Doc. 10709

5 October 2005

The OECD and the world economy


Committee on the Environment, Agriculture and Local and Regional Affairs

Rapporteur: Mr John Dupraz, Switzerland, Alliance of Liberals and Democrats for Europe

1.       The Committee on the Environment, Agriculture and Local and Regional Affairs welcomes and supports the report of the Committee on Economic Affairs and Development on “The OECD and the world economy” and congratulates the rapporteur.

2.       The committee wished to add the following amendments to the draft resolution:

Amend paragraph 6 to read:

“6.       High and volatile oil prices, due in particular to rapidly rising demand in the United States and in emerging economies, especially in China, pose a further risk to world economic growth. The Enlarged Assembly calls on OECD member countries to make greater efforts to increase energy efficiency; diversify energy sources including via nuclear energy; particularly addressing the unresolved problem of the processing and storage of radioactive nuclear waste; and further develop renewable energy sources and technologies. The Enlarged Assembly also invites OECD member countries to intensify efforts to promote peace and political stability in the Middle East and the Persian Gulf regions.”

Add two new paragraphs after paragraph 11, as follows:

“The Enlarged Assembly calls on the OECD to consider the non-economic aspects of agriculture. Consideration should be taken not only of the production aspect, its primary role, but also of the contribution of agriculture to the economic and social life of rural regions, the preservation and maintenance of landscapes, and the protection of life’s essential elements: water, air and land. Only on this condition will the balance between cities and rural areas be preserved.

The Enlarged Assembly strongly supports OECD’s ongoing mandate to mainstream sustainable development and considers that the implementation of the objectives of OECD’s Environmental Strategy for the First Decade of the 21st Century to achieve environmental sustainability should be treated as an urgent priority. In particular, urgent action is needed to implement the Kyoto Protocol and reduce greenhouse gas emissions in the post-Kyoto period, beyond 2012.”

Explanatory memorandum

3.       The Committee on the Environment, Agriculture and Local and Regional Affairs wishes to stress the link between the world economy and sustainable development and therefore particularly refers to OECD’s work in the fields of environment, agriculture and sustainable development.

4.       Current trends suggest that the goals of the OECD’s Environmental Strategy for the First Decade of the 21st Century and its objectives to achieve environmental sustainability 2010 goals will not be met unless more ambitious policies are pursued. The 2004 review of progress of the Strategy pointed towards undertaking analytical work to help policy and decision makers to better understand the benefits of environmental policies, as well as the cost of the lack of policy action. The OECD is also developing a tool kit for governments aimed at developing and engaging in effective environmental partnerships amongst them but also with the private sector and civil society.

5.       Other relevant activities of the OECD include a review by OECD Ministers of the results of a three-year project, which ended in 2004 and analysed the complex interactions between the economic, environmental and social elements of sustainable development. The project identified sustainable development indicators, used in OECD economic surveys, and OECD Ministers have asked for follow-up work on the reduction of environmentally harmful subsidies, and the use of economic instruments to measure progress.

6.       An important conclusion of recent OECD work has been the fact that while environmental protection costs have risen, amounting to about 2% of gross domestic product or more, they could have been reduced by at least 25% through a greater use of more cost-effective instruments. Alternatively, and more importantly, the OECD has found that more ambitious environmental objectives could have been achieved for little or no additional cost. The Committee believes that this approach of enhanced effectiveness in achieving environmental objectives for the same cost should be considered and applied by member countries when assessing environmental policies and measures at the national and international level.

7.       The committee welcomes those initiatives and also current OECD work to draw lessons from countries’ experience on sustainable resource use. Material resource flow accounting, indicators and guidance will be produced in 2006 to inform policy debates on the role of natural resources in economic growth and development. The Committee looks forward to the results of this work as well as to the outputs of a new OECD project on the costs of policy inaction on environmental issues, also expected in 2006.

8.       The committee draws attention to Assembly’s Recommendation 1653 (2004) on Environmental accounting as a sustainable development tool, which stressed the value of environmental accounting as an essential tool of public governance. The Assembly recognised the role played by the OECD and other organisations in advocating the essential role that environmental accounting can play in implementing the concept of sustainable development.

9.       The committee also recalls Resolution 1434 (2005) on Europe’s growing energy vulnerability and the need for a gradual reduction of dependence on fossil fuels while ensuring a secure and sustainable energy supply, through options such as further developing renewable energies. The Assembly further called on member countries to invest additional resources in the development of new technologies for the enhanced use of renewable energy sources, in particular biofuels, and to the need to integrate environmental costs into energy pricing.

10.       Global climate change is not just an environmental problem, but one of the most serious and complex challenges, with implications for economies, societies, and the environment. The committee further welcomes OECD’s work to help member countries assess appropriate policies to tackle the threats posed by climate change. Ongoing discussions at the OECD include consideration of transnational sectoral agreements (such as aluminium, cement, steel, power generation from coal or automobiles) as a useful component of international efforts to combat climate change. The Committee shares the view that the cost of measures to limit environmental damage could rapidly rise as environmental standards become stricter, which is particularly the case regarding the reduction of greenhouse gas emissions under the Kyoto Protocol. The committee further stresses the vital role that member countries need to play in the post-Kyoto period to mitigate and adapt to the effects of climate change, and further calls on the United States of America to join international efforts to tackle this critical challenge.

11.       Water management is a serious challenge for sustainable development and the OECD has addressed relevant issues such as the performance of water management policies in OECD countries; water pricing and related social aspects; financing of water and wastewater infrastructure; biochemical technologies for improving water quality; and aid to the water supply and sanitation. Some of the main lessons learned for improved water management include: making wider use of markets; improving the coherence of decision making; harnessing science and technology; and working in partnership with developing countries to address internationally shared objectives. The Committee welcomes OECD’s activities to enhance water management policies in OECD and non-OECD countries alike, which are in support of internationally agreed water goals, including the Millennium Development Goals on access to drinking water and sanitation, in line with the Assembly recommendations included in Resolution 1449 (2005) on the environment and the Millennium Development Goals. The Committee is fully engaged in the preparation of a specific report on Europe’s contribution to improving water management, which will be an input to the IV World Water Forum in Mexico in March 2006.

12.       As far as agriculture is concerned, the concept of sustainable agriculture seems to have gained importance in OECD countries, where 40% of the available land is destined to agricultural uses, which consume 45% of the total water supplies. Agriculture also has significant effects on water and soil quality, biodiversity and landscapes. According to OECD data, there has been some reduction in the pressure on the environment of agriculture across OECD countries in the past decade, but progress has been mixed, as land used for agriculture and soil loss has decreased while pressure on water use has increased. The Committee also welcomes OECD’s efforts to produce reference studies on the challenges faced by certain agricultural sectors, such as organic agriculture, arable crops, etc.

13.       The committee welcomes OECD’s efforts to broaden its perspective on agriculture and its multi-functionality. Indeed, as stated in OECD’s annual report 2004, agriculture is not just about producing food and fibre, as it also produces a range of less tangible items such as environmental and rural amenities, and it contributes to food security and rural viability. The Committee gives the highest consideration to the OECD initiative to publish the guide “Multi-functionality: The Policy Implications” intended to help policy makers take the best possible decisions taking account of the multi-functional character of agriculture, because of its paramount contribution to sustainable development, to the preservation of the natural and cultural diversity of Europe’s rural areas and its role against the negative effects of globalisation.

14.       The committee stresses the importance of OECD studies on member countries’ agricultural policies, published on a regular basis. Key reports published in 2004 were: “Agriculture in Emerging and Transition Economies’ and an analysis of the 2003 reform of the European Union’s Common Agricultural Policy which shed light on the implications of the proposed changes, compared to previous policies, in terms of production incentives, market developments and levels of support.

15.       The committee welcomes OECD studies dedicated to agriculture in countries of Central and Eastern Europe, such as Ukraine (“Achieving Ukraine's Agricultural Potential: Stimulating Agricultural Growth and Improving Rural Life”, published in September 2004) which provides a review of the food and agricultural sector in that country. The study goes beyond the strict boundaries of the agricultural sector to encompass the entire rural area, including rural physical and social infrastructure, and the extent of rural poverty. The Committee welcomes such studies that focus on countries which are not OECD members but which are members of the Council of Europe.

16.       In 2004 OECD published a most valuable “Agricultural Outlook 2004-2013”, with ten-year forecasts on agricultural prices, demand and output. According to this study, global production of cereals, meat, cheese, sugar and vegetable oils is set to outpace consumption over the next ten years, which is considered to moderate growth in trade and increases in world prices. Prices are expected to raise over the outlook period for almost all products covered in the report. However, real prices, corrected for inflation, are likely to continue to decline over the longer term. Therefore, the importance of compensatory measures to be applied in agriculture, with a view of preserving the rural lifestyle and farmers’ income, should be stressed.

17.       Last but not least, the Committee would like to stress the importance of another report published in 2004: “Agriculture and the Environment: Lessons Learned from a Decade of OECD Work”, which provides a concise summary of the main lessons learned from the activities developed between 1993 and 2003, and identifies the main emerging issues and challenges, in order to assist policy makers in the on-going design and implementation of effective and efficient policies.

Reporting committee: Committee on Economic Affairs and Development (Doc. 10645)

Committee for contribution: Committee on the Environment, Agriculture and Local and Regional Affairs

Reference to committee: Standing mandate

Contribution approved by the committee on 5 October 2005

Secretariat of the committee: Mr Sixto, Mr Torcatoriu, Mrs Lasen-Diaz.

1 Approved by the committee on 5 October 2005