Greening Growth in Eurasian Transition Economies: Some Drivers and Key Policy Measures

1. Greening Growth in Eurasian Transition Economies: Some Drivers and Key Policy Measures Angela Bularga Environment Directorate Almaty, 12 June 2014

2. Questions to be addressed • Reasons for policy action • Strategies to enable green growth • Need for policy dialogue

3. Resource-intensive model of growth in Eurasian transition economies Export product share by factor intensity Source: OECD (2012), Green Growth and Environmental Governance in EECCA.

4. Price volatility calls for resource efficiency and diversification Source: World Bank Source: OECD.

5. Jobs in many countries depend upon sectors vulnerable to external shocks

6. Loss of ecosystem services because of land-use change compared to GDP Estimates show that global land use changes between 1997 and 2011 have resulted in a loss of ecosystem services of between $4.3 and $20.2 trillion/year GDP - GDP in current U.S. dollars. Not adjusted for inflation. Source: World Bank data.

7. Natural resources remain the main source of wealth

8. High interdependency for energy and water in the Caspian Sea Basin

9. High and often increasing water losses Source: OECD, 2012.

10. Total water withdrawal as share of available water resources Source: UNEP, 2014.

11. What policy measures could enable a green transformation of economy? Value and price the natural assets and ecosystem services Remove environmentally harmful subsidies Make pollution more costly Improve regulations Influence consumer choices Encourage voluntary action and supply chain pressure Use better data to promote more sound decision making Reform institutions Help SMEs to go greener Scale up funding

12. More adequate price signals reduced energy intensities though not enough Energy intensities in Europe and Central Asia Relative to EU-15 levels, 1990-2009 Sources: World Bank calculations based on data from IEA 2011 and World Bank, World Development Indicators. Note: Energy intensity is the amount of energy used to produce US$1 of GDP. The shaded area represents the minimum-maximum range of the EU-15. EU-10 + 1 includes the EU-10 countries plus Croatia; kgoe = kilograms of oil equivalent.

13. Energy tariffs have increased in many countries of the region

14. So did water tariffs

15. Value of agricultural production per m3 of water utilized for irrigation Real price of fresh water to agriculture (inflation adjusted) Water pricing can work: Israeli economic efficiency of agricultural water use Source: OECD (2010), OECD Review of Agricultural Policies: Israel, 2010 .

16. Pricing pollution while reducing labour taxation: Multiple-dividend policy Revenue from environmental taxes: Share of GDP, %

17. Fossil fuel subsidies distort prices and the incentive framework Fossil fuel consumption subsidies for the top 25 non-OECD countries, 2010, IEA 90 Electricity 80 Coal 70 Natural gas 60 Oil 50 40 Billion dollars 30 20 10 0 Iran Iraq UAE India Libya Egypt China Qatar Russia Kuwait Algeria Mexico Ukraine Ecuador Pakistan Thailand Malaysia Indonesia Argentina Venezuela Uzbekistan Kazakhstan Bangladesh Saudi Arabia Turkmenistan Source: IEA.

18. Subsidies do not always benefit the poorest people

19. Change may happen faster than we think! Pace of innovation uptake: Wind energy Wind Energy Capacity in the EU-15, 2009 vs. Forecasts 1990–2002 Source: Based on World Bank (2013), Glowing Green: The Economic Benefits of Climate Action.

20. Establishing sound institutions: “mission possible” at any income level Quality of the overall framework: “Ease of Doing Business” Ranking Source: World Bank (2013), Doing Business 2013: Smarter Regulations for Small and Medium-Size Enterprises. Washington, DC: World Bank Group. DOI: 10.1596/978-0-8213-9615-5.

21. Scaling up funding is a priority North-South investment flows, USD billions (2008) Source: updated from Corfee-Morlot et al. 2009; OECD calculation based on OECD DAC-CRS, UNCTAD WIR (2010), World Bank (2010)

22. What role for policy dialogue? • Beneficial at all (and across) levels of governance • Sub-national • Country • Regional – EaP GREEN example • International • Involving all stakeholder groups • Influencing policies • Using the value of business to business dialogue • Many on-going initiatives

23. Goal of policy dialogue and action within EaP GREEN programme • COMPONENT 1: GOVERNANCE AND FINANCING TOOLS • Mainstream sustainable consumption and production into national development strategies • COMPONENT 2: USE OF SEA AND EIA AS PLANNING TOOLS • Promote the use of the Strategic Environmental Assessment (SEA) and Environmental Impact Assessment (EIA) • COMPONENT 3: DEMONSTRATION PROJECTS IN SUPPORT OF CORPORATE ACTION • Apply sustainable consumption and production practices in selected economic sectors (agriculture and manufacturing) • OVERALL OBJECTIVE • Enable countries of the Eastern Partnership to move towards a green economy

24. Programme overview • Regional programme, with a blend of regional-level and national-level actions targeting public and private sectors • Aims at supporting six Eastern Partnership countries • Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine • Multi-partner implementation • OECD, UNECE, UNEP, UNIDO • Multi-donor financing • European Union – the main donor; • 48 month implementation period as of January 2013 • 12.5 million Euros total estimated budget, including 10 million Euros contribution from the European Union

25. A programme tailored to grasp the benefits of green economy

26. Achievements so far

27. Recapping the essentials of policies in support to greener growth • A comprehensive policy toolkit • prices, regulation, information, institutions, finance • A wider policy focus • education and employment, innovation, trade, investment, territorial planning and infrastructure development • Access to finance, particularly in lower-income countries • Better institutional frameworks and international cooperation • Full understanding of distributional effects and impacts on competitiveness • Need for a tailored approach