Closing Remarks by Angel Gurría, OECD Secretary-General, delivered at the Green Growth and Sustainable Development Forum
6 December 2013, Paris, France
Ladies and gentlemen, Ambassadors, distinguished delegates,
I am delighted to be at the Green Growth and Sustainable Development Forum. We are here today to address a crucial issue: Encouraging and Leveraging Private Investment for Green Infrastructure and Technologies, Including Through Innovation Policies. This is not only a long title, it is a great topic!
Let me tell you why. We face a serious gap in infrastructure investment. And this gap drastically threatens our ability to foster growth and provide more opportunities and better services to our citizens. An additional USD 1.2 trillion of annual investment is required to meet global infrastructure needs to 2030. This is irrespective of environmental constraints!
Green investment provides an enormous opportunity to meet these needs, while potentially creating net savings, and protecting the long-term sustainability of the environment. Governments have recognized that policy action is needed, but what can they do to attract the necessary green investment?
I’d like to outline 3 key strategies to help governments tackle this urgent challenge.
Sending smart price signals will help attract green investment.
First of all, we have to get smart about the price signals we send to the private sector, and consider how they can encourage businesses to “invest green”. This means pricing carbon on a genuinely global basis, ideally across all countries and sectors, and eliminating market distortions and “mixed messaging”.
Governments must take a hard look at policy measures that subsidise or encourage the exploration, production and consumption of fossil fuels. Currently, governments worldwide are supporting fossil fuel production and consumption by about USD 600 billion according to OECD and IEA estimates. This is sending policy messages that are driving our investors and economies down a mistaken path: on a collision course with nature.
Our recent policy paper on “Climate and Carbon - Aligning prices and policies” provides a good overview of lessons learned from OECD analysis on carbon pricing and climate policies. Key lessons include the need to put an explicit price on carbon and identify other cost-effective policy instruments that put an implicit price on carbon. The paper further calls on governments to review the broader fiscal policy to ensure that it is coherent with stated climate goals and to make sure that any undesired impacts of carbon pricing measures are alleviated through complementary measures and accompanied by a clear communication strategy.
In addition to strong carbon pricing mechanisms, adequate and well thought-out policies for new green technologies and infrastructure also become essential. This is my second point.
Enabling policy frameworks are also crucial to unlocking green growth.
Well-designed policy frameworks are crucial to advancing investment in green infrastructure and technologies. To attract investors, targeted incentive schemes must be predictable and stable, and avoid the “stop-and-go” pattern to policy decision-making that has recently weakened investors’ confidence in the renewable energy sector.
In addition, short-run incentives for research, development and demonstration in green technologies and eco-innovation can help foster innovation, tackle barriers to technology and knowledge transfer costs, improve technology performance, ramp up production and address market barriers.
International investment can represent an important share of green infrastructure investment. Therefore, creating policy frameworks that enable international trade and investment flows are also crucial to driving green growth. Governments will be better equipped to consider the net benefit of trade restrictions if we can improve tracking and monitoring of trade and investment restrictions in green sectors.
This brings me to my last point. To attract investment in green infrastructure, we must also address a number of knowledge gaps.
Addressing knowledge gaps is key to our future work.
We need to pin down the exact financial implications of greening infrastructure. Perhaps, and despite the multiple co-benefits already identified, the financial case for some green infrastructure does not stack up without supporting policy measures. Governments cannot afford unnecessarily costly policies, so understanding what the most cost-effective policy interventions are likely to be, and whether additional resources will be required, is vital.
At the same time, becoming more clear about what green infrastructure will entail – and what it will cost – will allow us to track progress correctly. Without clear indicators to pin policy and measure progress across key sectors, the transition to a green economy simply won’t happen.
Another knowledge gap is how to involve small and medium-sized enterprises (SMEs) in greening infrastructure. SMEs are responsible for a significant proportion of economic activity and emissions and meeting their financing needs will be critical to achieving the transition. How can we address challenges that financial institutions face in dealing with SMEs? Are there innovative practices currently in place that can be drawn on globally?
Finally, we need to further our understanding of green FDI. Despite the fact that FDI appears to represent a significant proportion of green investment, there is a lack of an operational definition of, and OECD statistics on, green FDI.
The OECD Investment Committee and its subsidiary bodies have started working on issues related to the definition and measurement of green FDI. In the short term, countries have agreed to draw up an inventory of national initiatives and efforts to define and measure green FDI. Medium and long-term priorities could include developing agreed and internationally comparable methodological standards, collecting relevant data and presenting meaningful and reliable indicators.
Ladies and Gentlemen,
Advancing green growth is one of the most urgent challenges of our time. We need to use all of our knowledge to bring the private sector on board. If we fail to do this, we will fail to provide our citizens with adequate water, transport and energy infrastructure, and cause disastrous harm to our environment.
I urge you to take back to your capitals and committees the best practices and the knowledge gaps identified over the past two days to help increase and fine-tune your green growth strategies. I am certain that the OECD committees will use today’s great insights to reflect and evaluate their proposed 2015-2016 Programmes of Work.
Indeed, we have a long and productive road ahead of us. I look forward to continuing our dialogue on greening infrastructure, and on other dimensions of green growth policies, such as equity and distributional impacts, at our forum next year. I certainly hope to see each and every one of you there.