green growth oecd – canada 50 years 3 rd june 2011 simon upton, director, environment

Green Growth OECD – CANADA 50 YEARS

3rd June 2011

Simon Upton, Director, Environment

Growth & development

Wealth and GDP (2005 US$ per capita, wealth on bottom axis)

Low income

Middle income

Growth – not just a developing country concern

JobsDebtDemographics

The need for green

2050

World GDP (2005, PPP)USD 300 trillion

2030

USD 150 trillion

2010USD 70 trillion

1990

Food + 35%

Energy + 37%

Resources + 70%

Source: OECD Source: Global Footprint Network

Risks in not going green: bottlenecks

Source: World Bank Source: OECD.

Risks in not going green: shocks to food supply

Production +35%

Land +6%

Land at risk of erosion + 17%

By 2030, business as usual:

Biodiversity loss(2000-2030)

Pressures on natural capital

Water scarcity +30%

% mean species abundance loss

Source: OECD

Risks in not going green: water scarcity

Living with risk of water scarcity (millions of people under water stress)

Source: OECD

Risks in not going green: pollution and human health

Premature deaths from PM10 exposure(per million inhabitants)

Source: OECD

Risks in not going green: systemic risks

GHG emissions and climate change(per million inhabitants)

Costs of climate change(% loss, present value of consumption)

Source: OECD (see e.g. OECD (2008) “Costs of Inaction”) and UK Treasury “Stern review”

Better measurement: the capital base of economies

Source: Arrow et al (2009) in NBER WP 16599

Capital stock shares

Better measurement for better policy choices

Cost of GHG mitigation: GDP and GDP+

Source: OECD

Growth from green perspective

The gap in 2050 = 4%

Direct cost of GHG mitigation

Source: OECD

Structural reforms

Green Fiscal Reform

US

New Zealand

Japan

Ireland UK

Switzerland

Greece

Sweden

Netherlands

Revenue from taxes on energy, CO2 and other pollutants, % of GDP, 2008. Excludes vehicle taxes

Def

icit

imp

rove

me

nt t

o st

abili

se d

ebt

by 2

025

, %

of

GD

P

Current environmental taxes

Tax revenue, % of GDP

Improving resource management

Source: “Sunken Billions”, FAO World Bank

Revenue, 2004

$78 billion

$50 billion

$10 bn+

Over-exploited(31%)

Fully-exploited(53%)

State of catch fisheries, 2008

Under-exploited(16%)

Operating deficit, $5 billion

Subsidies

Economic loss

Source: FAO

Source: Joint OECD/IEA analysis

Removing fossil fuel subsidiesIncome gains from unilateral subsidy removal (% change in HH income vs BAU)

USD 115 billion, 2009 investment in renewables

10% less emissions globally

from removal of fossil fuel subsidies

USD 312 billion2009 , developing country fossil fuel consumption subsidies

?

Reframing environmental challenges

Regulation and diffusion of ICT

US

UK

Sweden

Germany

Belgium

France

Greece

Spain

Canada

ICT

inve

stm

ent

% o

f to

tal,

ave

rag

e 1

99

5-2

00

3

Regulation in ICT-using sectorsAverage1995-2003

Source: OECD

Overcoming inertia

Lifespan of capital investments

Rents embodied in

fossil fuel reserves

Sunk capital

USD 16 trillion

USD 6.7 trillion

World GDP

Costs of moving too slow

300GW retired early (loss > USD 70 billion)

Coal-fired generation capacity, IEA 450ppm scenario

Response to prices

-20

0

20

40

60

80

100

120

140

160

180

0 100 200 300 400 500 600 700 800 900

SE

K p

er k

g N

Ox

Emission intensity in kg NOx per GWh

1991 1992 1994 1996

Marginal Abatement Cost Curves of Taxed Emitters

NOx Tax in Sweden

Source: OECD

It’s ok to imagine new patterns of growth and innovation

Source: Merrill Lynch

Green Growth framework