Organisation for Economic Co-operation and Development (OECD)

The OECD was founded in 1961 as an international organisation to ‘build better policies for better lives.’ Its goals are to ‘foster prosperity, equality, opportunity and well-being for all.’ Given its broad remit, the OECD’s work spans various economic, social, and environmental issues. As of this year, the OECD has thirty-eight member countries: Austria, Australia, Belgium, Canada, Chile, Colombia, Costa Rica, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan, Korea, Latvia, Lithuania, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Turkey, the United Kingdom, and the United States. Accession discussions continue with six candidate countries: Argentina, Brazil, Bulgaria, Croatia, Peru, and Romania, while other nations, such as Indonesia, have also signaled an interest in joining. While economic issues remain the forefront of the OECD’s mandate, it is increasingly covering matters related to the environment. The OECD’s Environment Directorate has been active since 1971 and works to provide recommendations on a number of substantive areas of environmental policy-making. It also undertakes environmental policy reviews of OECD members and provides data and modelling for policy makers. The Directorate’s work includes a number of focus areas, including climate change and air quality; green growth and investment; circular economy and plastics; biodiversity; chemical safety and biosafety; agriculture, forestry, and land use; and the environment in emerging and transition economies. The following report canvasses the main developments at the OECD pertaining to international environmental law throughout the past year.

(1) Issue Areas

A number of issue areas came to the forefront of the OECD’s work this year, mostly stratified by climate change. Of particular note is the launch of the Inclusive Forum on Carbon Mitigation Approaches (IFCMA)—the OECD’s flagship initiative to help optimize the global impact of emissions reduction efforts around the world.

(2) Climate Change

Climate change remained a priority focus for the OECD in line with the Secretary General’s strategic whole-of-organization approach to climate change announced in 2021. A centrepiece of this work is the OECD International Programme for Action on Climate (IPAC), which supports progress towards net-zero greenhouse gas (GHG) emissions and a more resilient economy by 2050. To bolster this work this year, the OECD developed the IFCMA—a platform to scale emissions reduction efforts around the world through better data and information, drawing on policy perspectives from a diverse range of countries. The IFCMA held its first meeting in February, and an update was subsequently presented to the G20 leaders by the OECD Secretary-General in September. A horizontal project entitled ‘Net Zero+: Climate and Economic Resilience in a Changing World’ also featured in the OECD’s 2023 agenda.

The OECD continues to provide technical input into the negotiations under the United Nations Framework Convention on Climate Change (UNFCCC), including through its OECD–International Energy Agency Climate Change Expert Group, which has been active since 1993. The OECD was active at the twenty-eighth Conference of the Parties (COP-28) of the UNFCCC, hosting a program of more than thirty events addressing a wide range of issues, from the environmental integrity of carbon markets to adaptation policies and transition finance. The OECD also produced a report entitled Towards an Impactful Mitigation Work Programme under the UNFCCC, which finds that it could help to raise awareness of available tools and solutions, build momentum behind relevant ongoing mitigation-related initiatives without being prescriptive, and deliver more effective, targeted mitigation efforts across all fronts in the near-term, resulting in scaled-up mitigation efforts and learning-by-doing.

In terms of climate finance, the OECD produced a report entitled Climate Finance Provided and Mobilised by Developed Countries in 2013–21, which provides key recommendations for international providers to increase financing towards adaptation and more effectively mobilize private finance for climate action, which are both important policy priorities and current bottlenecks. The OECD provided a spotlight on climate change through the report, The Environment at a Glance in Latin America and the Caribbean. Other work includes A Territorial Approach to Climate Action and Resilience, which illustrates the role of local government—a trend also evident in a separate report on promoting nature-based solutions in municipalities in Hungary. The OECD further released a report on the climate implications of government support in aluminium smelting and steelmaking, which found that government support has contributed to increased carbon emissions from aluminium and steelmaking activities through an increase in production outputs and by shifting production to more emissions-intensive plants.

(3) Plastics/Circular Economy

This year, the negotiation of a global agreement on plastics edged forward. The OECD supported this development through its research efforts. In November, it released Towards Eliminating Plastic Pollution by 2040, which reviews the costs and benefits of alternative policy packages with varying levels of international coordination and policy stringency across the world. The OECD also released research on circular economy issues. Its report entitled Trade Policies to Promote the Circular Economy: A Case Study of the Plastics Value Chain, for example, recommended reduced tariffs on environmentally friendly alternatives to plastic products; trade facilitation measures for reverse supply chains; or technical regulations, standards, labelling schemes, and conformity assessment procedures that promote product designs that minimize pollution throughout the entire plastics lifecycle. The OECD produced a report entitled How Green is Household Behaviour? Sustainable Choices in a Time of Interlocking Crises, which finds that cost and convenience are key to shifting behavioural patterns.

In February, OECD ministers launched the Declaration on Promoting and Enabling Responsible Business Conduct in the Global Economy (OECD/LEGAL/0489), which, inter alia, reiterates the link between responsible business conduct and environment and climate goals.

(4) Green Growth and Investment

Green growth and investment remains one of the OECD’s principal areas of expertise. This year the OECD’s programming placed a particular emphasis on small and medium size enterprises (SMEs), with ministers launching the Declaration on Enhancing SMEs and Entrepreneurship Policies for Greater Resilience and Successful Green and Digital Transitions (OECD/LEGAL/0497) in June, which, inter alia, recognizes the essential role of SMEs and entrepreneurs in addressing the climate crisis.

The OECD continued to play host to several meetings on this issue area. On 21–3 November, the OECD hosted a Green Growth and Sustainable Development Forum in Paris with the theme ‘Navigating the Twin Transitions: Going Green and Digital.’ The Forum focused on the convergence of the digital and green transitions and how to leverage the complementarities and minimize the trade-offs between them to maintain progress towards greener and fairer societies. The ninth Annual Forum on Green Finance and Investment was held virtually on 5–7 October with the theme ‘Moving from Commitments to Actions in the Decade for Delivery: Towards Impactful Green and Sustainable Finance.’ The Forum featured discussions on all aspects of aligning financial flows with the Paris Agreement across public and private sectors.

The OECD also produced significant research on various elements pertaining to green growth and investment. Examples of this research include producing policy guidance in areas related to regulation for the green transition, renewable natural resources and ecosystem services, mitigating the risks of illicit financial flows in oil commodity trading, policy considerations for greener tourism, and net zero metrics for financial institutions.

(5) Biodiversity

The OECD has developed growing policy expertise in biodiversity, including in the run-up to, and during, COP-15 of the UN Convention on Biological Diversity held in Montreal on 7–19 December 2022. In the interregnum between the biodiversity COPs, the OECD produced several research outputs on biodiversity risks and dependencies and economics—for instance, a report entitled Biodiversity and Fragility: A Perspective On Fragile Contexts.

(6) Agriculture, Forestry, and Land Use

The OECD continued work examining the agriculture, forestry, and land-use sectors. The OECD held a global forum on agriculture in April, which focused on carbon footprints for food systems. The OECD’s Annual Agricultural Policy Monitoring and Evaluation examines the practice of fifty-four countries to establish trends in agricultural support. It notes significant divergence across the OECD in terms of agricultural policy support, including an overall decrease in support through market price support and output-based payments.

(7) Water

The OECD provides policy guidance to both OECD and non-OECD members to manage their water resources. The OECD actively participated in the UN Water Conference on 22–4 March in New York—the first such event in forty-seven years. In the run-up to it, in February, it hosted the ninth meeting of the Roundtable on Financing Water, which illustrated the need to: make water a higher priority in the international agenda; strengthen (international and national) legal frameworks around water; unpack the water value chain with (innovative) financing mechanisms; bring water issues into negotiations on the international financial architecture; address the double materiality of water-related risks; develops tools, metrics, and data on water-related risks; and address the issue of water, sanitation, and hygiene affordability.

(8) Environment in Emerging and Transition Economies

The OECD also continues to conduct research to assist emerging and transition economies—for instance, producing a report entitled Financing Uzbekistan’s Green Transition: Capital Market Development and Opportunities for Green Bond Issuance, as well as Financing Solutions to Foster Industrial Decarbonisation in Emerging and Developing Economies, which highlights the range of de-risking, financial instruments, and models that can help accelerate such investments.

(9) Chemical Safety and Biosafety

The OECD continued its work assisting countries in developing and implementing policies and instruments that make their systems for managing chemicals as efficient and robust as possible, while protecting human health and the environment. At their meeting in June, OECD ministers issued the Decision: Recommendation of the Council concerning Chemical Accident Prevention, Preparedness and Response, which sets out key high-level elements to support the development of a chemical accident program covering the fields of prevention, preparedness, and response. The OECD also hosted a number of webinars on various aspects of chemical management.

(10) Environmental Performance Reviews

The OECD’s Environmental Performance Reviews (EPR) provide independent assessments of countries’ progress towards their environmental policy objectives. The EPR program was launched in 1992 and continues to review all OECD members through a peer-review cycle. The EPR aims to help countries assess their environmental goals, promote policy dialogue and peer learning, and stimulate greater accountability in their policy making. The entire EPR process takes approximately one and one-half years from the first country meetings to the release of the final report. It is now in its third review cycle, which commenced in 2010. This year, the OECD released EPRs for Costa Rica, the United States, Israel, Germany, and Portugal.

(11) Costa Rica

This EPR is the first one for Costa Rica and review the progress of environmental policymaking to date in the country. The OECD notes that Costa Rica has established crucial goals to reverse deforestation, produce more renewable energy, and achieve net-zero GHG emissions by 2050. As a mega-diverse country housing some 6 percent of all world species, the OECD commends Costa Rica’s experimentation with payment for ecosystem services, yet notes that land conversion has led to ecosystem degradation across terrestrial and coastal environments and that biodiversity has not been mainstreamed across sectoral policies. The OECD further outlines a number of other areas where enhanced action is needed as a result of increasing energy use, rising GHG emissions, and urban air pollution. To address the latter, the OECD finds that there has been an effort to increase investment in public transport, but that targeted policy is needed to encourage the uptake of electric vehicles. The OECD also states that although there has been some progress, Costa Rica’s water infrastructure—particularly wastewater—requires further development. To address these areas, the OECD recommends further deployment of financial and human capital, as well as an unwinding of environmentally harmful subsidies.

(12) United States

The EPR is the third one for the United States and reviews its progress since 2005. Overall, the OECD finds that the United States has made progress in addressing climate change, but there are a number of areas that need to be addressed: from industrial agriculture to air pollution and high consumption of resources. Significantly, as it is the world’s largest economy, the OECD finds that the United States has decoupled economic growth from GHG emissions—a shift that led to it achieving its 2020 climate target. The EPR further highlights how the passing of the Inflation Reduction Act in 2022 has also made a significant difference. However, the EPR finds that environmental justice—whereby low-income households, indigenous communities, and people of colour in the United States are disproportionately exposed to pollution and other environmental risks—remains an issue. The OECD also notes with concern that the United States is the top generator of plastic waste globally, both in total volume and per capita. To address this, the OECD calls for enhanced recycling and other measures to prevent marine pollution from plastics.

(13) Israel

This EPR is the second one for Israel and reviews the past decade of environmental policy-making. The OECD notes that Israel has made several important climate change commitments in recent years, including reaching carbon neutrality by 2050. Yet it also finds that significantly more work is needed to reach these goals. In terms of Israel’s energy mix, the OECD notes the significant potential to expand renewable deployment. The OECD further recommends a raft of measures to address low-carbon transport options, given Israel’s high car dependency. The EPR further finds that the nation’s expanding urban footprint is putting pressure on the environment, including water infrastructure for domestic and agricultural use. The OECD recommends that the draft Environmental Licensing Law, initially passed by the Israeli Government in 2022, be fully adopted to aid in the practice of environmental assessment in Israel. The OECD recognizes that Israel plans to increase excise taxes to ensure that carbon pricing would cover approximately 80 percent of its GHG emissions, but also notes that extensive fossil fuel subsidies, including for gas, remain. The OECD commends the steps that Israel has taken to shift to a circular economy and achieve its goal of zero waste by 2050 but highlights that an economy-wide approach that sparks collaboration with local governments is needed for this to occur.

(14) Portugal

This EPR is the fourth one for Portugal and reviews progress since 2011. Since the last review, the OECD finds that there has been significant progress towards Portugal’s sustainable development goals. The EPR illustrates how Portugal instituted a National Adaptation Strategy in 2015 and a Climate Law Framework in 2021 and has further led work on climate change at the European Union level. The OECD notes that Portugal’s energy mix has shifted from oil and coal to natural gas and renewables, leading to an overall decoupling of energy consumption and pollutant emissions from economic growth. Despite this progress, the OECD notes that more work is needed to address the significant levels of material consumption and municipal waste generation, as Portugal has one of the highest land-filling rates in the OECD. To fund further work in these areas, the OECD recommends that Portugal pursue green tax reform, including enhancing taxes on fuel and conventional vehicles and reducing fossil fuel subsidies.

(15) Germany

This EPR is the fourth one for Germany, following on from one in 2012. Since the last EPR, the OECD notes that Germany has set an ambitious climate target of reaching climate neutrality by 2045 and achieving negative emissions after 2050. Towards this end, Germany has been undergoing a significant energy transition—one that was hastened by the war in the Ukraine. Despite progress in these areas, its EPR illustrates a need for Germany’s environmental taxation to better align with the polluter pays principle, including by ensuring that its environmental tax rates are inflation-adjusted. The OECD notes that Germany has also suffered extreme climatic events, which require the expansion of localized climate risk assessments and adaptation planning. They further note that biodiversity has been degrading in the past several decades, a trend the OECD recognizes could be countered with the new Federal Action Programme on Nature-based Solutions for Climate and Biodiversity.

(16) Environmental Policy Tools and Indicators

The OECD continued to expand its range of environmental policy tools & indicators. It launched the third edition of the Climate Action Monitor—a deliverable of the Net Zero+ IPAC that provides foundational data and metrics to assess countries’ progress towards net-zero GHG emissions and the goals of the Paris Agreement. IPAC covers all of the OECD countries as well as some non-OECD countries such as Brazil, the People’s Republic of China, India, Indonesia, South Africa, Argentina, Brazil, Bulgaria, Croatia, Peru, Romania, Russia, Saudi Arabia, and Malta. The OECD also launched its first estimates of an OECD pilot dashboard on SME greening and green entrepreneurship indicators, as well as a composite index tracking climate change and air pollution mitigation policies, which found that more stringent environmental policies are associated with lower emissions and that the effect builds over time and differs across sectors depending on their fossil fuel intensity. The OECD’s experimental database (OECD.Stat) also provided a new source of data for carbon dioxide emissions from global shipping, providing near real-time monthly data. Linked to the OECD’s work on environmental policymaking tools and indicators. The Environmental Policy Committee issued the Recommendation on Environmental Compliance Assurance (OECD/LEGAL/0494), illustrating their desire for more effective and efficient compliance monitoring.

(17) Summary

This year, the OECD continued its environment-related activities across several fronts, building on its legacy of continued engagement legacy of high-quality policy advice and tools to address pressing issues of global concern.