The green economy: matching long-term ambitions with short-term actions

Dr Hans BruyninckxEEA Executive Director

Informal Council of Environment MinistersMilan, 16th July 2014

The 7th EAP: a long term vision of sustainability

“In 2050, we live well, within the planet's ecological limits. Our

prosperity and healthy environment stem from an innovative,

circular economy where nothing is wasted and where natural

resources are managed sustainably, and biodiversity is protected,

valued and restored in ways that enhance our society's resilience.

Our low-carbon growth has long been decoupled from resource

use, setting the pace for a global, safe and sustainable society.”

Source: 7th Environmental Action Programme

Other EU policies offer similar perspectives: Europe 2020 Strategy, EU Energy Roadmap 2050, Roadmap

to a Resource Efficient Europe, Roadmap for a competitive low-carbon economy in 2050, etc.

The 2050 vision requires Europe to adopt a systemic approach & foster transitions

‘Systemic risks’ (persistent problems) require fundamental solutions “Regular policies” offer no fundamental solutions: Incremental institutionalism is too slow and often doesn’t touch the core issues Market creation and commodification in itself is not a solution Resource efficiency gains are necessary, but are not sufficient for ecosystem,

economic and societal resilience

→ Transitions= fundamental shifts in the systems that fulfil societal needs,

through profound changes in dominant structures, practices,

technologies, policies, lifestyles, thinking …

Green Economy: Living well within ecological limits

Ecosystemservices

ECOSYSTEMS

Policy

Values

Technology

Science

Market

Industry

SOCIO-TECHNICAL SYSTEMSproviding social needs and value

Environmental externalities

Withdrawals from the ecosystems

Deposits Emissions Pollution

system

system system

Foodsystem

Energysystem

Mobilitysystem

We need better sectoral accountability

Source: Eurostat

The growing influence of global megatrends on Europe’s long-term future

Past and projected global economic output (2005 USD PPP), 1996–2050

Note: gross domestic product expressed in billion 2005 US dollars at purchasing power parity.

Source: OECD 2013: 'All Statistics - OECD iLibrary'.

Back in Europe: energy efficiency has increased, but we are far from a low-carbon economy

Source: EEA (CSI 028)

Economic growth

Resource use

Efficiency gains

Homes are now more energy efficient, but also much larger, increasing pressures on land, water and materials

19901991

19921993

19941995

19961997

19981999

20002001

20022003

20042005

20062007

20082009

0.7

0.8

0.9

1

1.1

1.2

1.3 Total energy con-sumption of housing stock for space heat-ing

Energy consumption per dwelling for space heating

Energy consumption per m2 for space heating

Growth in floor area of housing (19 EU countries)

Index 1990 = 1

Resource use

Efficiency gains

Source: SCP023 indicator (draft)

Consumption

Cars are more efficient but contribute to a range of negative impacts on people’s quality of life in cities

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

80

90

100

110

120

130

140

150

160

GDP (fixed prices)

Total car km travelled

Total fuel consumption of private cars

Specific fuel consump-tion of average car (l-itres/km)

Total CO2 emissions of cars

Stock of cars

Index, 1990 = 100

Resource use

Efficiency gains

Consumption

Copyright: Tesla

nor new technologies only ...

To reach ambitious environmental visions

Not just incremental efficiency gains ...

Environment and climate policies can be engines driving future economic performance

“Our actions must leave us better placed for the future through smart investment in greening and new technologies.”

Jose-Manuel Barroso, March 2009

“In the EU, we have developed the world's most ambitious climate policies for 2020 whilst in the midst of an economic crisis! It shows that we believe in a new growth model: green growth, sustainable growth.”

Hermann van Rompuy, May 2011

Policy tools that can help achieve 2020 targets in line with 2050 visions

• Regulation

• Fiscal reform

• Financing tools

1. Well-designed legislation stimulates innovation

Policy analysis and research demonstrate that well-designed regulations can stimulate innovation.

Legislation supports the global ‘race to the top’

• Legislation ‘export’ gives European businesses a head start in global markets.

• Environmental policy is regarded in some quarters as Europe’s most successful foreign policy.

• The EURO emission standards and REACH legislation are examples of European regulation ‘export’. This spreads higher environmental standards around the world.

EU emissions standards are adopted across Asia, giving European exporters access to huge markets

Source: CAI, 2011

2. Environmental fiscal reform

• Shifting taxes from societal goods – employment, investment – to societal bads – pollution and over-consumption

• Taxation shift puts a price on environmental externalities, thereby reducing pressures on human and ecosystem health while also supporting economic efficiency and jobs.

• Removing harmful subsidies

Environmental taxes are an under-used tool

“Labour taxation is still too high, while growth-friendly bases, such as environmental taxes, are under-used in many countries. The tax shift away from labour, which we have consistently called for to allow our businesses to regain competitiveness, still has to materialise.”

Statement by Commissioner Šemeta on Taxation Trends in EuropeJune 2014

But environmental taxes are an under-used tool in the EU

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

0.00

0.50

1.00

1.50

2.00

2.50

3.00

energy taxation transport taxation resource/pollution taxation

Environmental taxation as a percentage of GDP (distinguished between energy, transport and pollution/resource) in the EU-27Source: Eurostat http://appsso.eurostat.ec.europa.eu/nui/show.do?dataset=env_ac_tax&lang=en

Eco-innovation and competitiveness are compatible

Global Competitiveness Index 2013-2014 Eco-Innovation Index 2012

Finland, Germany and Sweden are highly competitive, and leaders in eco-innovation

3. Several sources of financing the green economy shift

• Estimates for the financing needs of the green economy range from between US$70bn and several trillion dollars per year.

• Public funding: European Commission, European Investment Bank, the Green Climate Fund.

• Private funding: pension funds and insurance companies.

• Mixed public/private sources: ‘green bonds’, the Project Bond Initiative.

The global green bond market in 2011

Source: Della Croce et al., 2011

Some final reflections

• Is Europe making enough use of the tools at its disposal to create a green economy?

• The 7th EAP is a critical element of the transition to a circular economy.

• The EEA will provide the tools and knowledge base to inform the transition to a green, circular economy.

• Our five-year Multiannual Work Programme has identified the theme of transitions to a green, circular economy as a priority area.