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

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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.

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 report 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.

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

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.

The ITF organises the global dialogue for better transport acting as a platform for discussion and pre-negotiation of policy issues across all transport modes. “Transport for Inclusive Societies” was the theme for ITF’s 2022 annual summit. The 2023 Summit will focus on “Transport Enabling Sustainable Economies”.

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