Climate and economic rationality

OECD Environment Ministers' Meeting, Paris, 28-29 April 2008

Lorents Lorentsen ©OECD

How to be green and competitive was the centre of attention when environment ministers of OECD countries met at the end of April for the first time in four years. How to fight climate change and maintain competitiveness is a question that concerns many countries outside the OECD too, and the governments of four candidate countries for OECD membership–Chile, Estonia, Israel and Slovenia–participated at the conference, as did Brazil, China, Indonesia and South Africa, four countries with whom the OECD is strengthening its relations in a programme of “enhanced engagement”.

A new departure at this well-attended meeting was to invite business, labour and non-government organisations to the actual ministerial meeting, rather than a mere consultation in the margins of the meeting.

Four years ago sustainable development was the word on most people’s lips, and it was not evident that only a couple of years later climate change would become the main dimension of this challenge. It also has a bearing on other priority issues, including biodiversity loss, health impacts of pollution and water scarcity/shortage.

At the April 2008 meeting, environment ministers stressed that “climate change is not just an environmental challenge, but also an economic challenge”. In fact, moving towards a low-carbon society needs to be a process involving all areas of government, and this demands co-ordination and co-operation among the various ministries of finance, agriculture, transport, energy, industry, trade, development co-operation and so on.

Environment ministers appealed to colleagues in finance, economy and trade ministries as those responsible for getting the financial incentives right–taxes, subsidies, and tariffs, etc–to strengthen the use of market-based approaches in moving towards a global carbon price and to keep the costs of action manageable. The potential role of sectoral approaches was also mentioned.

Local authorities also had a major role to play, ministers said, and businesses and trade unions will also need to be key partners in addressing climate change.

Climate change is a challenge, but also an opportunity, and ministers said that some countries that move early can reap competitive advantages, in areas like renewable energy technologies. On the other hand, ministers also warned about the costs of waiting too long, or pursuing “business as usual” policies. Climate change is a reality, and inaction will merely delay costs, was the common view.

The April meeting echoed the main findings of OECD Environmental Outlook to 2030 by emphasising the economic aspects of climate change and other environmental challenges. “As the evidence laid out in OECD Environmental Outlook to 2030 shows, it is economically rational to implement ambitious climate policies, especially when we take into account co-benefits”, says Lorents G. Lorentsen, chief of the OECD Environment Directorate. “Countries need to put in policies to encourage green energy and buildings now in particular because new investments in energy infrastructures and building construction around the world over the next 10-20 years could lock in their environmental performance for decades to come,” he added.

Public and private sector financing will need to be mobilised, not least to encourage technological development, deployment and transfer to poorer countries. Environment ministers welcomed the idea of an international funding mechanism to help distribute the costs of action, and asked finance and economy ministers to take the lead in developing one.

For more information, contact Kumi.Kitamori@oecd.org
See www.oecd.org/envmin2008 and www.oecd.org/environment/outlookto2030
Order OECD Environmental Outlook to 2030 at www.oecdbookshop.org

©OECD Observer No 267 May-June 2008




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