Simple signals in a complex world Indicators for sustainable development Knut H. Alfsen OECD Seminar

Issues to be covered in this presentation Natural resource and environmental accounting: Some history – and lessons we learned Indicators for sustainable development - a Norwegian perspective A proposed indicator set Is Norway sustainable? Where do we go from here?

Some history: From natural resource and environmental accounting  indicators for sustainable development 1972 – Ministry of Environment established 1974 – Natural resource and environmental accounting and budgeting (Energy, forest, fish, minerals, land, air, water, …) 1986 – ”The mountain that gave birth to a mouse” 1987 – WCED = The Brundtland commission 2003 – Develop indicators for sustainable development 2005 – Proposed indicator set 2006 – System up and running?

What did we learn? Many of the accounts were never used by decision makers. Accounts for energy and air were utilised, but then mainly as input to economic models. Thus: ”Plug and play” in relation to decision making processes is essential. Policy relevance is essential. Easily understandable information.

National plan for sustainable development (NA 21) in Norway Developed by state secretaries from several ministries under the leadership of The Ministry of Finance. Presented in the National Budget for  Requested that indicators for sustainable development should be developed by a small expert group.

Mandate part I: Aim and principles Three concerns: The indicators should indicate status and point to challenges in securing a sustainable development. The indicators should help focus on policies that will secure an efficient use of resources. National wealth should be considered as a potentially important indicator.

Mandate part II: Suggestions for issues 1. Climate, ozone and transboundary air pollution 2. Biodiversity and cultural heritage 3. Natural resources 4. Dangerous chemicals (health and the environment) 5. Sustainable economic development 6. Social dimensions of direct relevance to sustainable development

Why indicators for sustainable development: To help policies securing sustainable development Sustainability – three pillars: Economic, environmental and social dimensions Sustainable development: Non-declining welfare in the long term (output of the system) A less ambitious aim: To preserve the resource base in the long term (input to the system)

The resource base = National wealth Economic resources Real capital (buildings, infrastructure, …) Financial capital (petroleum fund, …) Natural resources Natural capital (petroleum, forest, fish, water, …) Environmental capital (air, water, soil, undisturbed nature, …) Social resources Human capital (knowledge, …) Social capital? (institutions, norms, trust,…)

The committee's perspective Capital approach: The committee has applied a capital approach in the development of the indicator set: Our welfare today and in future may be considered as return on our total national wealth. Policies that ensure a sensible management of the total national wealth are a prerequisite for a sustainable development.

Is the National wealth a good indicator? In principle – yes, but: Problem 1: Substitutability– strong versus weak sustainability Problem 2: Valuation Problem 3: Complexity of the systems Thus: Need several indicators to ”capture” the National wealth

In conclusion: Indicators for sustainable development should: Reflect the value of our national wealth Be intuitively understandable Be internationally comparable Be relevant to policy makers Note: The indicators should also as far as possible be applicable at the local level.

The indicator set

Is Norway sustainable? The indicators show a picture of Norway with few acute problems, but with challenges concerning: future greenhouse gas emissions public finances exclusions from the labour market, and global income equalization through increased trade with the least developed countries. The indicators also show that it is particularly important to manage our human resources in a proper way.

1. Greenhous gas emission Greenhouse gas emissions in Norway rose by 2 per cent from 2002 to The overall rise since 1990, the base year for the Kyoto Protocol, is 9 per cent. The rise in 2003 was almost entirely due to an increase in CO 2 emissions. This in turn is explained by higher emissions from the oil and gas industry on the continental shelf and onshore. High electricity prices in 2003 resulted in a sharp rise in fuel oil consumption, which in turn resulted in substantial CO 2 emissions. Emissions from the use of autodiesel in cars and marine gas oil by domestic shipping are also rising.

9. Sustainable economic development: Sources for income The net national income (NNI) may be considered the market-based yield of our national wealth. Variations in NNI over time may therefore be considered an indication of changes in the wealth. The indicator shows that human capital and environmental capital are of utmost importance for our economic welfare. The importance of the exploitation of non- renewable resources, mainly oil and gas, has increased strongly since 1985, and is now nearly half of the yield from produced assets.

14. Rejections from the labour force: Disabled and long term unemployed For most people, employment is an important part of social life and important for a feeling of well-being and the feeling of being included and appreciated. This is true although in Norway there are rather well established social security arrangements for those that for different reasons are excluded from the labour market.In the economic recession at the beginning of the 1990s a rather high percentage were excluded from the labour market. This applied to both long-term unemployed persons and disability pensioners. After a passing decrease, the percentage has increased again to 11 per cent of the population in 2003.

12. Public finances: A generational account The generational account is a calculation of whether today's financial policy is sustainable in the long-term. If this is to be the case, public sector expenses must, over time, balance public sector income. The calculated need for tightening of public finances, as estimated in the generational accounts, has increased over time, partly as a result of altered assumptions concerning the development of life expectancy. The latest estimates of the need for tightening of public finances are between 5 and 6 per cent of GDP for 2004.

15. Poverty reduction: Trade with the least developed countries In the UN's Millennium Goals, adopted in year 2000, the most important target is the reduction of global poverty. In 2003, imports from the least developed countries (LDC) in Africa constituted just below 0.1 per cent of total import, the lowest level for more than 10 years. The Norwegian trade with African LDC-countries has been dominated by imports of used ships from Liberia and must be seen in connection with Norwegian shipowners' use of the international ship's register there. If we disregard this, the imports from the other 32 LDC-countries in Africa have been very modest and rather stable in the whole period.

The indicators show: That the sustainability in Norway is mostly threatened by the development of ”human systems”/”societal constructions”.

Where do we go from here? There is a strong need for international coordination of national indicator sets. A clear role for OECD in cooperation with The World Bank and UN. There should be more focus on external impacts of the nation state. A global indicator set for sustainable development is needed.

Thank you for your attention