OECD Environmental Outlook to 2030 How will economic and social developments drive environmental change to 2030? What policies are OECD needed to address the main environmental challenges? How can OECD and non-OECD countries best work together to tackle these challenges? Environmental The OECD Environmental Outlook to 2030 provides analyses of economic and environmental trends to 2030, and simulations of policy actions to address the key challenges. Without new policies, we risk irreversibly damaging the environment and the natural resource base needed to support economic Outlook to 2030 growth and well-being. The costs of policy inaction are high. But the Outlook shows that tackling the key environmental problems we face today − including climate change, biodiversity loss, water scarcity and the health impacts of pollution − is both achievable and affordable. It highlights a mix of policies that can address these challenges in a cost-effective way. The focus of this Outlook is expanded from the 2001 edition to refl ect developments in both OECD countries and Brazil, Russia, India, Indonesia, China, South Africa (BRIICS), and how they might better co-operate on global and local environmental problem-solving. O E C D E n v ir o n m e n t a l O u t lo o k The full text of this book is available on line via this link: t o www.sourceoecd.org/environment/9789264040489 2 0 Those with access to all OECD books on line should use this link: 3 0 www.sourceoecd.org/9789264040489 SourceOECD is the OECD’s online library of books, periodicals and statistical databases. For more information about this award-winning service and free trials ask your librarian, or write to us at [email protected]. ISBN 978-92-64-04048-9 -:HSTCQE=UYUY]^: 97 2008 01 1 P ����������������������� 972008011.indd 1 07-Feb-2008 10:10:58 AM OECD Environmental Outlook to 2030 ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT The OECD is a unique forum where the governments of 30 democracies work together to address the economic, social and environmental challenges of globalisation. The OECD is also at the forefront of efforts to understand and to help governments respond to new developments and concerns, such as corporate governance, the information economy and the challenges of an ageing population. The Organisation provides a setting where governments can compare policy experiences, seek answers to common problems, identify good practice and work to co-ordinate domestic and international policies. The OECD member countries are: Australia, Austria, Belgium, Canada, the Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, the Slovak Republic, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States. The Commission of the European Communities takes part in the work of the OECD. OECD Publishing disseminates widely the results of the Organisation’s statistics gathering and research on economic, social and environmental issues, as well as the conventions, guidelines and standards agreed by its members. This work is published on the responsibility of the Secretary-General of the OECD. The opinions expressed and arguments employed herein do not necessarily reflect the official views of the Organisation or of the governments of its member countries. Also available in French under the title: Perspectives de l’environnement de l’OCDE à l’horizon 2030 Corrigenda to OECD publications may be found online at: www.oecd.org/publishing/corrigenda. © OECD 2008 No reproduction, copy, transmission or translation of this publication may be made without written permission. Applications should be sent to OECD Publishing [email protected] or by fax 33145249930. Permission to photocopy a portion of this work should be addressed to the Centre français d’exploitation du droit de copie (CFC), 20, rue des Grands-Augustins, 75006 Paris, France, fax 33146346719, [email protected] or (for US only) to Copyright Clearance Center (CCC), 222 Rosewood Drive, Danvers, MA 01923, USA, fax 19786468600, [email protected]. PREFACE Preface T he environmental challenges we face over the coming few decades are daunting. They will require concerted policy action, and co-operation among countries, different ministries within countries, and with stakeholder partners. Climate change is particularly high on the political agenda now, but we also face the challenges of halting biodiversity loss, ensuring clean water and adequate sanitation for all, and reducing the health impacts of environmental degradation. The analysis presented in this OECD Environmental Outlook shows that the necessary policies and solutions are available, that they are achievable and that they are affordable. But we need to act now, while it is still relatively inexpensive, particularly in the rapidly emerging economies. One scenario in this Outlook found that if we are willing to accept a 98% increase in global GDP from now to2030 –rather than the 99% in our Baseline–we could achieve significant improvements in air and water quality, and progress towards climate targets. This is not a lot to pay (you can call it the cost of insurance). The consequences and costs of inaction, on the other hand, would be much higher. This Outlook provides policy-makers with guidance on how to address the more complex and long-term global environmental challenges, in a way that is cost-effective and can also deal with the shorter-term concerns of their local constituencies. The OECD is well positioned to provide this guidance. The analysis in this Outlook is based on an economic and environmental modelling framework, drawing on expert inputs from across the Organisation – macroeconomic assumptions from our Economics Department, energy projections from our sister organisation, the International Energy Agency, agricultural assumptions from our Trade and Agriculture Directorate–and environmental modelling expertise from the Dutch Environmental Assessment Agency. Environment Ministries cannot address these challenges alone. They need the support of other areas, in particular of the Ministries of Finance to provide environmental policy reforms with a strong financial backing. And they need the support of ministries of energy, agriculture, transport and industry to implement the sectoral policies required to reduce the environmental impacts of our production and consumption patterns. Countries will need to restructure their economies in order to move towards a low carbon, greener and more sustainable future. The costs of this restructuring are affordable, but the transition needs to be managed carefully to address social and competitiveness impacts, and to take advantage of new opportunities, like eco-innovation. Removal of environmentally harmful subsidies, particularly for fossil fuels and agricultural production, is a necessary first step: it would shift the economy away from activities that pollute and over-use natural resources while saving money for tax payers. The focus should be on taxing the “bad”, rather than subsidising the “good”. The reason is simple: the “bad” is known (e.g. CO emissions), while the “good” of today can becom 2 obsolete or be proven to be inefficient tomorrow. Policy simulations carried out for this OECD Environmental Outlook demonstrate that widespread use of market-based instruments can considerably lower the cost of action to achieve ambitious environmental goals. OECD ENVIRONMENTAL OUTLOOK TO 2030 – ISBN 978-92-64-04048-9 – © OECD 2008 3 PREFACE The most pressing environmental challenges cannot be solved by OECD countries alone. The OECD Environmental Outlook to2030 shows that the global cost of action will be much lower if all countries work together to achieve common environmental goals. To implement cost-effective solutions, developed countries will need to work closely with emerging economies– especially Brazil, Russia, India, Indonesia, China and South Africa–as well as with other developing countries. Governments, businesses, trade unions, NGOs and all citizens need to join forces to ensure that the ecosystem services that support economic growth and human well-being are not lost. With the size of the world economy expected to double by 2030, while population is expected to increase by one-third, continuing or expanding our current patterns of consumption and production is simply unsustainable. The OECD Environmental Outlook shows that the policies and solutions to address these challenges over the coming decades are available and affordable. But if we want to avoid irreversible damage to our environment and the very high costs of policy inaction, we’d better start working right away. Angel Gurría Secretary-General 4 OECD ENVIRONMENTAL OUTLOOK TO 2030 – ISBN 978-92-64-04048-9 – © OECD 2008 ACKNOWLEDGEMENTS Acknowledgements T he OECD Environmental Outlook to 2030 was developed by a team within the OECD Environment Directorate, under the management of Lorents Lorentsen (Director), Rob Visser (Deputy Director), Helen Mountford (Head of Division), and Jan Bakkes (Netherlands Environmental Assessment Agency). The OECD Environment Policy Committee (EPOC) was responsible for the oversight of the development of the report. The Working Party on Global and Structural Policies (WPGSP) was responsible for overseeing the modelling framework and application. Other OECD bodies also provided expert input to selected chapters, including: the Working Party on National Environmental Policies (WPNEP); Joint Meeting of the Chemicals Committee and the Working Party on Chemicals, Pesticides and Biotechnology; Working Group on Environmental Information and Outlooks (WGEIO); Working Group on Economic Aspects of Biodiversity (WGEAB); Working Group on Transport; Working Group on Waste Prevention and Recycling (WGWPR); Joint Working Party on Agriculture and Environment (JWPAE); Joint Working Party on Trade and Environment (JWPTE); Committee on Fisheries (COFI); and the Tourism Committee. Representatives from non-OECD countries – in particular Brazil, China, India, and the Russian Federation – provided input to the report through a Global Forum on Sustainable Development event in May2007. Stakeholder representatives provided input to draft chapters, in particular environmental citizens’ organisations (co-ordinated through the European Environmental Bureau), industry (co-ordinated through the Business and Industry Advisory Committee to the OECD), and trade unions (co-ordinated through the Trade Union Advisory Committee to the OECD). The main drafters of the chapters of the OECD Environmental Outlook were: Executive Summary Kumi Kitamori Introduction Helen Mountford The World to2030–The Consequences of Policy Inaction I. Drivers of Environmental Change 1. Consumption, Production and Technology Ysé Serret, Nick Johnstone, Ivan Hascic, Takako Haruyama 2. Population Dynamics and Demographics Xavier Leflaive 3. Economic Development Philip Bagnoli, Jean Chateau, Yong Gun Kim 4. Globalisation Cristina Tébar Less, Philip Bagnoli 5. Urbanisation Kyung Yong Lee, Carine Barbier (IDDRI) 6. Key Variations to the Standard Expectation to2030 Philip Bagnoli, Jean Chateau, Yong Gun Kim OECD ENVIRONMENTAL OUTLOOK TO 2030 – ISBN 978-92-64-04048-9 – © OECD 2008 5 ACKNOWLEDGEMENTS II. Environmental Challenges 7. Climate Change Jan Corfee-Morlot, Dennis Tirpak, Jane Ellis, Philip Bagnoli, Yong-Gun Kim, Jean Chateau, Detlef van Vuuren (MNP) 8. Air Pollution Frank de Leeuw, Jan Bakkes, Hans Eerens, Robert Koelemeijer (all MNP) 9. Biodiversity Philip Bagnoli, Takako Haruyama 10. Freshwater Gerard Bonnis 11. Waste and Material Flows Henrik Harjula, Myriam Linster, Soizick de Tilly 12. Health and Environment Pascale Scapecchi, Nicolas Gagnon, Dian Turnheim, Frank de Leeuw (MNP) 13. Cost of Policy Inaction Nick Johnstone, Jan Corfee-Morlot, Ivan Hascic Policy Responses III. Sectoral Developments and Policies 14. Agriculture Philip Bagnoli, Jean Chateau, Yong Gun Kim, Wilfrid Legg, Olivier Belaud, Elke Stehfest (MNP) 15. Fisheries and Aquaculture Martha Heitzmann, Helen Mountford, Philip Bagnoli 16. Transport Tom Jones, Michael Donohue, Nadia Caid 17. Energy Jan Corfee-Morlot, Jane Ellis, Trevor Morgan 18. Chemicals Richard Sigman 19. Selected Industries Steel and Cement Nils Axel Braathen Pulp and Paper Xavier Leflaive Tourism Xavier Leflaive Mining Peter Borkey IV. Putting the Policies Together 20. Environmental Policy Packages Helen Mountford, Tom Kram (MNP) 21. Institutions and Approaches for Policy Implementation Kumi Kitamori, Krzysztof Michalak 22. Global Environmental Co-operation Roberto Martin-Hurtado Annexes A. Regional environmental implications Xavier Leflaive B. Modelling framework and assumptions Jan Bakkes and Detlef van Vuuren (MNP), Philip Bagnoli The economic part of the modelling work for the OECD Environmental Outlook was undertaken by the OECD team working on ENV-Linkages, and the environmental modelling work was undertaken by the Netherlands Environmental Assessment Agency (MNP). The MNP used IMAGE and related environmental models, including collaboration with LEI at Wageningen University and Research Centre on agriculture-economy modelling, and the Center for Environmental Systems Research (CESR) at Kassel University for modelling of water quantity issues. In addition, environmental modelling drew on results from The World Bank and the European Commission’s Joint Research Centres (on air pollution) and the Sustainable Europe Research Institute (on use of material resources). 6 OECD ENVIRONMENTAL OUTLOOK TO 2030 – ISBN 978-92-64-04048-9 – © OECD 2008 ACKNOWLEDGEMENTS The modelling teams were: ENV-Linkages (OECD) IMAGE and related environmental models Core team: Specific contributions: Philip Bagnoli Tom Kram Annelies Balkema Jean Chateau Jan Bakkes Johannes Bollen Yong-Gun Kim Lex Bouwman Hans Eerens Sebnem Sahin Gerard van Drecht Michel den Elzen Bas Eickhout Henk Hilderink Michel Jeuken Morna Isaac Frank de Leeuw Paul Lucas Mark van Oorschot Jos Olivier Elke Stehfest Ellen Teichert (CESR) Detlef van Vuuren Kerstin Verzano (CESR) Jasper van Vliet Martina Weiss (CESR) From collaborating institutes: Andrzej Tabeau (LEI) Hans van Meijl (LEI) Frank Voss (CESR) Geert Woltjer (LEI) The MNP team consisted of the above modelling team as well as Johan Meijer, KeesKlein Goldewijk, Peter Janssen, Rineke Oostenrijk, Ton Manders, Robert Koelemeijer, Peter Bosch, Dick Nagelhout and Jan Bakkes (project management). Statistical and research assistance was provided by Cuauhtémoc Rebolledo-Gómez, Takako Haruyama, Carla Bertuzzi, Simon Faucher, and Niels Schenk. Jane Kynaston co-ordinated the reviewing and administrative processes of the report. Kathleen Mechali and Stéphanie Simonin-Edwards provided administrative assistance. Fiona Hall edited the report. Support for the publication process was provided by Katherine Kraig-Ernandes, Catherine Candea and the OECD Publishing Division. A number of OECD countries provided financial or in-kind contributions to support the modelling and Outlook work, including: Canada, the Czech Republic, Japan, Korea, the Netherlands, Norway, the United Kingdom, and the United States. This publication is dedicated to the memory of Takako Haruyama (1976-2007). OECD ENVIRONMENTAL OUTLOOK TO 2030 – ISBN 978-92-64-04048-9 – © OECD 2008 7