Protecting the environment is affordable but we must act now, says major OECD report
Wed 5 Mar 2008 - In its ‘Environmental Outlook to 2030’ published today, the Organisation for Economic Co-operation and Development (OECD) has put forward a package of policies to address the effects of global warming that to implement could cost as little as a loss of 0.03 percentage points in annual average GDP growth globally to 2030, or just over 1% of predicted world GDP in 2030, stressing the cost of inaction is high.
The OECD says projections show that world greenhouse gas emissions are expected to grow by 37% to 2030 and by 52% to 2050 if no new policy action is introduced. This would lead to in an increase in global temperature over pre-industrial levels in the range of 1.7-2.4°C by 2050, resulting in increased heat waves, droughts, storms and floods, and causing severe damage to key infrastructure and crops, a considerable loss in animal and plant species, water scarcity and adverse health impacts due to air pollution.
However, the Outlook says by implementing a range of policies it has suggested, key air pollutants like nitrogen oxides and sulphur oxides could be cut by about a third and GHG emissions could be contained to about 13% by 2030. It says a more ambitious policy action would be required to achieve the targets for 2050 being proposed in current international discussions. Its simulation shows that to stabilize atmospheric concentration at 450ppm CO2eq, actions by all countries are needed to achieve a 39% reduction in global GHG emissions by 2050 relative to 2000 levels. This would reduce GDP by 0.5% and 2.5% below baseline estimates in 2030 and 2050 respectively, equivalent to a reduction in annual GDP growth of about 0.1 percentage points per annum on average.
The more countries and sectors that participate in climate change mitigation action, says the Outlook, the cheaper and more effective it will be to curb global GHG emissions. However, it will require burden-sharing mechanisms within an international collaborative framework and co-operation with a wider group of emerging economies, in particular the BRIICS countries (Brazil, Russia, India, Indonesia, China and South Africa).
The primary energy consumption of Brazil, Russia, India and China together is expected to grow by 72% between 2005 and 2030, compared with 29% in the 30 OECD countries. Unless ambitious policy action is taken, says the Outlook, GHG emissions from just these four countries will grow by 46% to 2030, surpassing those of the 30 OECD countries combined.
Total greenhouse gas emissions (by region) 1970-2050 (source: OECD)
Saying “there is a window of opportunity now to introduce ambitious policy changes”, the report lists six key policy options:
·Use a mix of complementary policies to tackle the most challenging and complex environmental problems, with a strong emphasis on market-based instruments, such as taxes and tradeable permits, in order to reduce the costs of action.
·Prioritize action in the key sectors driving environmental degradation: energy, transport, agriculture and fisheries. Environmental ministers cannot do this alone. Environmental concerns need to be integrated into all policy-making by relevant ministries including finance, economy and trade, and reflected in all production and consumption decisions.
·Ensure that globalization can lead to more efficient use of resources and the development and dissemination of eco-innovation. Business and industries need to play a lead role, but governments must provide clear and consistent long term policy frameworks to encourage eco-innovation and to safeguard environmental and social goals.
·Improve partnerships between OECD and non-OECD countries to address global environmental challenges. BRIICS in particular are key partners given their growing influence in the world economy and increasing share of global environmental pressures. Further environmental co-operation between OECD and non-OECD countries can help spread knowledge and technological best practices.
·Strengthen international environmental governance to better tackle trans-boundary and global environmental challenges.
·Strengthen attention to the environment in development co-operation programmes, and promote more coherent policies.
The Outlook highlights key sectors, including transport, that require “priority actions” to prevent the environmental damage projected to 2030. It projects transport-related CO2 emissions to increase by 58% to 2030, while sulphur and nitrogen emissions will fall by a quarter to a third from today’s levels. Transport prices rarely reflect their full social and environmental costs, it says, resulting in over-use and sub-optimal choices about the type of transport to use. It maintains that transport pricing should fully reflect the costs of environmental damage and health impacts, for example through taxes on fuels – including the removal of tax exemptions. Research and development of new transport technologies should be promoted. The availability, frequency and safety of public transport should be strengthened to provide a viable alternative to private cars. “It is mobility and access that need to be ensured, not ‘transport’ per se.”
The report sees three obstacles to change: fear of impact on industrial competitiveness; uncertainty about who should take action and who should bear the costs of action; and underpricing of natural resource use and pollution. To overcome them, it suggests considering the following approaches to policy development and implementation:
·Phase in a policy to allow for options such as transitional adjustments, recycling of tax revenues back to affected sectors, border tax adjustments in compliance with WTO regulations and international co-operation to harmonize regulations and taxes.
·Work in partnership with stakeholders, including business, academia, trade unions and civil society organizations, to find creative and low-cost solutions to many of the environmental challenges.
·Bring OECD and non-OECD countries together to identify environmentally effective and economically efficient solutions to common environmental challenges.
·Make widespread use of market-based approaches to enable efficiency gains and market advantage through innovation.
·Develop policy mixes, or combinations of instruments, tailored to specific national circumstances.
Speaking at the publication’s launch in Oslo, the OECD Secretary General, Angel Gurría, said: “We must be aware that getting it right on the environment is not only about what to do and how to do it. We also need to address the question of who will pay for what. The global cost of action will be much lower if all countries work together.”
The OECD, based in Paris, comprises 30 countries that include most of the EU States plus the US, Canada, Japan, Korea, Mexico, Australia and New Zealand. It describes itself as “providing a setting where governments compare policy experiences, seek answers to common problems, identify good practice and coordinate domestic and international policies.”