OECD recommendations, which have been in effect since the restructuring of Europe after World War II, are designed to influence economic stability, democracy, foreign policy and sustainable development.

The 2008 OECD Environmental Outlook is a pathbreaking report created by economists in 30 countries that identifies four environmental priority areas where urgent action is needed: climate change, biodiversity loss, water scarcity and the impact on human health from pollution and toxic chemicals.

Ambitious Policies Needed to Avoid Irreversible Damage
Climate change, which is linked to all the priority areas, is the top concern because of potentially catastrophic consequences such as increased heat waves, droughts, storms and floods, that can severely damage key infrastructure and crops, and threatening the lives of millions. OECD economists warn that costs will rise significantly if action isn't taken now. Moreover, the report stresses, “Without more ambitious policies, increasing pressures on the environment could cause irreversible damage within the next few decades.”

Essentially, the report models a mixture of specific economic and market-based policies to address key environmental challenges, such as green taxes, efficient water pricing, emissions trading, polluter-pay systems, waste charges, and eliminating environmentally harmful subsidies (e.g. for fossil fuels and agriculture).  It is also calls for immediate response to impose more stringent regulations and standards (e.g. for transport and building construction), investment in research and development, sectoral and voluntary approaches, and eco-labeling and information.

It is hoped that political leaders of both developed and developing countries with concerns that Kyoto compliance could lead to energy price increases, rising unemployment, or economic decline, will find reassurance from the OECD’s methodical peer-reviewed projections that while “the cost of inaction is high,” “ambitious actions to protect the environment are affordable and can go hand-in-hand with economic growth.”

Protecting the Environment Costs less than 1% a Year
The OECD estimates the world economy will grow by nearly 99% between 2005 and 2030 without new policies. OECD policy simulation shows that by 2030 it would cost just over 1% of this GDP to implement policies that can cut key air pollutants by about a third, and contain greenhouse gas emissions at about 12%, compared with 37% growth without new policies. The simulation used a moderately ambitious climate change target aimed at stabilizing greenhouse gas emissions at 450 parts per million (ppm) in the atmosphere, leaving room for better results.

The social and environmental benefits of such policies would be both immediate, and long-lasting; while the costs would average a miniscule .03% a year.

“A window of opportunity to act is now open, but it will not be open for long. We need forward-looking policies today to avoid the high costs of inaction or delayed action over the longer-term,” the report states. But finding and implementing solutions will require political will and international co-operation on an unprecedented scale.

Benefits of Partnering Together
While OECD countries (developed countries) should take the lead, and instigate working closely together with a wide group of emerging economies, non-OECD countries could also benefit greatly by partnering together. The report states, for instance, that if countries like Brazil, Russia, India, Indonesia, China and South Africa (“BRIICS”) co-operate, they can achieve common environmental goals at lower costs. They can “leapfrog” to newer, cleaner technologies and infrastructure; and learn from other countries how to implement better energy-efficiency strategies. Also, the more countries that participate in carbon mitigation strategies, the cheaper they will be for everyone.

"Fair burden-sharing and distributional aspects will be as important as technological progress and the choice of policy instruments," the report highlights. Furthermore, because developing countries are more vulnerable to a carbon tax than in developed countries, better-suited, alternative solutions must be addressed.
 
If no action is taken, by 2030 the annual emissions of Brazil, Russia, India, Indonesia, and China together will exceed those of the 30 OECD countries combined.  For perspective, China, which is of greatest concern, is constructing the equivalent of two, 500 megawatt, coal-fired power plants per week and adding 600 new cars a day in Beijing alone.

OECD Priority Actions
The report highlights key priority actions that must be taken in several sectors:

Energy – Energy pricing that reflects the full cost of carbon is essential, but regulations and support for research and development of new technologies are also needed.

Transportation – Transportation pricing should fully reflect the costs of environmental damage and health impacts; and research in new technologies is needed to offset the rapid motorisation in non-OECD countries. “The availability, frequency and safety of public transport should be strengthened to provide a viable alternative to private cars. It is mobility and access that need to be ensured, not “transport” per se.”

Agriculture – is by far the largest user of water and is responsible for much of its pollution. Converting natural land to agricultural use is a key driver of biodiversity loss, and surging biofuels production will likely exacerbate this situation, unless new steps are taken. Removing environmentally harmful farm subsidies, taxing farm chemicals, and appropriately pricing irrigation water are effective strategies to improve agriculture.

Capture Fisheries – Fisheries depend on a healthy marine environment, and are especially susceptible to climate fluctuations and environmental pressures from other human activities. Fishing - more than almost any other sector -  depends on internationally-abided agreements to be effective. The report states that stronger international co-operation is needed in limiting total catch levels, designating fishing seasons and zones, and eliminating subsidies for wasteful and exploitive fishing practices.

Successful Strategies
The report offers advice for successfully implementing progressive policies to realize their long-term benefits to society. Working in partnership with stakeholders, phasing-in policies to allow people and businesses to adjust, using market-based strategies, and tailoring solutions to specific national circumstances are all keys to success.

The report takes an optimistic approach, demonstrating that the “costs of early action are far less than the costs of delaying; the earlier we act, the easier and less expensive the task will be.”

Ultimately, Gurría concludes, "The global cost of action will be much lower if all countries work together."