Years of inaction on climate change have significantly held back the world’s economic growth, according to the secretary general of the OECD. But fossil fuel subsidies are still commonplace, Angel Gurría told EURACTIV partner La Tribune.
Angel Gurría is the secretary general of the OECD. He spoke to Sarah Belhadi from La Tribune at the G20 summit that took place in Antalya, Turkey, on 15 and 16 November.
You have called on all the world’s governments to commit to taking “resolute action against climate change” in the run-up to the COP21. But we must acknowledge the unfortunate contradiction between countries’ economic necessities and the climate challenge. This raises serious doubts over any agreement that may be reached at the Paris summit.
I do not think that pro-climate decision making – now essential – can damage economic growth. The real issue should not be the question of whether opting for a green economy will harm growth, but understanding that the economies of those countries that do not opt for an energy transition will suffer negative impacts as a result.
At the OECD, we have conducted studies to measure the productivity of businesses. The results are clear: if we fail to address the question of climate change, the consequences for economic growth will be inescapable. After five or ten years of inaction on the climate, we have already observed an impact on the economy of two, three or 4%. And as with so many situations, the most vulnerable countries are the first to be affected.
One element of this paradigm shift is a reduction of fossil fuel subsidies (for oil, gas and coal). But the OECD has identified almost 800 programmes of public spending and tax breaks in place across its 34 member countries…
Our estimate is modest, yet it provoked strong reactions from some countries, who thought our calculations were wrong. Our methodology was severely attacked, but the OECD reported a more conservative figure than some other international organisations: $200 billion per year. As a comparison, the International Energy Agency put fossil fuel subsidies at $500 billion and the IMF at $5,000 billion per year!
What is more, we need to provide $100 billion per year to the countries of the Global South by 2020, to help them adapt to climate change. And all the while we continue to subsidise fossil fuels by $200 billion.
The OECD cut its growth predictions for 2015 and 2016: from 3% to 2.9% for this year and from 3.6% down to 3.3% for 2016. Is the Chinese slow-down really the only explanation?
Global economic growth needs a motor. This can come from four areas: trade, investment, credit and, until recently, the growth of emerging economies, which is now slowing down. China, most notably, is now at 6.5% growth, as opposed to the 11% that we have seen in the past.
But there are other factors. In the last 50 years, the growth of trade has never been so weak. And when it is below the rate of global growth, it signals an approaching recession. I am not saying that this scenario is awaiting us now, just that it is exactly what has happened in the past. Investment – which should be a driving force of the economy – has ground to a halt. Worldwide growth in investment is down to 3.3%, when it needs to be at least 7% to have a positive impact.
In the United States, for example, taxation is another factor holding back growth. There is problem with companies generating big profits but not paying their taxes in the country (for example the tax optimisation practiced by the GAFA companies, ed.).
What solutions does the OECD propose to this situation?
To make investment take off, we have to understand the reasons why it has been stifled. We have to adopt a clearer regulatory system and price transparency. In the domain of the climate, for example, we need to fix a price on carbon to give a boost to the development of renewables. For now, the fall in oil prices has not impacted on renewables, and countries are seeking to diversify their energy mixes and look for alternatives. This is very good news… The challenges of the climate should be taken as an opportunity for the global economy, not as a constraint…