The new OECD environmental Outlook – an alarm signal that comes at the right moment

Authors: Axel Volkery, Doreen Fedrigo-Fazio

“Urgent action is needed now to avoid significant costs of inaction, both in economic and human terms”. The Organisation for Economic Cooperation and Development (OECD) provides a clear message in its recent Environment Outlook to 2050: Act now – or face major and potentially disastrous consequences. 

The Institute for European Environmental Policy (IEEP) welcomes this publication. This strong alarm signal comes at the right time for Europe. The European Commission’s recent policy proposals to develop the EU’s energy and resource efficiency agenda are finding increasing resistance among Member States. 

OECD environment ministers are meeting today in Paris prior to the UN Rio+20 summit this summer. But the report should be carefully read by Heads of government, too. Prospects are more alarming than the situation described in the previous OECD environment outlook. In the absence of major policy changes, rising living standards will be accompanied by ever growing demands for energy, food and natural resources – and more pollution. Non-action, the OECD warns, will lead to continued degradation and erosion of natural environmental capital on a global scale by 2050, with the risk of irreversible changes that could endanger two centuries of rising living standards.

Strong and swift policy action is needed at unprecedented scale and intensity. The action is not only affordable, but makes good economic sense. The OECD finds many cases where the benefits of action outweigh the costs by a large margin. The average costs of limiting GHG emissions globally by 70 per cent by 2050 could total roughly 5.5 per cent of global GDP in 2050 – a figure that pales in comparison to the potential cost of inaction on climate change. While policy responses will need to differ between countries, they have some common elements: phasing out harmful subsidies, using environmental taxes more vigorously, devising effective regulations and standards, encouraging innovation and both valuing and investing in natural assets and ecosystems.

Recent IEEP analysis confirms a growing gap in the EU between the investments needed for the transition to a low-carbon and resource efficient economy and the levels suggested in the EU budget proposals.1Other IEEP analysis confirms the benefits of securing appropriate land management with a focus on public benefits and natural capital accounting.2 A recent package of IEEP briefings on the green economy shows the rich spectrum of potential policy actions that are available to green the EU’s economy.3

The EU needs to reinvigorate efforts to adopt a robust policy mix of subsidy reform, taxation and regulatory standard setting. The OECD study clearly shows that fears about losses in terms of economic growth and competitiveness should not obstruct measures to forestall the larger costs of inaction. 

Axel Volkery +32 (0) 2 211 1090
Doreen Fedrigo-Fazio +32 (0) 2 738  7489

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