Climate-Relevant Policy Assessment in the OECD and IEA

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Climate-Relevant Policy Assessment in the OECD
and IEA

• Jan Corfee Morlot, OECD
• Global and Structural Policy Division,
  Environment
• email jan.corfee-morlot_at_oecd.org

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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

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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
• .

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Environmental issues traffic lights

• 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

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Ancillary Benefits or Multiple Benefits of GHG
Mitigation
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1. Outlooks policy frameworks

• World Energy Outlook (2002)
• Reference Scenario Global energy-related CO2
  emissions grow by 70 over the period 2000-2030
• Alternative scenario in OECD countries,
  energy-related CO2 emissions are stabilised only
  towards the end of the period

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Key Factors Affecting Energy-Related Carbon
Emissions in OECD, 1970-2020
Source IEA and OECD

• GDP, TPES, CO2 increase relatively rapidly
• Carbon intensity declines slowly, levels off
  recent yrs
• Energy intensity steady decline

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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

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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)

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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

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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

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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
  (1994-1999 average).
• Source van Beers and de Moor (2001)

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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 20-30 billion p.a. (of which
  1/3 to support coal production)

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Implementing green tax reforms

• Environmentally related taxes in OECD countries
• 7 of total tax revenue (OECD average)
• 2.5 of GDP (range 1- 4.5)
• Price elasticities, including cross-price
  elasticities, high enough to justify broader use
  of taxes

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Revenues raised on environmentally related
tax-bases21 OECD Member countries, 1995
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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.

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New work on national policy instruments

• 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

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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

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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

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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

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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)

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6. Databases and Indicators

• OECD/IEA/EU database on environmentally-related
  taxes available at www.oecd.org/env/tax-database
• IEA database on energy-related climate policies
  multi-year data allow for some trend analysis

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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

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Policy Sector by Country, 1999-2001
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Policy Type by Region, 1999-2001
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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)

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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)

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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

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• More detailed information can be found on the
  OECD and IEA websites
• www.oecd.org/env/cc
• www.iea.org/envissu
• and in the OECD/IEA Information Paper
  Climate-relevant policy assessment in the OECD,
  IEA, NEA and ECMT