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GLOBAL VOICES147reduction targets using only auctioned tradablepermits or carbon taxes, they could raise revenues of asmuch as 0.6% of GDP (or USD $250 billion) by 2020.Revenues from carbon taxes or auctioned permitscould be used to support climate change action, forexample to finance adaptation and mitigation indeveloping countries. Coming out of the economiccrisis, revenues could also be used for fiscalconsolidation, while in emerging economies, suchrevenues could finance other pressing priorities, suchas education, health care and poverty alleviation. Developments at COP16 in Cancun represented animportant breakthrough for action to limit global GHGemissions and help to build cleaner economies. Butthe momentum needs to be maintained to COP 17 inDurban. On GHG mitigation and costs, it is promisingthat many countries are willing to commit to specifictargets or actions. However, OECD analysis suggeststhat delayed action, or taking only moderate action upto 2020 (as reflected in the Copenhagen/Cancunpledges) comes at a higher cost as it increases thepace and scale of efforts needed after 2020, and alsoposes a higher environmental risk.The use of market-based approaches, such asemissions trading schemes (ETS) and carbon taxes,will be critical to keep the costs of action affordableand to build-up a global carbon market. An importantfirst step in pricing GHG emissions is to reformenvironmentally harmful subsidies that support fossilfuel consumption or production. OECD analysis foundthat removing subsidies to fossil fuel consumption inemerging and developing countries alone could reduceglobal GHG emissions by 6 per cent in 2050compared with business-as-usual. It would also makethe economies undertaking the reforms more efficient,reduce the burden on scarce government budgets, andalleviate the potentially distortive effects of subsidieson competition. While consumer subsidies are large inmany emerging and developing countries, OECDcountries also support fossil fuel production andconsumption by an estimated US$ 45-75 billion perannum in recent years, according to a new OECDinventory of support mechanisms.Providing clear price signals to consumers is critical toraise awareness, empower choices and encouragehouseholds to save energy and limit emissions. Resultsfrom a survey of over 10,000 households across tenOECD countries confirm the impact of economicincentives on household behaviour. The results of thesurvey also confirm the important complementary roleplayed by information-based measures, such as energyefficiency labelling of appliances and housing, whichcan help to strengthen the price signals. We also need to move quickly to enhance action onadaptation through international co-operation anddomestic action at national, sectoral and local levels.The negative impacts of climate change will hit poorPhoto: UN Photo/A Fisher

people and countries disproportionately. Broadagreement on adaptation priorities and a means to address these, will help facilitate and coordinatesupport and also accelerate the flow of finance to support action. To be effective, adaptation needs to be integrated into development policy-making and planning, including in the context of nationalplans, such as Poverty Reduction Strategies. Likewise,many development activities can also contribute to building resilience to climate change. OECD work is highlighting what can already be accomplishedthrough existing channels, through work on Integratingclimate change adaptation into development co-operation policy guidance (OECD, 2009) and on harnessing the innovative potential of the private sector in forging new solutions to manageclimate risks.Action on both mitigation and adaptation is closely tiedto climate change finance - one will not happenwithout the other. The Cancun Agreements included acommitment by developed countries to deliver fast-start finance of US$30 billion for 2010-2012 and alonger-term goal to mobilise US$100 billion per yearby 2020 from public and private sources. Govern-ments also committed to create a Green Climate Fund.Delivering on these financial and institutionalcommitments will be critical to building trust and co-operation between countries at different levels of development. A challenge will be to enhance the measurement,reporting and verification (MRV) of climate finance,building on the existing information systems such as the OECD Creditor Reporting System that alreadytracks official development assistance targetingclimate change mitigation and adaptation (Chart 1).More generally, MRV of targets, actions and finance, is essential nationally to track policies and assess their effectiveness and internationally, to ensuretransparency and accountability amongst countries on climate change, including fulfillment ofinternational commitments. OECD is working onenhanced reporting of climate responses, includingfinancing, in order to increase the transparency andconsistency of country information. The OECD is also working with Pension FundRegulatorsfrom 60 countries worldwide to see whatrole pension funds - and other institutional investors -can play in financing green growth initiatives throughinnovative instruments like green bonds (see chart 2).With their $28 trillion dollars in assets, global pensionfunds potentially have an important role to play.Climate policies are also needed to stimulateenvironmental innovation and accelerate thedevelopment and diffusion of cleaner technologies.OECD analysis of innovation in cleaner technologiesindicates that business and other innovators needlong-term, predictable and strong policy signals.Beyond the use of economic policy instruments toprice carbon, other demand-side policies may also becentral to advance environmental innovation,including green public procurement, awareness raisingcampaigns, or the use of performance standards.Some progress has been made in this regard. Forexample, the adoption of the Kyoto Protocol in 1997coincided with a sharp increase in the rate ofinnovation in climate-friendly technologies. However,much of this innovation is still concentrated inadvanced economies which directly regulategreenhouse gas emissions. There are many policies that would encouragedevelopment and diffusion of cleaner technologies indeveloping countries. OECD work shows that countrieswith high domestic technological and absorptivecapacity are more likely to both develop and to benefitfrom cleaner technologies available on internationalmarkets. These capacities are driven by local policiesin developing countries as well as by participation intargeted international research programmes. A keypriority for international climate support should be tofurther strengthen local technological capacity indeveloping countries. The OECD will continue toprovide fact-based analysis and present policy optionson how to reconcile environmental concerns witheconomic and social goals. Climate change is thegreatest challenge facing mankind today and theOECD is ready to continue to work with all countries tosupport international climate change negotiations. nABOUT THE AUTHORAngel Gurría is the Secretary-General of theOrganisation for Economic Co-operation andDevelopment (OECD). He came to the OECDfollowing a distinguished career in public service,including two ministerial posts. As Mexico's Ministerof Foreign Affairs from December 1994 to January1998, Mr Gurría made dialogue and consensus-building one of the hallmarks of his approach toglobal issues. From January 1998 to December2000, he was Mexico's Minister of Finance andPublic Credit. For the first time in a generation, hesteered Mexico's economy through a change ofAdministration without a recurrence of the financialcrises that had previously dogged such changes.As OECD's Secretary-General, since June 2006, MrGurría has reinforced the OECD's role as a "hub" forglobal dialogue and debate on economic policy issueswhile pursuing internal modernisation and reform. 1 The International Organisation of Pension Supervisors(IOPS) is an independent international body representing thoseinvolved in the supervision of private pension arrangements.The organisation currently has around 70 members andobservers representing approximately 60 countries andterritories worldwide -from Australia to Zambia -covering alllevels of economic development and bringing together all typesof pension and supervisorysystems.148GLOBAL VOICES" "THE POTENTIALTHAT EXISTS TO GENERATE SIZABLE FISCALREVENUES FROMTHE USE OF MARKET INSTRUMENTS INCLIMATE POLICYIS ESPECIALLY ATTRACTIVE INCURRENT TIMESOF FINANCIALHARDSHIP