Aligning policies for a low-carbon economy.

242 Pages·2015·6.65 MB·English

by  OECD

Aligning Policies for a Low-carbon Economy
This report produced in co-operation with the International Energy Agency (IEA), the International Transport
Forum (ITF) and the Nuclear Energy Agency (NEA) identifi es the misalignments between climate change
objectives and policy and regulatory frameworks across a range of policy domains (investment, taxation,
innovation and skills, trade, and adaptation) and activities at the heart of climate policy (electricity, urban Aligning Policies
mobility and rural land use).
Outside of countries’ core climate policies, many of the regulatory features of today’s economies have been
for a Low-carbon Economy
built around the availability of fossil fuels and without any regard for the greenhouse gas emissions stemming
from human activities. This report makes a diagnosis of these contradictions and points to means of solving
them to support a more effective transition of all countries to a low-carbon economy.
Contents
Chapter 1. Core climate policies and the case for policy alignment
Part I. Reforming cross-cutting policies
Chapter 2. Scaling-up low-carbon investment and fi nance
Chapter 3. Implementing climate-friendly taxation practices
Chapter 4. Delivering innovation and skills for the low-carbon transition
Chapter 5. Removing international trade barriers
Chapter 6. Diagnosing misalignments for a more resilient future
Part II. Aligning policies in specifi c activities
Chapter 7. Reframing investment signals and incentives in electricity
Chapter 8. Opting for low-carbon urban mobility
Chapter 9. Strengthening incentives for sustainable land use
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Consult this publication on line at http://dx.doi.org/10.1787/9789264233294-en. o
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Aligning Policies
for a Low-carbon Economy
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Pleasecitethispublicationas:
OECD/IEA/NEA/ITF(2015),AligningPoliciesforaLow-carbonEconomy,OECDPublishing,Paris.
http://dx.doi.org/10.1787/9789264233294-en
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3
FOREWORD –

Foreword
At the Ministerial Council Meeting in May 2014, ministers and representatives of
OECD member countries and the European Union invited the OECD to work with the
International Energy Agency (IEA), the International Transport Forum (ITF) and the
Nuclear Energy Agency (NEA) “to continue to support the UNFCCC negotiations and to
examine how to better align policies across different areas for a successful economic
transition of all countries to sustainable low-carbon and climate-resilient economies and
report to the 2015 OECD Ministerial Council Meeting.” These areas include economic,
fiscal, financial, competition, employment, social, environmental, energy, investment,
trade, development co-operation, innovation, agriculture and sustainable food production,
regional as well as urban, and transport policies.
This report on Aligning Policies for a Low-carbon Economy responds to that request
by identifying where existing policy and regulatory frameworks are at odds with climate
policy, i.e. where existing policies may make climate policy less effective than it could be
otherwise. It reflects the initial diagnosis on where and how existing policy and
regulatory frameworks may not be aligned with a low-carbon economy.
ALIGNING POLICIES FOR A LOW-CARBON ECONOMY © OECD 2015
4
– ACKNOWLEDGEMENTS

Acknowledgements
This report is the product of a collaborative effort between the Organisation for
Economic Co-operation and Development (OECD), the International Energy Agency
(IEA), the Nuclear Energy Agency (NEA) and the International Transport Forum (ITF).
It has been overseen by OECD Deputy Secretary-General Rintaro Tamaki and co-
ordinated by Richard Baron, Project Co-ordinator, and Virginie Marchal. Amelia Smith
provided continuous editorial and secretarial support. The team is grateful to Simon
Upton, for his very useful guidance and leadership throughout the project, to Andrew
Prag who drafted the chapter on trade and provided valuable advice on the rest of the
report, and to Michael Mullan for the chapter on adaptation.
The authors would also like to thank particularly the following colleagues across the
four organisations for their input throughout the project: Anthony Cox, Nick Johnstone,
Tomasz Kozluk, Alexis Robert, Ron Steenblik and Kurt Van Dender (all from the
OECD), Philippe Benoit (IEA), Jan Keppler (NEA) and Stephen Perkins (ITF). The team
is also indebted to Sarah Finke for guiding the publication through the OECD approval
process. Government officials from different ministries across OECD countries, and
stakeholder representatives, in particular business (co-ordinated through the Business and
Industry Advisory Committee of the OECD), and trade unions (co-ordinated through the
Trade Union Advisory Committee to the OECD) provided extensive feedback on the first
draft of the report during and after a consultation seminar organised in February 2015 at
OECD headquarters.
The main authors of Aligning Policies for a Low-carbon Economy were:
Chapters Main authors
Executive Summary Richard Baron and
Virginie Marchal
Chapter 1: Core climate policies and the case for policy alignment Richard Baron
Chapter 2: Scaling-up low-carbon investment and finance Virginie Marchal
Chapter 3: Implementing climate-friendly taxation practices Richard Baron with Žiga
Žarnic
Chapter 4: Delivering innovation and skills for the low-carbon Richard Baron and Nick
transition Johnstone
Chapter 5: Removing international trade barriers Andrew Prag
Chapter 6: Diagnosing misalignments for a more resilient future Michael Mullan
Chapter 7: Reframing investment signals and incentives in electricity Richard Baron
Chapter 8: Opting for low-carbon urban mobility Virginie Marchal
Chapter 9: Strengthening incentives for sustainable land use Virginie Marchal

ALIGNING POLICIES FOR A LOW-CARBON ECONOMY © OECD 2015
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ACKNOWLEDGEMENTS –

Many other colleagues provided comments and suggestions and their contributions
are gratefully acknowledged. They include: from the Centre for Entrepreneurship, SMEs
and Local Development: Nathalie Cliquot; from the Centre for Tax Policy and
Administration: Johanna Arlinghaus; Florens Flues, Michelle Harding; from the
Development Co-operation Directorate: Jan Corfee-Morlot and Stephanie Ockenden;
from the Directorate for Financial and Enterprise Affairs: Karim Dahou, Raffaele Della
Croce, Despina Pachnou, Cristina Tebar-Less, David Pinkus, Joel Paula, Gert Wehinger;
from the Economics Department: Silvia Albrizio, Boris Cournède, Alain De Serres,
Balázs Egert, Christian Kastrop, Giuseppe Nicoletti and Mauro Pisu; from the Directorate
for Employment, Labour and Social Affairs: Alessandro Goglio and Paul Swaim; from
the Environment Directorate: Shardul Agrawala, Geraldine Ang, Nils Axel Braathen,
Gregory Briner, Simon Buckle, Jean Chateau, Christopher Kaminker, Kumi Kitamori,
Nicolina Lamhauge, Walid Oueslati, Robert Youngman and Žiga Žarnic, who also helped
on the organisation of an international seminar dedicated to this project; from the
International Energy Agency: Heymi Bahar, Manuel Baritaud, Adam Brown, Pierpaolo
Cazzola, Laura Cozzi, Davide D’Ambrosio, John Dulac, Anselm Eisentraut, Paolo
Frankl, Jean-François Gagné, Timur Guel, Christina Hood, Fabian Kesicki, Ellina Levina,
Simon Mueller, Cédric Philibert, Sylvia Spruck, Laszlo Varro and Matthew Wittenstein;
from the International Transport Forum: Aimée Aguilar-Jaber, Olaf Merk and José
Viegas; from the Nuclear Energy Agency: Thierry Dujardin; from the Public Governance
and Territorial Development Directorate: Rudiger Ahrend, Rolf Alter, Charles Baubion,
Andrew Davies, Claire Charbit, Isabelle Chatry, Ronnie Downes, Catherine Gamper,
Daniela Glocker, Stéphane Jacobzone, Céline Kauffmann, Karen Maguire, Tadashi
Matsumoto, Marissa Plouin, William Tompson and Paolo Veneri; from the Directorate
for Science, Technology and Innovation: Mario Cervantes, Colin Webb, Kirsten Wiebe,
Andrew Wyckoff, Norihiko Yamano; from the Trade and Agriculture Directorate: Ken
Ash, Morvarid Bagherzadeh, Jonathan Brooks, Dimitris Diakosavvas, Jared Greenville,
Guillaume Gruère, Julien Hardelin, Ada Ignaciuk, Franck Jésus, Jean Le Cocguic, Jehan
Sauvage, Frank Van Tongeren and Martin Von Lampe. The report also benefited from
comments of external reviewers: Michael Jacobs and James Rydge (New Climate
Economy), and Ian Cochran (CDC Climat Recherche).
Fiona Hinchcliffe and Jennifer Allain provided editorial support, and Janine Treves,
Katie Kraig-Ernandes, Catherine Bremer, Shayne MacLachlan and Stéphanie Simonin-
Edwards supported the publication and communication processes.
Japan and Korea provided financial contributions to the project.
ALIGNING POLICIES FOR A LOW-CARBON ECONOMY © OECD 2015

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TABLE OF CONTENTS –

Table of contents

Acronyms and abbreviations .............................................................................................................. 11
Preface................................................................................................................................................... 15
Executive summary .............................................................................................................................. 17
Chapter 1 Core climate policies and the case for policy alignment ................................................ 19
Facilitating the low-carbon transition ................................................................................................. 23
Core climate policies: Principles and implementation ....................................................................... 28
Notes .................................................................................................................................................. 40
References .......................................................................................................................................... 41
Part I Reforming cross-cutting policies ........................................................................................... 45
Chapter 2 Scaling-up low-carbon investment and finance ............................................................. 47
The low-carbon investment challenge ................................................................................................ 49
The enabling environment: Aligning investment policies with climate goals ................................... 54
Channelling all sources of finance to low-carbon infrastructure ........................................................ 58
Enhancing climate risk disclosure by corporations and investors ...................................................... 61
Mainstreaming climate change goals in public spending ................................................................... 64
Notes .................................................................................................................................................. 72
References .......................................................................................................................................... 73
Chapter 3 Implementing climate-friendly taxation practices ......................................................... 79
The taxing issue of low-carbon economies ........................................................................................ 81
How energy subsidies and taxes undermine climate change action ................................................... 82
Beyond energy taxes: Tax signals hindering low-carbon choices ...................................................... 86
Where next for tax revenues and budgets in the context of lower fossil energy use? ........................ 89
Notes .................................................................................................................................................. 91
References .......................................................................................................................................... 92
Chapter 4 Delivering innovation and skills for the low-carbon transition .................................... 95
Unpacking innovation policy for the low-carbon transition ............................................................... 97
Putting the labour markets at work for the low-carbon transition .................................................... 106
Policy misalignments restricting innovation in industry .................................................................. 109
Notes ................................................................................................................................................ 116
References ........................................................................................................................................ 116
Chapter 5 Removing international trade barriers .......................................................................... 123
Greenhouse gas emissions and international trade ........................................................................... 125
Potential misalignments with international trade rules .................................................................... 126
Misalignments arising through domestic policies related to trade ................................................... 129
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– TABLE OF CONTENTS

Fuelling international trade: Maritime shipping and aviation .......................................................... 134
Resilience of the modern trade system to climate change ................................................................ 136
Notes ................................................................................................................................................ 137
References ........................................................................................................................................ 138
Chapter 6 Diagnosing misalignments for a more resilient future ................................................ 143
All countries will be affected by climate change ............................................................................. 145
Building resilience to climate impacts ............................................................................................. 147
References ........................................................................................................................................ 152
Part II Aligning policies in specific activities.................................................................................. 155
Chapter 7 Reframing investment signals and incentives in electricity ........................................ 157
Electricity in decarbonisation ........................................................................................................... 159
How today’s market structures risk hindering the decarbonisation of electricity ............................ 163
Misalignments in fast-growing and often regulated electricity systems .......................................... 171
Resilience of energy systems to climate change .............................................................................. 173
Notes ................................................................................................................................................ 176
References ........................................................................................................................................ 178
Chapter 8 Opting for low-carbon urban mobility .......................................................................... 181
The decarbonisation challenge for urban transport .......................................................................... 183
Complementarities across policy sectors, programmes and levels of government .......................... 187
Remove barriers to action by cities .................................................................................................. 189
Removing bottlenecks to energy efficiency and technology breakthrough ..................................... 197
References ........................................................................................................................................ 201
Chapter 9 Strengthening incentives for sustainable land use ....................................................... 205
Land use could be key for tackling climate change ......................................................................... 207
Align food production and low-carbon goals ................................................................................... 210
Sustainable forest management should be at the core of a low-carbon, resilient society ................. 225
Moving towards a bio-economy consistent with climate and development objectives.................... 228
Waste and over-consumption need to be tackled ............................................................................. 231
Towards an integrated and holistic approach ................................................................................... 233
Notes ................................................................................................................................................ 234
References ........................................................................................................................................ 234
Tables
Table 1.1. A wide range of energy and climate policies to reduce greenhouse gas emissions .............. 32
Table 2.1. Examples of policy misalignments that undermine low-carbon investment ........................ 53
Table 2.2. How challenges and opportunities for low-carbon, resilient infrastructure
investment vary by national circumstances or institutional context ..................................................... 58
Table 4.1. Clinker-to-cement ratios (inverse measure of clinker substitute use) by region ................. 113
Table 6.1. Climate change projections of insured losses and/or insurance prices ............................... 146
Table 6.2. A range of potential climate risks and response measures.................................................. 149
Table 6.3. Summary of risk management, risk pooling and risk transfer approaches ......................... 150
Table 9.1. Potential environmental impact of Producer Support Estimate and their share
in the OECD area ................................................................................................................................ 215
Table 9.2. Food loss and waste along the supply chain ....................................................................... 232
ALIGNING POLICIES FOR A LOW-CARBON ECONOMY © OECD 2015