Executive summary

Our ability to sustain economic and social progress in the long run will depend on our capacity to reduce dependence on natural capital as a source of growth, abate pollution, enhance the quality of physical and human capital and reinforce our institutions. Delivering the quality of growth to which citizens of OECD and G20 countries aspire will require concerted action across countries and within ministries invested in green growth – finance, economy, industry, trade and agriculture, among others.

This report on Green Growth Indicators updates previous editions. It integrates the results of recent developmental work on new indicator methodologies and wider country coverage. This applies notably to the indicators on environmentally adjusted multifactor productivity growth, population exposure to air pollution and the related economic costs, land cover change, and technological innovation. Other indicators have been refined, including demand-based CO₂ productivity and environmentally harmful subsidies.

Moreover, greater emphasis is placed on the role of policy action. To that end, the report includes enriched discussion in the chapters on environmentally related taxes and subsidies, technology and innovation, and international financial flows. This is supported by an enhanced visual presentation of the indicators.

Are we becoming more efficient in using natural resources and environmental services?

• The environmental productivity of OECD countries in terms of carbon, energy and materials has improved, but with wide variation across countries and sectors. Carbon dioxide emissions and fossil fuel use have decoupled from economic growth. Most countries, however, have achieved only a relative decoupling. In other words, CO₂ emissions increased at a lower rate than real GDP. Today, OECD countries generate much more economic value per unit of material resources used than in 2000. Efforts to recycle waste are also starting to pay off. Nutrient use in agriculture is improving as well, with surpluses declining relative to production.

• However, once indirect flows such as carbon emissions and raw materials embodied in international trade are considered, improvements are often more moderate.

• Despite productivity gains, environmental pressures remain high: carbon emissions continue to rise; fossil fuels continue to dominate the energy mix, sometimes benefiting from government support, and renewables still play only a relatively minor role; the consumption of material resources to support economic growth remains high; and many valuable materials continue to be disposed of as waste.

Is the natural asset base of our economies being maintained?

• The overall pressure on natural resources remains high. Many ecosystems have been degraded, biodiversity-rich areas are declining and wildlife is increasingly threatened. A third of global wild fish stocks are overexploited. Wild bird populations have declined by 28% since the 1980s and by nearly 41% since the 1960s. Many forests are threatened by degradation, fragmentation and conversion to other land types.

• Threats to biodiversity are particularly acute in countries with a high population density and infrastructure development. Built-up areas have been increasing across the OECD and cover 30% more land than in 1990. Globally, an area the size of the United Kingdom has been converted to built-up areas since 1990. If significant areas of land are not protected from modification, biodiversity will be imperilled. Terrestrial protected areas are increasing, but remain insufficient. Many countries still need to expand or establish marine protected area networks.

• Progress has been made with the management of water as the abstraction of renewable freshwater resources remained relatively stable despite increasing demand. But in some countries, water stress is high and local water scarcity may constrain economic activity.

Does greening growth generate benefits for people?

• Improvements in air quality have been modest and people’s health and quality of life remain at risk. Air pollution is the single greatest environmental health risk worldwide. Human exposure to fine particulates remains dangerously high. There has been little improvement in exposure to ground-level ozone and nitrogen oxides that continue to severely affect human health. In the OECD area, exposure to outdoor PM2.5 and ozone is estimated to cause 0.5 million premature deaths each year, with an annual welfare cost equivalent to 3.8% of gross domestic product (GDP).

• Most people in the OECD benefit from improved sanitation and almost 80% benefit from public wastewater treatment, often using advanced treatment technologies. However, the need to upgrade ageing water supply and sewage systems, and improve access to efficient sewage treatment in small or isolated settlements, remains a challenge.

How does greening growth generate economic opportunities?

• Efforts to implement green growth policies by encouraging innovation and changes in consumer behaviour are accelerating but comparable information about the extent of this change, and the associated jobs and business opportunities, remain difficult to capture statistically.

• Progress has been mixed on the innovation front. Government research and development (R&D) spending is rising. However, the share dedicated to environment and energy objectives has remained stagnant. At the same time, research, development and demonstration (RD&D) efforts directed at energy are shifting towards renewables. Globally, inventive activity in environment related technologies has been slowing down. Long-term incentives are needed to direct innovation towards environmental objectives more effectively.

• Sectors producing environmental goods and services command a growing albeit modest share of the economy. The share of trade in environmentally related products is rising, signalling a certain greening of international trade.

• The use of environmentally related taxes is growing, but remains modest compared to labour taxes. Their contribution to countries’ total tax revenue has actually decreased since 1995. The share of support to farmers that potentially exerts the greatest pressure on the environment has decreased, while the share that includes environmental requirements has grown.

• International financial flows that support greener growth are evolving. While carbon markets shrank, new opportunities arose with financial institutions issuing green bonds. Development aid for environmental purposes has continued to rise and aid for renewable energy has surpassed aid for non-renewables.

• Too often, policies lack coherence, undermining the transition to green growth. Countries continue to support fossil fuel production and consumption in many ways, at a cost of more than USD 60 billion per year in the OECD area alone, and more than USD 200 billion in BRIICS. Misalignments in the taxation of energy persist. In many countries there is scope to adapt the taxation of motor vehicles to reflect the external costs of vehicle use. The tax rate on diesel fuel should be increased at least to the level of the tax rate on petrol to better reflect the impact of diesel on climate change and local air pollution.