International Workshop on "Foreign Direct Investment and Climate Change: New Research Directions" (7-8 October, Venice)

Transcription

1 DEFINING AND MEASURING GREEN FDI: an OECD exploratory review of existing work and evidence International Workshop on "Foreign Direct Investment and Climate Change: New Research Directions" (7-8 October, Venice)

2 The context: OECD Green Growth Strategy The OECD Green Growth Strategy and its pillar on green growth indicators. Horizontal work on green investment t (corporate practices, policy framework for investment). Interface of several OECD policy communities: Working Party of the Investment Committee; Working Group on International Investment Statistics; Working Party on Climate, Investment and Development. Demand for an exploratory study summarizing work to date, investigating g the practicability of various possible definitions of green FDI, surveying available statistics and identifying associated investment policy restrictions. OECD 2

3 The big picture: why measuring green FDI? FDI can play an important role in support of the diffusion of environmentally-friendly technologies Countries have made various pledges in support of climate change actions but also biodiversity it - that t will require greater mobilisation of private resources Tools are necessary to monitor progress with green growth (e.g. performance of policy to lever private investment) However, so far: Limited information on the scale of green investment flows, incl. green FDI. It is not clear what «green» investment may mean. OECD 3

4 Scale of FDI and ODA ($ bn, OECD and World Bank) FDI, net inflows, Developing countries FDI, net inflows, World Total Net ODA OECD 4

5 Defining green in other areas Areas Objectives Scope of green Data collection Limitations ODA Track donors commitments in Aid to environment, water & sanitation, Specific markers in standard reporting Self assessment and declaration environment area, renewable energy, template of donors + under Rio Rio markers: biodiversity, sector classification Conventions desertification, CC mitigation & adaptation Trade Support trade 3 groups of EGS: pollution Trade registers are the Product liberalisation in EGS management, cleaner technologies and main source for trade in EGS data. Follow a approach leaves out the general products, resource management product classification greening of processes Euros Support compliance Goods, services and Builds on existing No direct tat with environmental technologies serving statistics & additional correspondence EGS Objectives and environmental protection questionnaires to with FDI Sector consistency of data & resource management enterprises classification INV Index collection efforts Evaluate and inform markets on performance of green companies purposes Renewable energy, energy efficiency, waste reduction & water, production of low impact material and products Computed by financial advisory services based on various methodo using company info Domestic & foreign investment are not distinguished OECD 5

6 Defining «green» FDI UNCTAD (2008 & 2010): 1. that which goes beyond national environmental standards, i.e. which is compliant plus ; 2. that which is the direct production of environmental goods and services in host countries OECD initial work: 1. FDI in EGS sectors; 2. FDI in environmental-damage mitigation processes, i.e. use of cleaner and/or more energy-efficient technologies. OECD 6

7 Estimating the magnitude of «green» FDI No readily available statistics matching part 1 or 2 of the definition: What to include in part 1? Renewable energy, waste treatment, manufacturing of environmental goods How to assess the environmental outcome of FDI in part 2? => Proxies and upper bound of green FDI: 1) FDI in renewable energy & environmental goods and services => imperfectly proxied by FDI in Electricity, Gas and water 2) Upper bound (environmentally-relevant relevant FDI, i.e. In Agriculture, Mining, Manufacturing, Construction and Transport). OECD 7

8 Coverage of Green Energy, Various Sources IEA UNFCCC U.S. DOE India China S&P New Energy Finance Renewable Energy Policies Database Special Report Renewable Energy Sources U.S. Recovery Act: Production Tax Credits Non- Conventional Energy New Energy Sources a Clean Energy Index / Alternative Energy Biomass X X X X X X X Geothermal X X X X X X X Clean Energy b Hydro X X X X X X X Solar X X X X X X X Wind X X X X X X X Ocean X X X X Waste X X Hydrogen X c X d X Co-gen X e X Sources: IEA: UNFCCC: India: U.S. DOE: China: the-guidance-of-foreign-investment-industries; foreign investment industries; S&P: www2.standardandpoors.com/spf/pdf/index/sp_global_clean_energy_index_methodology_web.pdf; New Energy Finance: OECD 8

9 Narrow and Broad boundaries of green FDI (Flows, USD bn) Developed Developing World Developed Developing World countries countries countries countries Total Environmentally relevant sectors 58.4 (36.1%) 22 (63.6%) 80.4 (43.1%) 305 (28.8%) (46.1%) (41%) (% of total FDI) Agriculture Mining Manufacturing Construction Transport Energy, Gas & Water (rough estimate of FDI in EGS) (0.5%) (3.4%) (1.1%) (3.2%) (1.9%) (2.8%) Sources: CEPII FDI database ( i ht 2005 ESI database ( OECD 9

10 Estimates of the Potentially Green Share of Environmentally Relevant FDI, 2004 Stock of Environmentally- Relevant FDI in CEPII Database (USD Billions) Green Share Based on Environment Regulatory Stringency Green Share Based on Energy Efficiency Mining % 48.9% Manufacturing % 50.3% Electricity, Gas and % 42.6% Water Agriculture % 54.4% Construction % 3% 41.6% Total % 49.6% OECD 10

11 Restrictions on foreign firms Restrictions may be regulatory (de jure) or implicit (de facto). Regulatory restrictions: Limits on foreign ownership, Screening based on national interest considerations, Operational limitations such as domestic content requirements, and nationality stipulations for board members or managers. Restrictions indicators based on the OECD Regulatory Restrictiveness Index and World Bank (2010) Investing Across Borders indicators. OECD 11

12 Severity of restrictions based on restrictiveness index OECD 12

13 In most countries regulatory restrictions are low for both measures of green FDI, and generally below the economy-wide average level of restrictiveness. Exceptions include countries where electricity generation, including that with renewable energy, is totally or partially restricted to foreign investors. Countries with high economy-wide restrictions also have high restrictions on environmentally-relevant FDI. Ex: Asian countries, except of India OECD 13

14 Conclusions Need for better information and indicators on the scale and trends of private finance in support of green policy objectives (FDI) Feasible to identify FDI flows in a number of EGS industries, i i.e. renewable energy, water and wastewater treatment, waste management and remediation activities, contingent on countries making publically available more detailed information on categories of current FDI classification (ISIC). In absence of information on technology used & outcomes of FDI on the environment, i.e., energy-intensity, carbon footprint, waste management, air and water pollution, etc., it is difficult to estimate the level of 2 nd part of definition => case studies, empirical work. OECD 14

15 THANK YOU Contact: OECD 15