OECD Climate-Relevant Policy Assessment in the OECD and IEA Jan Corfee Morlot, OECD Global and Structural Policy Division, Environment

OECD Overview of current work 1. Outlooks and policy frameworks 2. National policy reviews 3. Sectoral policy evaluations 4. Analysis of policy instruments 5. Beyond the OECD 6. Databases and indicators 7. Conclusions

OECD 1. Outlooks and policy frameworks …assess climate policies in the context of environment, energy and sustainable development policies Environment Outlook: –Aggressive policies are required for significant improvements in efficiency and penetration of new technologies –….

OECD Some air pollutants (lead, CFCs, NOx, SOx) Forest coverage in OECD regions Water use Surface water quality Hazardous waste & toxic emissions from industry Energy production & use Forest quality in OECD regions Agricultural pollution Over-fishing Greenhouse gas emissions Motor vehicle & aviation air pollution Biodiversity & Tropical forest coverage Chemicals in the Environment Environmental issues: traffic lights

SectorGHG Policy ObjectiveAncillary Benefit (examples) Electricity production Fuel switching away from oil and coal to fuels with low or no GHG emissions Improved local/regional air and water quality Improves human health Preserve eco-system and freshwater Limits forest die-back (due to acid rain) TransportLower emission vehicles and demand side management Lowers congestion in cities Improves human health costs from air pollution AgricultureMinimise use of fertilisersLowers nitrogen run-off from agricultural land, improving water quality Manufactur -ing Prioritise investments in energy and materials efficiency Improve resource efficiency of industrial operations Long term and often short term financial savings accrue; lower energy costs Ancillary Benefits or Multiple Benefits of GHG Mitigation

OECD 1. Outlooks & policy frameworks World Energy Outlook (2002): –Reference Scenario: Global energy-related CO 2 emissions grow by 70% over the period –Alternative scenario: in OECD countries, energy-related CO 2 emissions are stabilised only towards the end of the period

OECD GDP, TPES, CO2 increase relatively rapidly Carbon intensity declines slowly, levels off recent yrs Energy intensity steady decline Key Factors Affecting Energy-Related Carbon Emissions in OECD, Source: IEA and OECD

OECD 2. National policy reviews Environment Performance Reviews (EPRs): –peer reviews of OECD Member Countries progress towards achieving domestic environmental objectives and international commitments (similar to UNFCCC reviews) –Includes systematic review of climate policies –4 countries per year; second cycle started in 2001

OECD 2. National policy reviews (cont) Special sustainable development chapters of OECD Economic Surveys –focus on cost-effectiveness of policies –climate as selected issue for review IEA Country Reviews –6 IEA Member countries reviewed annually –includes review of climate/energy policies and trends (energy/carbon intensity)

OECD 3. Sectoral policy assessment Energy policy (IEA): renewables, nuclear, gas, coal, electricity Sustainable construction and buildings Environmentally sustainable transport Sustainable consumption and waste Industry/manufacturing Agriculture

OECD 4. Policy instruments: making markets work for SD and Climate Phase out (environmentally harmful) subsidies Make greater use of environmental taxes; remove distortionary tax provisions Set up tradable permits systems for GHG emission

OECD Phasing-out subsidies Environmentally harmful subsidies in OECD countries are estimated at $ 400 billion in 2000, 1.9 % of GDP. –Source: OECD (2001) Non-OECD countries: $ 340 billion, 6.3 % of GDP ( average). –Source: van Beers and de Moor (2001)

OECD Phasing-out subsidies (cont) Agriculture: 310 billion $, 1.3% OECD GDP (2001) –Induce intensive farming, conversion of forest and wetlands into agricultural land, overuse of fertilisers and pesticides, over production (EU CAP) Energy production: billion $ p.a. (of which 1/3 to support coal production)

OECD Implementing green tax reforms Environmentally related taxes in OECD countries: –7 % of total tax revenue (OECD average) –2.5 % of GDP (range %) Price elasticities, including cross-price elasticities, high enough to justify broader use of taxes

OECD Revenues raised on environmentally related tax-bases 21 OECD Member countries, 1995

OECD Removing distortionary tax provisions Tax rate variations or exemptions such as: –under-taxing transport diesel fuel –under-taxing coal –tax free aviation fuel (and airlines tickets) –almost complete energy tax exemption to the industrial sector Tax exemptions for specific activities: more than 1000 recorded in the OECD tax database.

OECD OECD Assessments Environmentally-related taxes –looks at obstacles to a broader use of tax instruments, including competitiveness issues (e.g. in the steel sector) Environmentally-harmful subsidies –comprehensive review and quantification in different sectors according to their environmental harm VA and emission trading in the policy mix New work on national policy instruments

OECD GHG trading systems Linking national systems Benefits to linking: it broadens abatement opportunities, increases market liquidity, reduces costs Few technical barriers to linking Without design solutions, linking can reduce environmental performance of systems Some design solutions required to remove barriers, though these will involve additional administrative costs

OECD New work on emission trading OECD and IEA work including work of the Annex I Expert Group –develop strategic guidelines on good practice and ex-post evaluations –share information on (and analysis of) recent developments of domestic trading policies –study issues related to linkages between domestic systems –assess transition issues: Kyoto/global markets

OECD 5. Beyond the OECD Work on PAMs in the Annex I Expert Group: –Assessment of PAMs by sector (energy supply, transport, industry workshops) –Review technology-related PAMs Strengthening institutions in EIT countries –Implementation of Convention & Protocol –Enforcement of environmental policies –Environmental finance mechanisms

OECD 5. Beyond the OECD (cont) Development Co-operation: Integrating the Rio Conventions Jt. Project on Development and Climate: –How to enhance adaptation through development plans and development co-operation projects Benefits of climate policies –a framework to assess long term direct and ancillary benefits Technology Co-operation : CTI and IEA Implementing Agreements Adverse effects of changes in fossil fuel export markets (IEA)

OECD 6. Databases and Indicators OECD/IEA/EU database on environmentally-related taxes available at IEA database on energy-related climate policies: multi-year data allow for some trend analysis

OECD Dealing With Climate Change: Policies and Measures in IEA Member Countries Since 1999, IEA has continually collected, reviewed and classified information on energy-related greenhouse gas mitigation measures. With over 800 records, the Dealing with Climate Change project is one of the most extensive sources of policy information on the subject

OECD Policy Sector by Country,

OECD Policy Type by Region,

OECD New work on PAMs databases OECD/IEA/EU database on economic instruments (e.g. taxes, tradeable permits...) available soon New IEA searchable web-site on all energy- related climate change policies in countries –including renewable energy policies IEA analyses of specific technology and fuel options (including renewable energy, natural gas, and carbon capture and storage)

OECD 7. Conclusions: PAMs in OECD Significant action to date in Member countries Some success in de-coupling (e.g. c-intensity) OECD emissions still on the rise - much remains to be done OECD and IEA have a mandate to assess performance and promote good practice Need to learn together and begin to look beyond OECD for lessons (e.g. Annex I and non-Annex I)

OECD 7. Conclusions: Role of FCCC Subsidiary Bodies SBs play a unique role to: Assess progress through national communications Review key developments, emission trends, drivers and key indicators Identify and share lessons amongst all Parties

OECD More detailed information can be found on the OECD and IEA websites: – – …and in the OECD/IEA Information Paper Climate-relevant policy assessment in the OECD, IEA, NEA and ECMT