CLIMATE CHANGE Mitigation: Solving the Rubik’s cube Why institutional investors matter Getting policies in line Supporting investment and disclosure No 304 November 2015 www.oecdobserver.org Nuclear vision Decarbonising transport No jobs on a dead planet Economics for the Anthropocene Spotlight: Ville Lumière–Paris lights the way Climate change Seeing the light ©Marcelo Del Pozo/Reuters ©Marcelo ©Rodi Said/Reuters ©Rodi CONTENTS No 304 Novemberr 2015 EDITORIAL 30 Business brief: ARDCI on how regional BOOKS 2 Overcoming climate change and unleashing authorities in Africa are now getting involved 65 Reviews: Renewable workers; Groundwater a dynamic, zero-carbon economy in the fi ght against climate change by making is not so well Angel Gurría, Secretary-General of the OECD concrete commitments 66-67 New publications 3 Paris attacks 31 There are no jobs on a dead planet 68 Review: Fossil folly; Crossword John Evans, General Secretary, Trade Union NEWS BRIEF Advisory Committee to the OECD (TUAC) DATABANK 4-5 Growth prospects cloudy; OECD-G20 BEPS 32 Decarbonising transport: From smart technology to smart use 69 Mapping carbon emissions; Breaking down project endorsed; Drug spending slows; carbon emissions Soundbites; Economy; Country roundup; 34 Build more, build right: Development fi nance, infrastructure and climate change 70 Main economic indicators Helmut Schmidt; Other stories; Plus ça 72 Supporting green growth in Southeast Asia change Naeeda Crishna Morgado and Juan Casado- Asensio ORDER FORM… ORDER FORM CLIMATE CHANGE 36 Energy transitions, renewables and rational 7 Three things you need to know about energy use: A reality check climate change Vaclav Smil, University of Manitoba, Canada Simon Upton 38 Planetary limits, social needs and 8 The energy sector holds the keys on economics for the Anthropocene climate Joshua Farley, Professor, Community Fatih Birol, Executive Director, International Development, University of Vermont Energy Agency (IEA) 42 OECD green growth indicators 10 Combatting climate change: What policy 43 Business brief: SICPA on how fuel fraud makers are doing. Roundtable of ministers, perpetuates further harmful auto emissions with: Chile, Germany, Japan, New Zealand, and increased fuel consumption United States Energy holds the key, page 8 14 Business brief: Renault on why electric SPOTLIGHT: VILLE LUMIÈRE vehicles are the answer to climate change PARIS LIGHTS THE WAY ON CLIMATE 16 We have the ingenuity and the fi nancial 47 Cities at the forefront of fi ghting climate means to confront climate change change Tahehiko Nakao, President, Asian Anne Hidalgo, Mayor of Paris Development Bank 48 Fighting climate change: What city mayors 17 Mitigation: Solving the Rubik’s cube of are doing. Roundtable of mayors with: climate change Libreville, Madrid, Rio de Janeiro, Seoul, Gregory Briner Stockholm 19 Tackling the folly of fossil fuel subsidies 51-60 Paris leads the way in electro-mobility; Jehan Sauvage Clichy-Batignolles: Where urban planning 20 Sustainable energy infrastructure, fi nance meets the climate; Energy boost: How to Why institutional investors matter, page 20 and institutional investors carry out a perfect retrofi t; A natural capital Christopher Kaminker and Robert Youngman for a circular economy; Urban cultivation: 22 Nuclear vision Protecting nature in the city; Tour de force: 23 The Amazon: Seeing more of the wood and The Eiff el Tower’s new clean view the trees 24 Getting public policies in line with climate goals OECD.ORG Richard Baron and Virginie Marchal 62 New Centre for Opportunity and Equality 26 Business innovation and climate change: opens; Mali Co-operation; Uruguay joins Policy makers must favour dynamism OECD Development Centre; Coff ee space; Nick Johnstone and Dirk Pilat G20 and BEPS 28 Climate change: Towards clean energy 63 Recent speeches by Angel Gurría; List of investment and supporting disclosure OECD ambassadors Anne Hidalgo on Paris, from page 47 Adrian Blundell-Wignall 64 Calendar; Frankie Published in English and French by the OECD All signed articles in the OECD Observer express the opinions EDITOR-IN-CHIEF: Rory J. Clarke of the authors and do not necessarily represent the offi cial PLANNING AND DEVELOPMENT EDITOR: Diana Klein views of the OECD or its member countries. EDITORIAL ASSISTANT: Neïla Bachene Reprinted and translated articles should carry the credit line www.oecdobserver.org EDITORIAL INTERN: Catherine Partridge © OECD November 2015 “Reprinted from the OECD Observer”, plus date of issue. Signed LAYOUT: Design Factory, Ireland articles reprinted must bear the author’s name. Two voucher ISSN 0029-7054 ILLUSTRATIONS: Charlotte Moreau, Stik, David Rooney, copies should be sent to the Editor. All correspondence should Tel.: +33 (0) 1 45 24 9112 André Faber be addressed to the Editor. The Organisation cannot be respon- Fax: +33 (0) 1 45 24 82 10 PHOTO RESEARCH: Rory J. Clarke sible for returning unsolicited manuscripts. [email protected] Special consultant, Spotlight: Mélanie Rigaud, Ville de Paris Founded in 1962. The magazine of the Organisation The statistical data for Israel are supplied by and under ADVERTISING MANAGER: Aleksandra Sawicka the responsibility of the relevant Israeli authorities. for Economic Co-operation and Development The use of such data by the OECD is without prejudice PRINTERS: SIEP, France; Chain of Custody certifi ed. OECD Publications 2 rue André Pascal to the status of the Golan Heights, East Jerusalem and 75775 Paris cedex 16, France Applications for permission to reproduce or translate all or parts Israeli settlements in the West Bank under the [email protected] of articles from the OECD Observer, should be addressed to: terms of international law. www.oecd.org The Editor, OECD Observer, 2 rue André Pascal, 75775 Paris, cedex 16, France. Overcoming climate change and unleashing a dynamic, zero-carbon economy exemptions. Remarkably, two-thirds of these measures were introduced before 2000, and some during the oil crisis of the 1970s. A low-carbon A broader estimate from the International Energy Agency (IEA) puts global consumer price subsidies even higher, at about $500 transition is feasible. billion. Both estimates greatly exceed the $100 billion per year that And besides, we developed countries have pledged to help poor countries prepare for climate change. Fossil fuel subsidies benefit the wealthy, and have no choice. skew resources away from priorities such as health, education and cleaner energy development. They no longer make sense. Removing them may not be easy in the face of resistance from deep-seated interests in “carbon-entangled” sectors. Yet many countries are taking action, such as the Netherlands, Mexico, India and Indonesia, in some cases with surprisingly good results Angel Gurría Secretary-General of the OECD in terms of improved public finances, economic incentives and equity. More governments should follow suit. Apart from subsidies, policy makers must put a robust and The UN Conference on Climate Change (COP21) in Paris 30 steadily rising price on carbon through green taxes and/or sound November-11 December is a once-in-a-generation opportunity to reach a new international agreement to combat climate change carbon trading schemes that operate globally. These will help and accelerate our transition to a low-carbon economy. World curb emissions by tilting the policy balance away from, say, leaders attending the summit are aware of the urgency we face. coal which is relatively lightly taxed, and in favour of cleaner However, to judge by their national contributions pledged so far, alternatives. more ambition will be needed to keep global temperatures from rising above the agreed limit of 2ºC. The “carbon entanglement” of This leads to our second step, which is that of unleashing a our economies is keeping us on a collision course with nature. low-carbon future. This entails two initial challenges: devising and aligning policies to build the innovative, dynamic environment in We must and can change course. Simply committing to reduction which low-carbon technologies and systems can flourish; and targets for greenhouse gas (GHGs) emissions by 2030 is not enough; funding the infrastructure and transition. leaders must take action, with zero net emissions by the end of the century as our common goal. Public spending on clean energy R, D&D (research, development and demonstration) averages about 0.05% in OECD countries. The OECD has been involved in the fight against climate change The IEA warns that we need to triple public energy investment for several decades, with cross-cutting analysis and in-depth in RD&D and scale up collaboration between public and private discussion among experts and stakeholders both at the entities. organisation and beyond. We know a low-carbon transition will not be easy, but it is feasible. And besides, we have no choice. Meanwhile, OECD research shows that although new firms are driving innovation in low-carbon technology and systems, For COP21, the OECD’s message is clear: world leaders are three conventional policy settings like tax credits and regulatory steps away from overcoming climate change and unleashing a standards restrict them, putting polluting incumbents at an dynamic, zero-carbon economy. They must: first, end harmful advantage instead. Policy makers must reverse this. subsidies and wasteful support for fossil fuels; second, spur innovation, and promote the conditions needed for climate- Our analysis suggests that they should do a better job of aligning friendly investment and development; and third, work together other parameters too. The low-carbon transition cuts across society, to monitor progress and help one another to move forward, and policies on the likes of value-added trade, investment rules, through co-operation, investment, trade and sharing ideas. local-content requirements, building standards, electricity grids, transport procurement, skills and taxes should all be pointing in Let’s start with unhealthy fossil fuels. Coal, oil and gas can one single direction: low-carbon. be replaced by cleaner energy sources, which open up new opportunities for wealth creation, work and well-being.