BETTER POLICIES FOR A SUCCESSFUL TRANSITION TO A LOW-CARBON ECONOMY Rintaro Tamaki Deputy Secretary-General, OECD International Forum for Sustainable Asia and the Pacific (ISAP)1 Yokohama, July 1 Four key policy approaches for a low-carbon transition 1. Put a price on carbon emissions. Reform fossil fuel subsidies. Boost green infrastructure investment. Better align policies to overcome regulatory and market rigidities 1
1. Carbon Pricing: Existing, emerging and potential ETS s Source: World Bank (1), Mapping Carbon Pricing Initiatives, Washington DC Implicit carbon pricing Revenues from environmentally-related taxes, as % of GDP (11) Other Motor vehicles Energy % of GDP 1-1 Mexico United States Chile Canada New Zealand Spain Japan Australia* France Slovak Republic Poland* Switzerland Belgium Iceland Germany Norway Portugal Luxembourg Korea Ireland United Kingdom Sweden Austria Hungary Estonia Italy Greece Slovenia Czech Republic Finland Israel Turkey Netherlands Denmark *1 figures; ** 9 figure Source: OECD-EEA Database of Environmental Policy Instruments [www.oecd.org/env/policies/database] Weighted average Argentina ** Brazil China Colombia Costa Rica * Dominican Republic * Guatemala * India * Peru * Uruguay * South Africa
USD billion (current) 9 8 7 6 1. Fossil Fuel Subsidy Reform Needed: Support to fossil fuels in OECD countries By type of fuel Petroleum, 71% (11) Coal, 1% (11) Natural gas, 18 % (11) 6 7 8 9 1 11 USD -9 billion/year USD billion (current) 9 8 7 6 1 By measure Consumer support, 8% (11) Producer support, 16% (11) General services support 6 7 8 9 1 11 Note: Based on arithmetic sum of the individual support measures identified for all OECD member countries. It includes the value of tax relief measured under each jurisdiction s benchmark treatment. The estimates do not account for interactions that may occur if multiple measures were considered simultaneously. Source: OECD (1), Inventory of Estimated Budgetary Support and Tax Expenditures for Fossil Fuels 1, OECD Publishing.. Green Infrastructure Investment: A Green Investment Policy Framework 1. Strategic goal setting and policy alignment. Promote green business and consumer behaviour. Enabling policies and incentives for LCR investment. Financial policies and instruments. Harness resources and build capacity for an LCR economy Source: Corfee-Morlot et al., 1. 6
Landscape of investment financing sources for clean energy in the average OECD country -1 (illustrative example, varies by country). In non- OECD the public sector typically accounts for / and private sector 1/. Financing Sources Private Sector Financial Sector % 6% 9% Long Term Loans / 1% Short Term % 1/ Clean Energy Financing Sources Public Sector Sources (incl. Dev. Banks) Private Sector Sources Corporate On- Balance Sheet (utilities + project developers) Financial Sector Bank asset financing Source: OECD Analysis based on OECD (1, forthcoming); Kaminker et al. (1) Institutional Investors and Green Infrastructure Investments: Selected Case Studies; OECD (1) The Role of Institutional Investors in Financing Clean Energy; G/WB/FSB/OECD (1) European Bank Deleveraging and Global Credit Conditions; G/OECD (1) The Role of Banks, Equity Markets and Institutional Investors in Long-Term Financing for Growth and Development; BNEF database. Other nonbank sources including institutional investors 7 $8 trillion in assets under management by institutional investors in the OECD (1) 1% of pension fund assets invested directly in infrastructure Investment funds Insurance companies Pension funds USD trillions 1 1 An even smaller portion invested directly in green infrastructure Public Pension Reserve Funds 1 Foundations, endowments, etc Note: Book reserves not included. Pension and insurance companies' assets include assets invested in mutual funds, which may be also counted in investment funds. (1) Public Pension Reserve Funds (PPRFs) e.g. Government Pension Fund Norway or Unites States' Social Security Trust Fund. () Other forms of institutional savings include foundations and endowment funds, non-pension fund money managed by banks, private investment partnership and other forms of institutional investors. () Source: OECD Large Pension Fund Survey (1) Source: OECD Global Pension Statistics, Global Insurance Statistics and Institutional Investors databases, and OECD estimates. 8
. Better Policy Alignment needed: Are governments sending the right signals? Sources: OECD (1), Inventory of Estimated Budgetary Support and Tax Expenditures for Fossil Fuels; IEA (1), World Energy Outlook; IEA (1), Tracking Clean Energy Progress Report; OECD (1, forthcoming). 9 Thank you very much! www.oecd.org/env/cc