Towards Green Growth: Tracking Progress (SG/GG(2015)1) DRAFT BIAC COMMENTS 15 April 2015 BIAC is pleased to submit the following comments on the draft OECD green growth report and looks forward to remaining actively involved in green growth discussions going forward. Overarching comments Making green and growth mutually supportive: The OECD Green Growth Strategy correctly underlines that green and growth must go hand-in-hand. In line with this, we encourage the OECD to more clearly underline up-front that fostering growth remains fundamental for economic and social wellbeing and that green growth is not about curbing growth but about making the two concepts mutually supportive. Furthermore, consumption of material should not automatically be considered a green growth problem. The emphasis should be on efficient use of resources. Recognise business as a key partner: The report should underline upfront the importance of constructively involving the private sector in a pro-active framework for action. We encourage the OECD to further highlight throughout the report the importance of close cooperation with business as an important provider of solutions. Flexible bottom-up approaches, partnerships and concrete solutions developed by the private sector need to be considered an integral part of the strategy. Getting the policies right for green investment and open markets: To enable a successful transformation, a transparent and predictable policy framework must be in place to allow business to make the long-term and often capital-intensive investments that are required for greening growth. Some of the fundamental conditions include rule of law, sound science, life cycle informed decision-making, intellectual property rights protection, as well as open markets and trade, especially for cleaner technologies. Increasing trade and market access should be enhanced, so that greening economic activity can be seized as an opportunity. Especially in the currently difficult economic context, governments need to focus their attention on applying cost-effective instruments to achieve environmental goals, while supporting economic development. In line with the key messages in the newly updated Policy Framework for Investment, which includes a green growth chapter, the fundamental importance of investment should be more fully highlighted as a key condition. 1 P a g e
Underlining the importance of innovation: Innovation and green growth need to be pursued in the overall economy, and opportunities should be explored at all levels. The significant potential for reducing emissions by using and improving upon existing technologies that are not yet realized at their full capacity should be underlined. At the same time, the development of new approaches will be essential. This will require a policy framework that provides adequate incentives to create and stimulate adoption of the new underpinning technologies. While the private sector has a key role in the area of innovation and technology, research needs to be carried out using both public and private resources. Such a policy framework should also encourage the movement of research carried out in the public sector to private innovations. At the same time, public policies should be designed to take into account the potential and complexities of environmentally beneficial innovations as well as the incentive structure that encourages firms to innovate. The provision of an enabling framework for the private sector that facilitates the necessary financial flows and that encourages firms to address green growth challenges is essential. We also emphasize the importance of fostering open trade and investment liberalisation to facilitate the diffusion of technology. Foster integrated approaches: Overall policy coherence and close cooperation among Ministries, including with Finance Ministries, is crucial. In BIAC s view, the OECD as a multi-disciplinary organisation with excellent expertise in areas such as economics, environment, trade, investment, education, and competition, to name just a few, can make a significant contribution. At the same time, green growth cannot be seen in isolation from other global challenges. Links to issues such as energy access, food security, land use, water and waste management challenges, for example, should be more fully underlined. We also note that there are several other horizontal initiatives, such as NAEC, inequality, innovation, etc. For overall coherence, OECD should attempt to bring together key messages from different growth initiatives. Delivering green growth for all: Green growth should be seen in the broader context of sustainable development and a return to economic recovery and growth to ensure that the investments necessary for greening growth will come forward. For a green growth strategy to be effective, it needs to be attractive to both developed and developing countries, recognizing that there are common but differentiated realities in different parts of the world. Policies and targets need to be achievable, taking into account national circumstances and priorities, the global economic context, as well as poverty alleviation objectives. Furthermore, capacity building will be vital to ensuring the effectiveness of both technical and financial cooperation with developing countries. Going forward, we recommend increased outreach efforts and cooperation with key non-member countries. Further underline incentive-based approaches: While the text heavily focuses on regulation and pricing, tax incentives, incentives for R&D and the dissemination of environmental friendly technologies through trade and investment should be given increased attention. While there are differing views on the issue of carbon pricing, there is a basic need for business everywhere to operate in a stable and predictable policy environment. We also underline that pricing environmental externalities needs to be done in a credible way, acknowledging the challenges involved in setting the "right" price, paying due attention to the use of revenue and competitiveness impacts in a global environment. Existing mechanisms and legislation need to be taken 2 P a g e
into account to avoid market distortions for business already working with national or regional carbon pricing systems. Market distortions should be addressed. Additional specific comments on selected sections in the report Introduction Para 1 correctly underlines that green growth implies transforming current modes of production and consumption across the entire economy at a global scale so as not to simply displace unsustainable production and consumption patterns. BIAC very much supports this statement and calls upon the Organization to explore additional ways of working with major non-member economies in the area of green growth. Executive summary: Paragraph 5 highlights the need to better understand the opportunities and trade-offs of green growth policies, which is fundamental to progress. We underline the need to look at both benefits and challenges, including competitiveness concerns in a global environment. Paragraphs 6-8 focus mainly on pricing with little consideration of incentives for the development and diffusion of green technologies. The fact that increased taxes can lead to resources being taken away that could otherwise have been devoted for R&D and the development and diffusion of environmentally friendly technologies should also be taken into consideration. As mentioned above, the focus should not just be on pricing and regulation, but also increasingly on incentives and an overall pro-innovation policy framework. Paragraph 9 mentions potential distributional consequences, including labor market and household impacts. We would add to this the need to consider sectoral implications in a global context bearing in mind that as mentioned earlier in the report, it is not the objective to simply displace unsustainable production and consumption patterns. Chapter 1: A Framework to Align Economic and Environmental Goals Paragraphs 6 & 12: The steps to green growth should also specifically mention the need to foster investment opportunities (see also the new green growth chapter in the Policy Framework for Investment). Paragraphs 13 & 14: Good economic policy lies at the heart of green growth because a flexible, dynamic economy will best spur the transition - This recommendation should be further underlined in the executive summary and in the key recommendations. 3 P a g e
Para 17: Assess business concerns over potential competitiveness impacts. We strongly recommend deleting the footnote that industry largely overstates competitiveness impacts. This is an overly general and subjective statement. Chapter 2: Country Efforts To Implement Green Growth: Top 8 Challenges in Implementing Policy Frameworks for Green Growth Challenge No 1: As mentioned above, due consideration should be given to reducing resources for innovation or diffusion of advanced technologies in case of increased tax burden. Paragraphs 29 and 30 should be redrafted. Whilst the vast majority of the document speaks about efficient use of resources as one of the objectives of Green Growth, paragraph 30 focuses on decoupling GDP from material consumption. The recommendation should focus on efficient use of resources, and in line with this, paragraphs 29 and 30 of Chapter 2 should be re-aligned with the rest of the document. Paragraph 34: National accounts of mineral assets cannot be thought of as defined fixed stocks. Such account entries are highly changeable, mostly influenced by non-geological factors. Challenge No 5: In the section on subsidies, it should be underlined that to the extent possible they should be time-bound and carefully targeted. Appropriate incentives, if put in place in the right policy framework, can promote efficient use of energy resources and the market penetration of promising technologies that are in early stages of development. At the same time, all subsidies should be examined in a cost-benefit analysis in order to avoid discrimination and economic and environmental inefficiencies. As business operates to develop and deliver a new product or infrastructure often at a global level, a clear understanding of the way subsidies are designed and impact over the lifespan of various business activities is essential. Paragraph 53: Rather than focusing on resource-intensive, focus should be on GHG emitting. Challenge No. 7: Orienting innovation systems to advance green growth priorities: We highlight the fundamental importance of fostering innovation for addressing green growth challenges, and the need for a strong overall pro-innovation policy framework, including the protection of intellectual property, as indispensable prerequisites for green growth. Technology holds the key to make green growth deliver. It is therefore essential to promote the widespread adoption of available green technologies, while focusing attention on developing and deploying new solutions that will enable a more rapid transition to greener growth. Public policies should create the right market conditions to trigger innovation at the required scale, including through stable market frameworks, encouraging research cooperation, fostering the right skills and ensuring effective intellectual property protection. At the same time, the report should further underline that open trade and markets are indispensable for the diffusion and deployment of technologies. Building on the review of its Innovation Strategy, we encourage the OECD to keep innovation for green growth high on its agenda. 4 P a g e
Chapter 3: Revising the Green Growth Strategy Paragraph 17: Improving the application of cost-benefit analysis is an important consideration. Effective use of cost-benefit analysis is important to help inform policy decisions. Paragraph 34: What is the proposed definition or framework to identify "remaining stocks"? Due to changing demand and supply technologies, different types and grades of mineral occurrences become economically available to humans and no firm conclusion on remaining stocks can be drawn. 5 P a g e