate change adaptation policies to foster resilience in agriculture.

The OECD will also continue looking at responses to the climate change and water challenges for the sector, analysing the economic effects of climate mitigation strategies in agriculture, and investigating political reform pathways to improve agriculture water use.

Key Publications and website

• OECD-FAO Agricultural Outlook 2022-2031 (2022)

• Agricultural Total Factor Productivity and the environment: A guide to emerging best practices in measurement, OECD Food, Agriculture and Fisheries Papers (2022)

• Soil carbon sequestration by agriculture: Policy options, OECD Food, Agriculture and Fisheries Paper (2022)

• Characterising agri-environmental policies: Towards measuring their progress, OECD Food, Agriculture and Fisheries Papers (2021)

• Innovation, Productivity and Sustainability in Food and Agriculture (2019)

• Evaluating the environmental impacts of agriculture policies, Agriculture and Fisheries Papers (2019)

• www.oecd.org/agriculture/

Contact for more information

Guillaume Gruère

Trade and Agriculture Directorate

E-mail: Guillaume.Gruere@oecd.org

Greening the Ocean Economy

A healthy ocean is central to the future welfare and prosperity of humankind. Not only does it play an essential role in mitigating carbon emissions and generating the oxygen needed for life on earth, it also nurtures rich biodiverse habitats and provides invaluable ecosystem services, including food provisioning, coastal protection and recreational benefits. The ocean therefore also provides valuable opportunities for economic growth, development, and employment.

Yet, the ocean is facing unprecedented pressures from human activities, including pollution from plastics, over-exploitation of fish, offshore oil and gas development, shipping, sewage, fertiliser and agricultural runoff. As a result, the state of marine biodiversity and ecosystems is degrading at an alarming rate.

The OECD is supporting governments to address pressures and negative effects of cumulative ocean pollution and economic activity on human well-being and ecosystem health. For instance, it helps to identify and promote policy that can effectively ensure that fisheries and aquaculture are environmentally, economically, and socially sustainable. The OECD Review of Fisheries 2022 brings together available data on fish stock health, fisheries management, and support to fisheries to assess the health of fisheries and investigate how public policies could better support fisheries’ contribution to global food security and the ocean economy.

OECD work on the ocean spans across multiple directorates and reflects an integrated “whole-of-government” approach to respond to complex challenges by mobilising expertise across many policy fronts, covering environmental, economic, financial and social dimensions.

OECD analysis and guidance supports countries to fulfil their international commitments on the ocean including Sustainable Development Goal (SDG) 14 on Life Below Water, the Convention on Biological Diversity, the United Nations Convention on the Law of the Sea and the Paris Agreement on climate change.

The OECD also provides policy insights on managing and preventing water pollution and marine plastic waste. The recently released Global Plastics Outlook finds that, globally, the annual production of plastics has doubled, soaring to 460 Mt and 6.1 Mt of plastic waste leaked into rivers, lakes and the ocean. The report also identifies effective policies to curb the plastic pollution curve.

Realising the potential of the ocean economy while protecting ocean resources and marine ecosystems is a significant and growing challenge. The ocean economy is defined by the OECD as the sum of the economic activities of ocean-based industries, together with the assets, goods and services provided by marine ecosystems. To support governments in the transition to a more sustainable ocean economy, the OECD is mobilising expertise across relevant oceanbased sectors, covering environmental, economic, financial and social dimensions.

The OECD projects a doubling of the ocean economy from 2010 to 2030, reaching USD 3 trillion and employing 40 million people. Despite the COVID-19 pandemic slowdown, 2021 showed a renewed growth for many ocean-based industries. The interdependency of ocean-based industries and marine ecosystems has led to a growing recognition of the need for an integrated approach to ocean management. The OECD contributes to such efforts by drawing from a range of work – including marine biodiversity and ecosystem services, climate, pollution, infrastructure resilience and sustainable ocean finance.

The first step to realise the potential of the ocean economy is the collection of reliable and timely data on the sustainability of the ocean economy, the well-being and resilience of coastal communities, and the health of marine ecosystems. The OECD contributes to this directly via its Sustainable Ocean Economy Database, which helps support SDG 14. Additionally, as the knowledge base on marine ecosystems’ accounting builds, countries could greatly benefit from refining the international environmental accounting guidelines and marine ecosystem services’ classification. The OECD is currently developing an experimental OECD satellite accounts on ocean economic activities to improve international comparability and as a building block to a future ocean account. Lastly, a new OECD foresight exercise, launched in 2022, will provide a global outlook on the future of the ocean economy and develop key trends and data projections on the ocean economy to 2045.

The sustainable development of the ocean economy is particularly relevant for developing countries, as they are on average more reliant on ocean economy sectors than high-income countries. Yet, they only capture a small fraction of the global value added from the ocean economy. The OECD Sustainable Ocean for All Initiative produced a comprehensive report quantifying the economic trends of the ocean economy across developing countries and identifying existing and innovative policy and financing tools to enhance its sustainability. In 2021, the “Blue Recovery Hubs” project was launched to assist developing countries in restarting and transforming their ocean economy sectors.

Recognising that healthy oceans depend on decisions taken on land, the OECD project on Cities and Regions for a Blue Economy supports national and subnational governments in achieving resilient, inclusive, sustainable and circular blue economies. The 2022 OECD Global Survey on Localising the Blue Economy, which collected 56 responses from subnational governments from 30 OECD and non-OECD countries, highlights the need to apply a functional lens to the blue economy, developing city-basin interlinkages on the ground.

Key Publications, websites and databases

• Global Plastic Outlook: Policy Scenarios to 2060 (2022)

• Global Plastic Outlook: Economic Drivers, Environmental Impacts and Policy Options (2022)

• Eliminating government support to illegal, unreported and unregulated fishing (2022)

• Review of Fisheries (2022)

• International effects of fisheries support policies (2022)

• The role of development co-operation in tackling plastic pollution (2022)

• COVID-19: Toward a Blue Recovery in Small Island Developing State (2021)

• Development co-operation for a sustainable ocean economy in 2019: a snapshot (2021)

• Cities and Regions for a Blue Economy (2021)

• Blueprint for improved measurement of the international ocean economy: an exploration of satellite accounting for ocean economic activity (2021)

• Sustainable Ocean for All: Harnessing the Benefits of Sustainable Ocean Economies for Developing Counties (2020)

• Marine Protected Areas: Economics Management and Effective Policy Mixes (2017)

• Ocean Economy in 2030 (2016)

• www.oecd.org/ocean

• http://oe.cd/fisheries-aquaculture

• http://oe.cd/fse-stats

Contact for more information

Claire Jolly

Science, Technology and Innovation Directorate

Email: Claire.jolly@oecd.org

Claire Delpeuch

Trade and Agriculture Directorate

Email: claire.delpeuch@oecd.org

Will Symes

Trade and Agriculture Directorate

Email: Will.Symes@oecd.org

Katia Karousakis

Environment Directorate

Email: Katia.Karousakis@oecd.org

Peter Borkey

Environment Directorate

Email: Peter.Borkey@oecd.org

Ivan Haščič

Environment Directorate

Email: Ivan.Hascic@oecd.org

Piera Tortora

Development Co-operation Directorate

Email: Piera.Tortora@oecd.org

Oriana Romano

Centre for Entrepreneurship, SMEs, Regions and Cities

Email: Oriana.Romano@oecd.org

Industry

The manufacturing industry is a major source of global carbon dioxide emissions accounting for around 40% of the total. The shift to a circular and low-carbon production method is needed to meet the UN 2030 Sustainable Development Goals and the objectives of the Paris Agreement. The greening of industry implies a deep transformation, as well as multiple challenges. These include scaling-up innovative technologies, investments, competitiveness, ensuring a global playing field, developing markets for green steel, and social aspects.

The OECD undertook a comprehensive assessment of the existing policy package in the Netherlands to evaluate its consistency and cost-effectiveness to reach its 2050 decarbonisation objectives in the manufacturing sector. The analysis highlights the importance of combining a strong commitment to raising carbon prices with ambitious technology support (for mature and radically new technologies, such as hydrogen). The review illustrates the tradeoff between short-term emissions cuts and longer-term technology shift, as well as the consequences of competitiveness provisions on reaching long-term climate goals.

Low-carbon hydrogen plays a key role the net-zero transition of several sectors. OECD work has recently focused on the industrial policies in place to support low-carbon hydrogen development across countries. It concludes that a five-pronged approach would be need to accelerate its adoption:

1) supporting R&D and demonstration projects;

2) increasing the supply of renewable electricity;

3) introduce a comprehensive policy package, including carbon pricing and the phasing out of inefficient fossil fuel subsidies;

4) reducing uncertainty, for instance by promoting international standardisation; and

5) considering blue hydrogen as a short-term option to facilitate the transition to green hydrogen.

The report on Green hydrogen opportunities for emerging and developing economies presents a value chain approach to identify priority areas for developing national hydrogen strategies, focusing on emerging and developing economies.

The larger adoption of hydrogen in production and consumption process brought by the green transition may require the update of risk and safety procedures. The project on Precaution in the energy transition and improved knowledge for hydrogen risk regulation aims at fostering the energy transition in the Netherlands by providing adequate precaution recommendations and enhanced risk knowledge on hydrogen applications, and envisages the development of a risk-based regulatory framework to facilitate the further use of hydrogen as an energy carrier to consolidate the hydrogen economy. The programme on chemical accident prevention, preparedness and response is investigating emerging trends in accidents from the energy transition, with a final report on current chemical accident trends and specific risk considerations for future applications of new energy sources to be published in 2023.

The highly competitive and greenhouse gas intensive nature of steel production makes its decarbonisation particularly challenging. To support governments in addressing such challenges, the OECD steel policy community – comprising the OECD Steel Committee and the Global Forum on Excess Capacity - provides a unique forum for dialogue, sectoral expertise, and policy focus. Recent contributions pertain indicators for measuring steel decarbonisation progress, a brief supporting the COP27 Presidency’s call for implementation, and the monitoring of low-carbon emission steel projects.

In addition, the OECD steel policy community has convened governments, industry and steel experts to further multi stakeholder dialogue. Forthcoming OECD Steel Committee’s decarbonisation agenda will explore scrap and the circular economy, hydrogen as a new strategic input, and how steel firms are shifting to the lowcarbon transition. In addition, the OECD steel policy community is considering positioning as a platform to accelerate cooperation and implementation of steel decarbonisation.

Key Publications and website

• Green hydrogen opportunities for emerging and developing economies, OECD Environment Working Papers (2022)

• Assessing Steel Decarbonisation Progress – Ready for the decade of delivery? (2022)

• Innovation and industrial policies for green hydrogen, OECD Science, Technology and Industry Policy Papers (2022)

• Policies for a Carbon-Neutral Industry in the Netherlands (2021)

• www.steelforum.org

Contact for more information

Deger Saygin

Environment Directorate

E-mail: Deger.Saygin@oecd.org

Joseph Cordonnier

Environment Directorate

E-mail: Joseph.Cordonnier@oecd.org

Antoine Dechezlepretre

Directorate for Science, Technology and Innovation

E-mail: Antoine.Dechezlepretre@oecd.org

Anthony De Carvalho

Directorate for Science, Technology and Innovation

E-mail: Anthony.Decarvalho@oecd.org

Bertrand Dagallier

Environment Directorate

E-mail : Bertrand.Dagallier@oecd.org

Marie-Ange Baucher

Environment Directorate

E-mail: Marie-Ange.Baucher@oecd.org

Giuseppa Ottimofiore

Directorate for Public Governance

E-mail: Giuseppa.Ottimofiore@oecd.org

Tourism

Tourism can play a key role to deliver on the objectives of the UN 2030 Agenda for Sustainable Development, by contributing to local development, job creation, and the green transition. However, despite progress, tourism development has been economically, socially and environmentally unbalanced in many regions. More needs to be done to embed environmental objectives into tourism policies.

The OECD is engaged with Member and Partner countries to ensure that policies to restart the Tourism sector after the COVID-19 pandemic can also contribute to make the sector more sustainable and inclusive. The OECD G20 Rome guidelines for the future of tourism, which were endorsed in the Rome Communiqué of the 2021 G20 Tourism Ministers’ meeting, identify key issues and opportunities to rethink and reshape tourism policy in response to the impacts of the COVID-19 pandemic.

The report Managing tourism development for sustainable and inclusive recovery highlights five main policies to help rebuilding the tourism sector for a sustainable recovery. The report also presents a selection of 9 case studies on destination strategies to support a sustainable and inclusive recovery.

The 2022 edition of OECD Tourism Trends and Policies includes a thematic chapter focused on Promoting a Green Tourism Recovery. It highlights key policy considerations to promote the transition

to the greener business models and destinations needed to transform the tourism system, and deliver sustainable outcomes in the longer term. The chapter builds on discussion at the Global Forum on Tourism Statistics, Knowledge and Policies hosted by Korea in November 2021, on the opportunity presented by the disruption from the COVID-19 pandemic, to shift to a greener, more sustainable model of tourism.

The OECD is also providing tailored support to the recovery and reform agenda in 7 European countries, to promote a more sustainable tourism ecosystem, including work to upgrade tourism statistics to include sustainability, put in place sustainable destination management and monitoring tools, and develop sustainable tourism indicators.

Key Publications

• Tourism Trends and Policies (2022)

• Managing tourism development for sustainable and inclusive recovery (2021)

• G20 Rome guidelines for the future of tourism (2021)

• Global Forum on Tourism Statistics, Knowledge and Policies Highlights (2021)

Contact for more information

Jane Stacey

Centre for Entrepreneurship, SMEs, Regions and Cities

Email: Jane.Stacey@oecd.org

A nature-positive economy: biodiversity, ecosystem services and water

Biodiversity and ecosystem services

Biodiversity – covering species, ecosystems and genetic diversity - underpins all life and provides vital benefits to our societies and economies. Yet, pressures from land- and sea-use change, overexploitation of natural resources, pollution and climate change are contributing to an alarming loss of biological diversity. In line with the Convention on Biological Diversity (CBD), the 2030 Agenda for Sustainable Development places strong emphasis on biodiversity for achieving global goals for people and planet.

OECD analysis focuses on the economic aspects of biodiversity and aims at enhancing understanding of how biodiversity and associated ecosystems can be valued, and how these values can be captured through policy instruments and incentives to support biodiversity conservation and sustainable use. The objective is to promote policies that are environmentally effective, economically efficient and distributionally equitable.

Given on-going and projected trends in biodiversity loss and degradation, there is an urgent need for: greater and more ambitious use of policies including economic instruments, more cost-effective use of existing finance for biodiversity, and mainstreaming of biodiversity across sectors of the economy.

OECD work on biodiversity also supports the UN Convention on Biological Diversity, and has provided analysis relevant to the post2020 Global Biodiversity Framework and CBD COP15 in December 2022. Work on The Post-2020 biodiversity framework: targets, indicators and measurability implications at global and national level, put forward the concept of headline indicators, as a means to ensure more consistent and comparable monitoring of progress towards individual targets across countries.

The OECD released Biodiversity: Finance and the Economic and Business Case for Action, which was launched at the G7 Environment Ministers’ Meeting in Metz, France in May 2019. A follow on report on A Comprehensive Overview of Global Biodiversity Finance, covering public, private, domestic and international finance flows to protect biodiversity, was released in 2020.

More recently, the OECD released in 2021 a report on Biodiversity, Natural Capital and the Economy: A Policy Guide for Finance, Economic and Environment Ministers, which was prepared at the request of the UK G7 Presidency. The report provides the latest findings and policy guidance for G7 and other countries to underpin transformative domestic action to address biodiversity loss in four key areas: measuring and mainstreaming biodiversity; aligning budgetary and fiscal policy with biodiversity; embedding biodiversity in the financial sector; and improving biodiversity outcomes linked to international trade.

OECD work also focuses on tracking economic instruments and the finance they mobilise for biodiversity. These policy instruments include biodiversity-relevant taxes, fees and charges, positive subsidies and tradable permits. This work serves to monitor progress towards the implementation of the OECD Council Recommendation

on the Use of

Economic Instruments to

Promote Biodiversity Conservation and Sustainable Use

The data was used to monitor progress towards Aichi Target 3 on incentives and Target 20 on resource mobilisation under the previous 2011-2020 Strategic Plan for Biodiversity under the CBD, and will be relevant to the Post-2020 Global Biodiversity Framework. Latest trends are provided in Tracking Economic Instruments and Finance for Biodiversity – 2021, which also covers new data on payments for ecosystem services and biodiversity offsets.

Work has also focused on incentives harmful to biodiversity. A new report, Identifying and assessing incentives, including subsidies, harmful to biodiversity at national level: A comparative review of existing national level assessments and insights for good practice, was released in 2022.

Sub-national governments have a key role in addressing biodiversity loss. Drawing on policy practices from Scotland (UK), France and other signatories to the Edinburgh Declaration, Enhancing the effectiveness of sub-national biodiversity policy - Practices in France and Scotland, United Kingdom examines governance and institutional issues as well as the policy instruments that subnational governments can leverage to deliver positive biodiversity outcomes.

Biodiversity loss and climate change are closely linked. Climate change is one of the five key pressures on biodiversity loss while degradation and loss of ecosystems can result in significant greenhouse gas emissions. At the same time, biodiversity and ecosystem services play an important role in helping people adapt to the impacts of climate change, and reducing the risk of climate-related disasters. Towards Sustainable Land Use: Aligning Biodiversity, Climate and Food Policies examines on-going challenges for aligning land-use policy with climate, biodiversity and food objectives, and the opportunities to enhance the sustainability of land-use systems. Adapting to a Changing Climate in the Management of Coastal Zones highlights how coastal ecosystems, such as mangroves, provide significant benefits, including decreasing the impact of coastal flooding.

Scaling up Nature-based Solutions to Tackle Water-related

Climate Risks: Insights from Mexico and the United Kingdom examines good practices for scaling up nature-based solution for adaptation to climate change.

On-going work on biodiversity is focusing on mainstreaming biodiversity in renewable energy infrastructure, and biodiversity in green budget tagging.

Number of countries with biodiversity-relevant economic instruments

Source: OECD PINE database, accessed 28 July 2021 https://www.oecd.org/environment/indicators-modelling-outlooks/policy-instrument-database/

Key Publications and websites

• Mainstreaming Biodiversity in Infrastructure (Forthcoming 2023)

• Identifying and assessing subsidies and other incentives harmful to biodiversity: OECD Environment Working Papers, OECD Environment Policy Papers (2022)

• Biodiversity, Natural Capital and the Economy: A Policy Guide for Finance, Economic and Environment Ministers, OECD Environment Policy Papers (2021)

• Tracking Economic Instruments and Finance for Biodiversity, (2021)

• Adapting to a changing climate in the management of coastal zones, OECD Environment Policy Papers (2021)

• Enhancing the effectiveness of sub-national biodiversity policy, OECD Regional Development Papers (2021)

• A Comprehensive Overview of Global Biodiversity Finance (2020)

• Towards Sustainable Land Use: Aligning Biodiversity, Climate and Food Policies (2020)

• The Post-2020 Biodiversity Framework: Targets, indicators and measurability implications at global and national level (2019)

• http://oe.cd/biodiversity

• http://oe.cd/BLUE

Contact for more information

Katia Karousakis

Environment Directorate

E-mail: Katia.Karousakis@oecd.org

Managing water for green growth

The UN 2030 Sustainable Development Agenda recognises the critical contribution of water to sustainable development. However, investment in waster security falls short of global needs and the impacts on communities, economies and the environment are significant. The OECD Policy Perspectives on Water, Growth and Finance explains that this does not result from a shortage of finance, but from inadequate risk-return profiles of infrastructure projects in the water sector.

In 2017, the OECD established the Roundtable on Financing Water to facilitate dialogues between the water and finance communities on how to overcome the global challenges of financing investments that contribute to water security and sustainable growth. Specifically, the Roundtable: i) tracks water- related financing needs and capacities in different regions of the world; ii) develops policy recommendations to mobilise private finance (e.g. through blending development finance with domestic commercial finance); and iii) analyses how to ensure that available finance goes to projects which are not merely bankable but deliver tangible benefits in terms of water security and sustainable development.

The Roundtable embarked on a series of regional meetings (covering North and Latin America and Asia in 2019, other regions in 2020) for more tailored discussions on issues and opportunities.

Recognising that water crises are often primarily governance crises, the OECD Water Governance Initiative was set up as an international multi-stakeholder network where delegates from public, private and non- profit sectors share good water governance practices. It has led to the development of the OECD Principles on Water Governance in 2015, the OECD Water Governance Indicators in 2018 and the “How To Assess water Governance” guide in 2022.

The OECD supports ambitious water policy reforms in selected countries, on demand. These combine robust analyses of water economics and governance with insights from international practitioners, in the framework of national policy dialogues on water. Over the past decade, Water Policy Dialogues have been undertaken in Mexico, the Netherlands, Brazil, Korea, Argentina, Peru. They have helped to inform the water policy reform agenda.

The OECD also provides support to the transition economies of Eastern Europe, the Caucasus and Central Asia to improve their environmental and water policies, integrate environmental considerations into the processes of economic, social and political reform and gradually shift to a green growth and sustainable development model. As a key implementing partner of the European Union for Environment Water Resources and Environmental Data Programme (EU4Environment – Water and Data), OECD work on policy reforms in this region are aimed at the economic and financial dimensions of sustainable water resources management, the reform of water supply and sanitation systems, and enhanced transboundary co-operation in water basins.

Key Publications and websites

• Financing a Water Secure Future, OECD Studies on Water (2022)

• Reform of Water Supply and Wastewater Treatment in Lithuania, OECD Studies on Water (2022)

• Towards Sustainable Water Services in Estonia, OECD Studies on Water (2022)

• Managing and Financing Water for Growth in Thailand, OECD Studies on Water (2022)

• Financing a Water Secure Future, OECD Studies on Water (2022)

• Fostering Water Resilience in Brazil, OECD Studies on Water (2022)

• How To Assess water Governance, OECD Studies on Water (2022)

• Developing a Water Policy Outlook for Georgia, the Republic of Moldova and Ukraine, OECD Studies on Water (2021)

• Water Governance in Peru, OECD Studies on Water (2021)

• Water Governance in African Cities OECD Studies on Water (2021)

• Water Governance in Cape Town, South Africa OECD Studies on Water (2021)

• www.oecd.org/water

• www.oecd.org/environment/outreach/water-eecca/

Contact for more information

Xavier Leflaive

Environment Directorate

E-mail: Xavier.Leflaive@oecd.org

Matthew Griffiths

Environment Directorate

E-mail: Matthew.Griffiths@oecd.org

Oriana Romano

Centre for Entrepreneurship, SMEs, Regions and Cities

E-mail: Oriana.Romano@oecd.org

Greening regions, cities and communities

Inclusive green growth in cities and regions

More than half the people in the world live in or near cities today. By the middle of the century, urban areas will be home to over two-thirds of the global population and a large share of economic activity. The OECD work on urban and regional development finds that appropriate local policies can help generate growth and jobs while becoming greener.

The 2021 Regional Outlook - Addressing COVID-19 and Moving to Net Zero Greenhouse Gas Emissions analyses the different territorial impacts of COVID-19 on health and economy and the different territorial implications of moving to net-zero greenhouse gas emissions by 2050 whilst adapting to climate change. Building on these insights, it provides guidance for integrating the climate challenge into multi-level governance, urban and rural development so as to leave no region behind. The report also highlights the opportunity to draw lessons from COVID-19 for a place-based response to the climate challenge.

The OECD Programme on the Circular Economy in Cities and Regions supports national, regional and local governments in their transition towards a circular economy by: supporting multi-level dialogues; providing an international network, where regions and cities can share knowledge, experiences and good practices with a wide range of stakeholders; and facilitating the uptake of the OECD Scoreboard on the Governance of the Circular Economy.

The OECD Programme A territorial approach to climate action and resilience supports countries, regions and cities in their efforts to develop and implement their climate plans, strategies and policy instruments. The programme seeks to demonstrate the potential of subnational action by strengthening local understanding of climate change drivers, impact and vulnerabilities; assessing national and subnational policy and governance frameworks to provide locallytailored recommendations; sharing and disseminating innovative policies, strategies and programmes applying a territorial approach to drive the zero-carbon transition and climate resilience.

The Building decarbonisation in cities and regions project focuses on the role of the building sectors for meeting net-zero targets. The project started in 2021 with a multi-level governance framework to guide building policies, including energy efficient retrofits, installing high performance equipment and promoting renewable energy. Besides saving energy and reducing CO2 emissions, decarbonising buildings also brings multiple benefits such as reducing energy bills, improving health and creating green jobs. Using the framework as a foundation, the project provides more specific place-based analysis taking into account regional differences.

Mining Regions and cities play a key role in the green inclusive transition. The OECD Mining Cities and Regions initiative aims to develop recommendations for improving regional development outcomes for regions and cities specialised in mining and extractive industries by developing a global platform for mining regions and cities through events and peer-review that enable knowledge sharing, advocacy and dialogue between public/private sectors and local communities on better policies to enhance regional productivity and wellbeing.

Key Publications and websites

In the broader context of the 2030 Agenda for Sustainable Development, the OECD Programme on a Territorial Approach to the SDGs seeks to support cities and regions in localising the SDGs, with the participation of 10 pilot cities and regions from around the world. Recent projects of the framework include the Rhine-Neckar Metropolitan Region (2021-2022) and the Autonomous Province of Bolzano (2022).

• Decarbonising Buildings in Cities and Regions, OECD Urban Studies (2022)

• OECD Regional Outlook 2021: Addressing COVID-19 and Moving to Net Zero Greenhouse Gas Emissions (2021)

• A Territorial Approach to SDGs, OECD Urban Policy Reviews (2020)

• www.oecd.org/regional/cities/circular-economy-cities.htm

• www.oecd.org/cfe/cities/tacar.htm

• www.oecd.org/fr/regional/mining-regions-cities.htm

• www.oecd.org/dac/financing-sustainable-development/development-finance-topics/small-island-developing-states.htm

Contact for more information

Tadashi Matsumoto

Centre for Entrepreneurship, SMEs, Regions and Cities

E-mail: Tadashi.Matsumoto@oecd.org

Andrés Fuentes Hutfilter

Centre for Entrepreneurship, SMEs, Regions and Cities

E-mail: Andres.Fuentes@oecd.org

Oriana Romano

Centre for Entrepreneurship, SMEs, Regions and Cities

E-mail: Oriana.Romano@oecd.org

Asia

The current development of Asia is characterised by a rapid urbanisation, rising economic growth led in most places by the manufacturing industry, and a rapidly increasing motorisation. The result has been escalating air and water pollution, large greenhouse gas emissions, increased solid waste generation and plastic pollution, sprawling urban development, depletion of natural resources and deforestation.

The development of infrastructure supports Asia’s dynamism but also plays a key role in soaring greenhouse gas emissions, air pollution and the destruction of ecosystems. To help governments across Central and Southeast Asia plan, evaluate and finance sustainable infrastructure projects in line with long-term environmental and development goals, the OECD launched the Sustainable Infrastructure Programme in Asia (SIPA) in 2021. SIPA provides countries with capacity development and policy advice at different stages of the infrastructure investment cycle, focusing on long-term strategic planning, project-level evaluations, aligning national sectoral policy frameworks (energy, transport, industry) with the goals of the Paris Agreement and the SDGs as well as promoting the adoption of green finance and responsible business conduct principles.

China, Japan and Korea – like many other countries that underwent periods of rapid industrialisation – share a common story of high economic growth and intense pollution followed by progressive efforts to improve air quality. The critical impact of air pollution on human health in both developed and developing countries is well-known. Building on the expertise of the OECD Environment Policy Committee and the Regulatory Policy Committee, the OECD brought together policy makers, academics and experts from China, Japan and Korea to discuss regulatory frameworks, enforcement and co-operation to address air pollution as well as existing international regulatory co-operation to control trans-boundary air pollution in Northeast Asia, North America, and Europe. The report Economic benefits of international co-operation to improve air quality in Northeast Asia: A focus on Japan, Korea and China provides projections of the benefits of policy action up to 2050, and finds that further co-operation to reduce air pollution in the Northeast Asia region can result in health, environmental and economic benefits.

The OECD also engages with Southeast Asian economies to support them in the promotion of a sustainable ocean economy and to address policy challenges related to marine plastic pollution by providing policy guidance and sharing best practices. The ten recently published ASEAN Country Notes map the government ministries and departments responsible for managing marine plastic pollution, the government policies, measures and selected initiatives to combat marine plastic pollution in those countries.

The OECD is currently developing a regional scale-down of its Global Plastics Outlook report that will be specific to the region.

A sound investment and finance policy framework is a key enabler for the green transition. The 2022 Economic Outlook for Southeast Asia, China and India highlights the existing challenges, and policy options to support the further development of sovereign green bond markets in the region. In addition, the report Strengthening

Macroprudential Policies in Emerging Asia: Adapting to Green

Goals and Fintech provides a detailed overview of the current macroprudential policy situation in Emerging Asian countries and explores how the macroprudential policy toolkit has evolved. In particular, the report devotes special attention to macroprudential policies for emerging priorities, such as achieving green goals and updating regulatory frameworks to reflect ongoing fintech developments. Furthermore, several countries in the region have joined the Clean Energy Finance and Investment Mobilisation (CEFIM) programme, including India and Indonesia.

OECD has worked with the Chinese experts on Environmentally Adjusted Multifactor Productivity (EAMFP), applying the OECD measurement framework to national data. The project led to the release of the report on Environmentally Adjusted Multifactor Productivity in China in March 2022, which provides indicators to track the progress towards green growth, including metrics on the reliance on natural capital and pollution-intensive activities to generate income growth.

Key Publications and website

• Southeast Asia Plastics Outlook (forthcoming 2023).

• Economic Outlook for Southeast Asia, China and India 2022: Financing Sustainable Recovery from COVID-19 (2022)

• The economic benefits of international co-operation to improve air quality in Northeast Asia: A focus on Japan, Korea and China (2022)

• Environmentally Adjusted Multifactor Productivity in China (2022)

• Strengthening Macroprudential Policies in Emerging Asia: Adapting to Green Goals and Fintech (2021)

• Clean Energy Finance and Investment Policy Review of Indonesia (2021)

• Clean Energy Finance and Investment Roadmap of India: Opportunities to Unlock Finance and Scale up Capital (2021)

• Enhancing Air Quality in Northeast Asia: Regulatory frameworks, enforcement and co-operation (2019)

• Green Growth Performance Review of Indonesia (2019)

• www.oecd.org/site/sipa/

• www.oecd.org/cefim/

Contact for more information

Virginie Marchal Environment Directorate

E-mail: Virginie.Marchal@oecd.org

Eija Kiiskinen Environment Directorate

E-mail: Eija.Kiiskinen@oecd.org

Elisa Lanzi Environment Directorate

E-mail: Elisa.Lanzi@oecd.org

Eastern Europe, the Caucasus and Central Asia (EECCA)

Since the collapse of the Soviet Union, the countries of Eastern Europe, the Caucasus and Central Asia (Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, the Kyrgyz Republic, Moldova, Tajikistan, Turkmenistan, Ukraine and Uzbekistan) have been on long journeys to pursue economic development that is also environmentally sustainable.

The last decade witnessed an accelerated awareness of, and more ambitious response to, local environmental impacts of the traditional path of economic development and of global trade. Many countries of EECCA have set and updated national targets to guide their transition towards a green economy, including on green and sustainable energy, low-carbon economy, and natural resource management. EECCA countries have also significantly modernised environmental policies and legislation at both strategic and technical levels to make them less costly and complex while not compromising achieving environmental and climate objectives. These developments have been accompanied by the creation of inter-ministerial co-ordination mechanisms on greening the economy.

Most recently, EECCA countries have integrated green stimulus measures into their response to the COVID-19 pandemic and their broader recovery packages. They also have embarked on aligning the policy objectives of the financial sector development with their national climate and environmental targets.

The Task Force has also developed and provided EECCA countries with a range of practical tools that support policy decision making, including for strengthening environmental performance of large enterprises and SMEs, measuring green growth by using indicators and developing green public investment programmes.

Despite progress, the EECCA countries are still facing significant environmental challenges, partly inherited from the Soviet Union and partly newly acquired as a result of new consumption patterns. They need significant investments and policy reforms to move onto a greener path of economic development.

Since the 1990s, the OECD has supported the EECCA countries in developing policies that improve environmental quality and wellbeing, while creating opportunities for strong economic growth and decent jobs. The long-standing collaboration between the countries of EECCA and the OECD, which has been carried out through the GREEN Action Task Force (previously known as the EAP Task Force), has produced concrete country- and regionspecific results such as, for instance, new strategies for greening the economy, pragmatic reform of policies, regulations and developing options for mobilising green finance.

The GREEN Action Task Force work has been carried out in cooperation with OECD member countries, International Financial Institutions and international organisations, such as the UNECE, UNEP and UNIDO.

Key Publications and websites

• Green Economy Transition in Eastern Europe, the Caucasus and Central Asia: Progress and Ways Forward, OECD Green Growth Studies

• Towards a Green Economy with EU4Environment in Armenia (2022)

• Towards a Green Economy with EU4Environment in Azerbaijan (2022)

• Towards a Green Economy with EU4Environment in Georgia (2022)

• Towards a Green Economy with EU4Environment in Moldova (2022)

• Towards a Green Economy with EU4Environment in Ukraine (2022)

• Towards green transformation of Ukraine: State of Play in 2021 (2022)

• Towards green transformation of the Republic of Moldova: State of Play in 2021 (2022)

• The environmental compliance assurance system in the Republic of Moldova: Current situation and recommendations (2022)

• The environmental compliance assurance system in Armenia: Current situation and recommendations (2022)

Key Publications and websites - continued

• Towards a green economy in the Eastern Partner countries with EU4Environment: mid-term achievements (2021)

• Fossil-fuel subsidies in the EU’s Eastern Partner countries (2021)

• Policy Highlights: “Fossil-fuel subsidies in the EU’s Eastern Partner countries in 2020” (2021)

• Accessing and Using Green Finance in the Kyrgyz Republic – Evidence from a Household Survey (2021)

• An Assessment of Investment Needs for Climate Action in Armenia up to 2030 (2021)

• Measuring Green Finance Flows in Kazakhstan (2020)

• SME Policy Index: Eastern Partner Countries 2020 (2020)

• Access to Green Finance for SMEs in Georgia (2019)

• Promoting Clean Urban Public Transportation and Green Investment in Moldova (2019)

• Sustainable Infrastructure for Low-carbon Development in Central Asia and the Caucasus: Hotspot analysis and needs assessment (2019)

• Mining and Green Growth in the EECCA Region (2019)

• Promoting Clean Urban Public Transportation in Kazakhstan, Kyrgyzstan and Moldova – Summary Report of Project Implementation 20162019 (2019)

• Enhancing the Economic Regulatory System for Moldova’s Water Supply and Sanitation (2019)

• Addressing Industrial Air Pollution in Kazakhstan – Reforming Environmental Payments Policy Guidelines (2019)

• www.oecd.org/env/outreach/green-action-task-force/

• www.oecd.org/env/outreach/water-eecca/

• www.oecd.org/site/sipa/

• www.eu4environment.org/

Contact for more information

Krzysztof Michalak

Environment Directorate

E-mail: Krzysztof.Michalak@oecd.org

Matthew Griffiths

Environment Directorate

E-mail: Matthew.Griffiths@oecd.org

Virginie Marchal Environment Directorate

E-mail: Virginie.Marchal@oecd.org

Latin America and Caribbean

Natural assets have underpinned the economic development in Latin America and Caribbean, with strong ties to social aspects of growth. The increasingly large share of the population exposed to the consequences of environmental degradation has escalated the green growth debate in the region. Concrete steps have been taken in Latin America and Caribbean to develop environmental strategies for a net-zero carbon economy.

The OECD is supporting the national efforts in the LAC region to deliver on their sustainable development objectives and green transition. The Latin American Economic Outlook has systematically analysed critical aspects related to sustainable and inclusive development in Latin America and the Caribbean (LAC) region since its launch in 2007. The 2022 LAC Outlook on Towards a Green and Just Transition analyses the challenges and opportunities of a green and just transition in LAC, and provides policy recommendations to ensure the wellbeing of citizens and the region’s vast and rich ecosystems.

The OECD project Enhancing Green Transition in LAC; From Commitments to Action is implementing the Environmental sustainability priority of the OECD Latin America and the Caribbean Regional Programme (LACRP), with the support of the EU’s Regional Facility for Development in Transition. The project includes support for the development of the LAC Environment at a Glance and Key Environmental Indicators, and organisation of a series of Regional Policy Dialogues and Expert Workshops on domestic climate change mitigation and adaptation challenges and policy solutions.

Albeit governments throughout LAC have established highlevel decarbonisation policies that often focus on solutions like sustainable bioenergy and waste-to-energy, projects often lack access to financing, as identified in the report Enabling conditions for bioenergy finance and investment in Colombia. Through five case studies from Brazil, Chile, Colombia, India and Turkey, the report considers the enabling environment and lessons learnt from bioenergy developments in different countries.

The report Biodiversity Conservation and Sustainable Use in Latin America summarises key findings on biodiversity conservation and sustainable use from the EPRs of Brazil, Chile, Colombia, Mexico and Peru. The report reviews common challenges, the strategies being used to tackle them, the gaps that remain and how these can be addressed.

Key Publications and website

• Environmental Performance Review of Costa Rica, OECD Publishing (forthcoming, 2023)

• Latin American Economic Outlook - Towards a green and just transition (2022)

• Enabling conditions for bioenergy finance and investment in Colombia, Green Finance and Investment (2022)

• Towards Green Growth in Emerging Economies: Evidence from Environmental Performance Reviews (2019)

• Biodiversity Conservation and Sustainable Use in in Latin America: Evidence from Environmental Performance Reviews (2018)

• www.oecd.org/environment/country-reviews

• www.oecd.org/latin-america/regional-programme/environment/

Contact for more information

Eija Kiiskinen

Environment Directorate

E-mail: Eija.Kiiskinen@oecd.org

Africa and MENA

Commitment towards building climate resilience and achieving a just energy transition is high in the African continent agenda. All 54 African countries signed the Paris Agreement and Agenda 2063, which is Africa’s “blueprint and masterplan for transforming the continent into the global powerhouse of the future”, addresses topics such as climate change, green and blue growth. The OECD is supporting the region in its green transition efforts through multiple actions.

Boosting African cities’ resilience to climate change: The role of green spaces explores the dynamics between urbanisation and green spaces and highlights that availability of green space can be expanded by building vertically in increasingly compact African cities. Moreover, the analysis reveals that the availability of green spaces is not the same as proximity. Communities who live further away from green spaces are less likely to reap their benefit, such as cooling effects during heat waves.

The data underpinning this report is freely available on OECD platform Mapping Territorial Transformations in Africa (MAPTA), which enables users to explore interactive maps on the sustainability and resilience of African cities. This platform includes several types of data related to urban forms, street networks, and pollution to aid actors in decision-making.

COP27 returned the annual meeting to Africa for the first time since 2016. The report, West Africa and the global climate agenda, analyses the 17 NDCs of West African countries (as of September 2022) to understand the region’s ambition, financing needs and potential to implement their Nationally Determined Contributions (NDCs). One of the key takeaways is that so far, mobilised finance has fallen short of the specified needs in the region’s NDCs. West African NDCs state that USD 221.2 to 279.7 billion is needed for mitigation and USD 61.4 to 88.8 billion for adaptation by 2030. So far, according to OECD estimates, the 17 West African countries received less than USD 6 million in 2020 of the “100 billion” mobilised by developed countries, which is far from meeting the region’s needs.

Pricing Greenhouse Gas Emissions: Turning climate targets into climate action examines carbon pricing policies in 71 countries, including 12 countries from Africa (Burkina Faso, Côte d’Ivoire, Egypt, Ethiopia, Ghana, Kenya, Madagascar, Morocco, Nigeria, Rwanda, South Africa, Uganda). The report finds that welldesigned energy, carbon tax and subsidy reform can strengthen efforts to improve domestic revenue mobilisation. While the revenue potential varies across countries, it is often substantial.

Revenues from carbon pricing could be used to provide targeted support to improve energy access and affordability, enhance social safety nets, and support other economic and social priorities. For example, in Egypt, where a successful fossil fuel subsidies reform generated fiscal savings, the government was able to allocate more funds to education and health and implement an economic stimulus package to recover from the crisis.

The upcoming Green Growth Policy Review of Egypt (GGPR) will provide an independent, evidence-based and country-tailored assessment of Egypt’s environmental performance and green growth policies with targeted recommendations designed to help the Egyptian government evaluate progress and identify options to achieve its green growth objectives. An in-depth chapter will be dedicated to the theme of “Building climatesmart, resilient and inclusive cities”. The Clean Energy Finance and Investment Mobilisation (CEFIM) programme supports the country in unlocking finance and investment flows to achieve clean energy targets and sustainable finance goals through extensive stakeholder, implementation-support activities, regional peerlearning and investor dialogues.

An extensive consultation process is underway between the OECD and African stakeholders to strengthen collaboration on several topics, including green growth. Ongoing discussions on the OECDAfrica Partnership includes how to support the development of policy frameworks to promote green growth and sustainable development that is territorially balanced across Africa. In the 2021 MENA-OECD Ministerial Declaration, Ministers announced their commitment to design and implement a comprehensive programme of work, in order to promote a strong, resilient, green, and inclusive recovery in the MENA region.

Key Publications and website

• West Africa and the global climate agenda, West African Papers (2022)

• Boosting African cities’ resilience to climate change: The role of green spaces West African Papers (2022)

• Towards an OECD Africa partnership (2022)

• Pricing Greenhouse Gas Emissions: Turning Climate Targets into Climate Action (2022)

• www.mapping-africa-transformations.org/

• www.oecd.org/mena/

Contact for more information

Brilé Anderson

Sahel and West Africa Club

E-mail: Brile.Anderson@oecd.org

Fianna Jurdant

Global Relation Directorate

E-mail: Fianna.Jurdant@oecd.org © OECD 2023

The Green Growth Knowledge Partnership (GGKP)

Since its establishment in 2012, the GGKP has since expanded to include a large, diverse group of more than 75 Knowledge Partners. It is a network of international organisations and experts that addresses major knowledge gaps in green growth theory and practice. The OECD is a founding partner of the GGKP, together with the Global Green Growth Institute, the UN Environment, the United Nations Industrial Development, and the World Bank.

By encouraging collaboration and co-ordinated research, the GGKP seeks to increase the impact of its partners. Through its thematic expert working groups, the GGKP draws together policy makers, practitioners and academics to assess the state of knowledge and prioritise knowledge gaps around key green growth topics.

To date, joint research themes have included; metrics and indicators, trade and competitiveness, fiscal instruments, technology and innovation, gender, behavioural insights, inclusiveness, and natural capital.

The GGKP hosts three state-of-the-art web platforms, providing easy access to policy guidance, good practices, tools and data through a searchable e-library with technical and policy resources as well as data for some 193 countries. Moreover, through its online interactive Community, Annual Conferences and webinars, the GGKP harnesses in-person and virtual networks to foster information sharing and learning through the creation of a vibrant green growth community of practice.

Learn more at: www.greengrowthknowledge.org

More information on OECD work on green growth

The Green Growth and Global Relations Division produces titles in English and French, with selected titles translated into other languages.

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