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Choosing a package

It is easy to call for urgent action on the environment, but hard to know where to start. A pragmatic approach would be to bundle different policy choices into coherent packages to suit government priorities and ambitions.

Each option has pros and cons, and what counts in the policy package is the mix. An efficient one will likely place a strong emphasis on market-based instruments, such as environmentally-related taxes, backed up by enabling regulation, eco-labelling, training, R&D funding and so on.

The policy package presented in the 2008 Environmental Outlook is an example. It would slash farm subsidies and tariffs by 50% worldwide, phased in by a 3% decrease per year in 2010- 2030. It would accelerate the up-take of so-called second generation biofuels, cultivated on marginal soils that do not compete for food crops.

A price on carbon would be phased-in across all sectors via a tax of $25 per tonne of CO2 equivalent, starting with OECD countries in 2012, then to major emerging countries in 2020 and the rest of the world in 2030. And there would be regulatory policies on emissions introduced in transport, power, refineries and industry, starting with inefficient sectors like maritime shipping. Policies for improving public sanitation complete the package.

Though this example is not comprehensive, the returns would be attractive. Greenhouse gas emissions would increase by only a third of the baseline increase, while nitrogen oxide emissions would fall sharply. Water quality and sanitation would also improve. The overall cost would be just 0.03 percentage points of global GDP growth per year in the period to 2030. And that does not count any health savings from a cleaner environment!

For more on policy options and the “EO policy package”, see OECD Environmental Outlook to 2030, chapter 20.

©OECD Observer No 266 March 2008