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CC: JRL
OECD
RL
OCDE
1
5A
PARIS
MJ
JAF
2, RUE ANDRE PASCAL
75016 PARIS
RB
FAX COVER SHEET
DATE:
17 March 1998
TO:
Ms. Janet Yellen
The Chairman
Executive Office of the President
Council of Economic Advisers
Washington
PHONE:
FAX:
1 202 395 6958
FROM:
Mr. Thorvald Moe
PHONE: (33) 1 45 24 89 50
FAX:
(33) 1 45 24 79 31
Number of pages including cover sheet: 32
Message
Please find attached a one-page letter from Mr. Thorvaid Moe, Deputy Secretary-
General, together with a 30-page document.
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OCDE
OECD
ORGANISATION DE COOPÉRATION ET
ORGANISATION FOR ECONOMIC
DE DÉVELOPPEMENT ÉCONOMIQUES
CO-OPERATION AND DEVELOPMENT
Le Secrétaire general adjoint
2, Tue André-Pascal
The Deputy Secretary General
75775 PARIS CEDEX 16
Tél. 45 24 82 00
TM(98)82
17 March 1998
Dear Junet Ms. Yellen,
Reference is made to the letter of Secretary-General Johnston to you of 22 December 1997,
and my informal meetings with Ms. Blank during Working Party No. I in February.
Please find enclosed the final version of "Strategy for Further OECD Work on Sustainable
Development" C(98)46 of 16 March. There is a cover note by the Secretary-General and our response
to your request for work on climate change is described in some detail in Annex II, pages 13-17. As
you see, WC will attempt a broad, horizontal effort.
In my opinion, it is extremely important for the quality of the work - and in order to focus on
the economic dimension - that the Economics Department (ECO), Working Party No. 1- which is now
chaired by Jean-Philippe Cottis - the EDRC and the EPC itself are importantly involved in this work.
This requires priorities as the resource constraints on ECO are getting quite severe.
1 have kindly been invited by the US OECD Delegation to a luncheon with you on 26 March
and I hope we can touch base on these issues.
Best regards,
The
Thorvald Moc
Encl: 1
Ms. Janet Yellen
The Chairman
Executive Office of the President
Council of Economic Advisers
Washington DC 20500
cc:
Mr. J.-P. Cottis
Mr. I. Visco
03000
TELEGRAMMES DEVELOPECONOMIE / TELEX 640048 / TELEFAX (33-1) 45.24.85.00
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For Official Use
C(98)46
OECD
Organisation dc Coopération et de Développement Economiques
OLIS : 13-Mar-1998
Organisation for Economic Co-operation and Development
Dist. : 16-Mar-1998
OCDE
PARIS
Or. Eng.
COUNCIL
For Official Use
C(98)46
Council
A STRATEGY FOR FURTHER OECD WORK ON SUSTAINABLE DEVELOPMENT
(Note by the Secretary-General)
63154
Or. Eng.
Document complet disponible sur OLIS duas son format d'origine
Complete document available on OLIS in its original format
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TABLE OF CONTENTS
I. INTRODUCTION
3
II. CHALLENGES FOR MEMBER GOVERNMENTS AND THE ORGANISATION
5
III. ORGANISATION AND FURTHER WORK
6
ANNEX I KEY DIMENSIONS OF SUSTAINABLE DEVELOPMENT
8
1. The Economic Dimension:
8
2. The Human Capital and Social Dimension
9
3. The Environmental Dimension
11
ANNEX II PROCEEDING WITH CONCRETE PROJECTS
13
1. Further Work on Climate Change
13
2. Other Projects
17
ANNEX III MEASURING PERFORMANCE: ON-GOING OECD WORK ON INDICATORS
20
ANNEX IV ACTIVITIES IN RELATION TO NON-MEMBERS
27
ANNEX V SOME RECENT OECD, ECMT AND IEA PUBLICATIONS RELEVANT TO
SUSTAINABLE DEVELOPMENT
30
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I.
INTRODUCTION
1.
Sustainable development is one of five priority areas in my Challenges and Strategic Objectives
paper of September 1997 [C(97)180]. The Report of the High-Level Advisory Group on Environment
(HLAGE) of November 1997 suggested further impetus to work in this area, and recommended that the
OECD "should as a matter of urgency, develop into the key intergovernmental organisation providing the
industrialised nations with the analytical and comparative framework of policy necessary for their
cconomies to make the transition to sustainable development". This Report also formulated a number of
recommendations as to further work, the most specific being development of the concept of resource
productivity, as well as recommendations on how this work should be organised.
2.
This Note follows up on my Strategic Objectives paper and gives an initial response drawing on
very useful comments from Delegations to the report of the Advisory Group, referring as appropriate to
past and on-going work. It outlines a strategy for further work, raises some of the challenges faced by
member governments and the Organisation, and indicates how to proceed with concrete activities within
an overal) integrated framework. If the Council agrees with the broad thrust of this note, I will develop
with the OECD Directorates, the IEA and NEA concrete proposals within this framework for integrating
existing and future work into a broad, horizontal set of activities on sustainable development, and submit a
more detailed Progress Report in July for Council consideration.
3.
I do not propose to set up a special unit or create new committees. The time frame envisaged is
three years, as I intend to present to the Ministerial Council Meeting in 2001, prior to Rio + 10, an
overview and synthesis report on the contribution this Organisation and its affiliates have made to
sustainable development.
4.
A good model for organising major cross-cutting horizontal projects is the ongoing work of the
OECD Jobs Study. 1 have therefore already set up a Sustainable Development Steering Group with myself
as Chair, and with Deputy Secretary-General Thorvald Moe as Deputy Chair and co-ordinator of the work.
This group should operate flexibly at the Director level, and all Directors involved in the work would
participate as appropriate. The Sustainable Development Steering Group will be used as the vehicle for
the overall direction and co-ordination of the work, and I will report to Council from time to time on
progress.
5.
Discussions about the new policy challenges associated with economic development are not new
in this Organisation. A first wave of work relevant to sustainable development started more than 25 years
ago, with the initiative to establish the Environment Directorate'. OECD work in this area intensified in
the late 1980s and early 1990s, partly as a response to the World Commission's report on Environment
and Development (April 1987), and is summarised in: "The Economics of Sustainable Development. A
Progress Report" (May 1990).
6.
A lot of work related to sustainable development has taken place in the OECD, ECMT and the
IEA since then. The Environment Directorate, ECMT and the IEA have contributed jointly to the climate
change debate over many years². In the first half of the 1990s the Economics Department became
1
OECD Council, Guiding Principles concerning International Economic aspects of Environmental Policies, Council
Recommendation [C(72)128]".
2.
This is evidenced in the publication on sustainable development issued at the time of the UNGASS in June 1997, to
which many parts of the house contributed.
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involved in this work. The GREEN model was developed, and economic dimensions and policy responses
regarding global warming were analysed'. Annex V lists some recent OECD, ECMT and IEA publications
relevant to sustainable development apart from those referred to here.
7.
In recognition of their global nature and importance, some dimensions of sustainable
development have been a growing element of OECD's work in relation to non-Members. In particular,
OECD's policy dialogues and analytical work through the CCNM programmes and the Development
Centre, and policy co-ordination through the DCD/DAC and the Club du Sahel have been addressing the
economic, environmental and social dimensions of the development of non-Members, including the "Big
Five" (Brazil. China, India, Indonesia and Russia). On the environment side, it has involved
environmental performance reviews of a number of transition economies, with an ongoing environmental
review of Russia; policy dialogue with a wide range of emerging and transition economies, e.g. in the
Climate Change Forum; and OECD's Partnership Strategy for the 21st Century, which was adopted by the
Development Assistance Committee in May 1996, and is the basic framework for the Organisation's work
in development co-operation activities, incorporating developmental goals for economic well-being, social
development and environmental sustainability and regeneration.
8.
Sustainable development has been broadly defined by The World Commission on Environment
and Development [the "Brundtland Commission" (1987)] as "development that meets the needs of the
present without compromising the ability of future generations to meet their own needs". The needs in
this context concern three dimensions of sustainability -- economic needs, environmental needs and
social/human needs. People derive welfare from each, i.e. from consumption of goods and services, from
a clean and well-functioning environment, and from a secure and cohesive social framework. Most would
agree that these elements are the key factors to be taken into account.
9.
A conclusion from the OECD work in the 1990s is not to attempt to develop a formal definition
of sustainable development. However, I think that it will be useful for the OECD to clarify the concept
somewhat further. Thus, I suggest that, as we move the work forward, we should address in greater detail:
i) what are the necessary conditions for sustainable development; and ii) what are the key elements of
sustainable development. In this process we should further develop a more integrated framework for
policy analysis in order to arrive at concrete and practical recommendations for Member governments. We
should aim at focused, policy-relevant and high-quality products, emphasising the economic dimension
and areas requiring international co-operation - while not duplicating work in the World Bank, the UN, the
European Commission and other international organisations.
10.
As a point of departure, and building on work carried out and ongoing. I propose that we
consider three components of sustainable development, namely, the economic dimension; the human
capital/social dimension; and the environmental dimension. Energy. and the on-going work of IEA and
NEA, is an important part of both the economic and environmental discussion and will be incorporated in
the work. Fully exploiting the potential for new technology and more efficient and environment-friendly
production techniques will also be an important part of the work. A key objective is to proceed with this
work in an integrated manner so as to contribute to a coherent, overall policy framework for sustainable
development. See Annex If
3
OECD (1996), Global Warming. Economic Dimensions and Policy Responses. An update on work on climate change
is given in: "OECD Work on Climate Change: Economic Theory and Policy Implementation", Annex 2:
Contributions of the OECD to Climate Relevant Activities (ECO/CPE/WP1(98)7/ANN 2). and "Key issues in the
Design of New Mechanism under the Kyoto Protocol: A Scoping Paper', COM/ENV/EPOC/DCD/DAC/JEA(98)1.
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11.
As a further step, I propose that we develop our horizontal work on sustainable development
starting with a number of specific projects, which are outlined in the next section.
II.
CHALLENGES FOR MEMBER GOVERNMENTS AND THE ORGANISATION
12.
The integration of economic policy with environmental and social concerns is a major challenge
for governments aiming at sustainable development. The implication of the concept for work in the
OECD is that committees and the Secretariat - and ultimately Ministers - need to view this particular
concern through a broader, multidisciplinary prism then they have done in the past. This is effectively an
extension of my triangular paradigm of "carefully balancing economic growth, social stability and
political stability which is necessary to achieve the economic and social progress for which OECD was
created "[C(97)180, paragraph 15]. In this respect let me come back to the first Article of the OECD
Convention which mandates the Organisation to promote policies designed to achieve the highest
sustainable growth and employment and a rising standard of living...". I would hope that there is general
agreement that environmental considerations need to be an important element in this context, and that it is
also important to focus on social considerations and hence the longer term welfare of our populations.
13.
A major thrust of the HLAGE report was to ask the OECD to develop a framework for the
successful integration of economic, environmental and social policy, which is necessary for making the
transition to sustainable development. I feel that the OECD - in close co-operation with the IEA and the
NEA - is well equipped with broad, multidisciplinary expertise to assist Member governments in this task.
Work on dimensions of sustainable development encompasses the full range of activities of this
Organisation. Macro and micro-economic analysis; extensive experience on environmental matters:
labour markets, education, health and social policies; agricultural and fisheries policies; energy policies;
technological development and development co-operation. Our outreach activities give a necessary
dimension for global co-operation. The challenge confronting the Organisation and its affiliates is that of
moving beyond a narrow sectoral approach to policies, and of making greater use of synergy between
these different competences. Our response should involve the harmonisation and integration of policies
addressing economic, social and environmental objectives.
14.
I propose that we develop and intensify our horizontal work on sustainable development by
elaborating on and commencing four specific, concrete projects. First. work on climate change will
address a number of issues which are raised by the agreement reached in Kyoto. Second, getting prices to
reflect the social costs of environmental damage is an important priority of sustainable development;
hence the importance of a horizontal review of the environmental impact of economic subsidies. Third,
provided the signals delivered by incentives built into the system are improved, the potential for solutions
to environmental degradation arising from new knowledge, from product and process innovation and from
advances in technology is considerable; collaboration among a number of OECD Directorates and the IEA
and the NEA will be important for this work. This could throw light on eco-efficiency and resource
productivity. Fourth, measuring performance through indicators of the economic, social and
environmental dimensions has been an on-going activity in the OECD: providing an analytical framework
and an integrated overview without embarking on large new projects would be a contribution and is an
objective of further work. The project on climate change is further detailed in Annex II. The other three
projects are briefly outlined in the last part of that Annex. They will have to be elaborated on and further
specified, which I propose to do in my first Progress Report to Council in July.
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III.
ORGANISATION AND FURTHER WORK
15.
While sustainable development will be a major horizontal activity for the next three years, a
number of intermediate outputs will be produced as the work moves along. A key objective would be to
produce in an integrated manner across Directorates, the IEA and NEA consistent policy analysis and
concrete and pragmatic recommendations to be used in several ways:
- As objective and high quality analytical inputs to on-going international processes of
considerable economic importance, e.g. the Climate Change negotiations.
- As a point of departure for strengthened co-operation with non-Member countries, focusing
perhaps on a few key aspects of global relevance in some of the "Big Five".
- As a basis for peer reviews of overall national policies towards sustainable development in a
number of Member countries, drawing as appropriate in an integrated manner on economic,
environmental, energy and social/ educational reviews. (Annex I countries will have to
develop national policy strategies according to the Kyoto Protocol).
- To throw further light on the environmental interface with important sectoral policies
pertaining to agriculture and fisheries, energy and transport. Regional and local aspects
could also be explored at a later stage and incorporated in the report to the Ministerial
meeting in 2001.
16.
If the Council agrees with the strategy for further work on sustainable development outlined in
this note, I will establish a more detailed overall framework for the work that will be carried out over the
next three years, and present the Council with a first Progress Report containing proposals for further
specific work in July this year.
17.
The work will be co-ordinated - as mentioned in paragraph 4 of section I - by a Director-level
Steering Group (SD Steering), and I intend to keep the Council fully informed and present progress reports
at regular intervals. As intermediate outputs emerge, they will be presented to relevant committees and
working groups, and it may also be appropriate to arrange joint meetings of senior officials representing
economic, social and environmental expertise from different ministries in capitals. I may also ask Chairs
of the most involved committees and working groups to joint meetings - as was done with the OECD Jobs
Study.
18.
A cautious, gradual approach to develop the OECD external relations on work on sustainable
development, be it the social partners, the NGOs or Parliamentarians, is suggested. We should continue to
use BIAC and TUAC as appropriate, develop our relationship with the World Business Council on
Sustainable Development (and perhaps others) in a pragmatic way, and include NGOs in meetings where
their inputs are valuable. As we develop the major projects further, we should consider whether a more
explicit multi-stakeholder approach would help to ensure higher quality products. We should also be
conscious of enhancing the transparency of the work. Parliamentarians do come to the OECD on an ad
hoc basis today. They should be briefed as they come, and according to their interests.
19.
As we move along. we should also reflect further on our information/publication strategy
regarding sustainable development. The wealth of material on sustainable development attested to in the
Annexes needs to be integrated and presented in a more coherent and visible way, so as to be of maximum
help in formulation of policies for sustainable development in Member countries.
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20.
I will come back to the Birkhofer Report on the future of the OECD Nuclear Energy Agency at a
later date.
21.
The Secretary-General invites the Council to adopt the following draft entry in its Summary
Record:
THE COUNCIL
a) noted document C(98)46;
b) noted that this document would be presented to the next meeting of the
Economic Policy Committee on 26 and 27 March 1998. the Environmental
Policy Committee at Ministerial level on 2 and 3 April 1998, and the Meeting of
the Council at Ministerial level on 27 and 28 April 1998;
c) noted that a first Progress Report would be presented to the Council in July 1998.
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ANNEX I
KEY DIMENSIONS OF SUSTAINABLE DEVELOPMENT
22.
The sustainable development concept has placed emphasis on the links that may exist between
economic, social and environmental concerns, bearing in mind that such links are complex and that
whether there is complementarity or substitutability will depend importantly on the specific circumstances
of each case. It has put the focus on welfare more broadly rather than just economic growth, and on equity
considerations and the need for governments to address threats to the global "commons". It is important.
in this context, to ensure that economic policy considerations take into account environmental and social
policy concerns, and vice-versa, while fully exploiting the potential for new technology and more efficient
production techniques. The notion of purely economic sustainability -- for example, saving and
investment behaviour by current generations that will permit future generations to enjoy appropriate
economic living standards and suitable institutional frameworks such as pension and health systems which
are viable over time -- is certainly not sufficient for ensuring the maximisation of welfare over the longer
term.
23.
Full integration of economic policy with environmental and social concerns and full exploitation
of the potential of new technology are an essential requirement for governments aiming at sustainable
development. The economic, social and environmental dimensions are further elaborated below.
1.
The Economic Dimension:
24.
The intensified interest in environmental and social problems in economic policy discussions can
be attributed to a growing awareness that such problems have economic dimensions that must be brought
to the forefront in order to enhance social welfare. In practical terms, however, what does this mean as
regards the economic dimension of sustainable development?
25.
A major cause of environmental degradation is the presence of external environmental costs and
the lack of well-defined property rights. Open access to many environmental resources, which are
regarded as common property by economic agents. means that agents lack incentives to take the full costs
of environmental degradation into account. A key factor in an effective pursuit of sustainable
development is thus "getting the price right". The divergence of the private costs of an activity from the
social costs, which characterises the use and hence misuse of many environmental resources, notably air
and water, means that the desired mix between environmental amenity and the production of goods is not
achieved by market forces under laissez-faire conditions.
26.
Unless prices for raw materials and products properly reflect the social and environmental costs
and benefits, and unless prices can be assigned to air, water and land resources that presently serve as cost-
free receptacles for the waste products of society. resources will be used inefficiently and environmental
pollution will likely increase. Hence, "externalities" need to be internalised either through the price
system or by establishing property rights. The Polluter Pays Principle (PPP), established by the OECD
governments in the 1970s, was aimed at dealing with one part of this problem but is by no means easy to
apply, given the difficulties in estimating social costs. Valuing and dealing with environmental benefits is
even more challenging. The acceptance of PPP -- even though it has not been fully applied -- and the
increasing use of economic instruments, as well as the examination of subsidies harmful to the
environment, seem to indicate the increasing awareness that economic considerations must be factored
into the setting of environmental policy. An example is the ECMT Task Force on the Social Costs of
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Transport, which completed its work in 1998, establishing a common basis for the examination of external
costs, reviewing methodologies and estimates of transport externalities, and making recommendations on
the mix of policy instruments (both economic and regulatory) for internalising them.
27.
With energy being a fundamental element in economic development, a key question is whether
energy demand growth can be compatible with sustainability. This depends on the level of economic
activity, the composition of outputs as well as the technology and fuel mix. The IEA has been working in
this area to provide a comprehensive understanding of the relationship between energy and growth, and in
particular the relation between CO, emissions from energy and economic development, taking into account
several technological issues (see below).
28.
The substantial resources involved as a result of policy measures to enhance developments in the
environmental and social dimensions, and thereby the opportunity costs in terms of economic
development, present a strong argument for pursuing these targets in the least cost way. In terms of
environmental protection, it is important that the extra benefit in terms of improved environment for each
extra resource spent is equal across various fields. Previous OECD work has illustrated this clearly in the
case of measures to alleviate climate change. Concentrating a given overall emission cut in a few
countries, where the costs of abatement are high, leads to an economic loss for the world as a whole
countries. compared to the situation where emission cuts are distributed so that their marginal costs are similar across
29.
The main economic instruments in this field, environmental taxes and tradeable permits, can be
used to improve economic efficiency while meeting environmental objectives, though they also give rise
to distributional implications. Used within a country, the revenues obtained through such taxes or the
proceeds of selling off permits may allow governments to reduce other taxes that distort economic
behaviour and thereby possibly reap a double dividend in the form of improved economic performance.
Used across countries, these instruments can be used to ensure lower-cost outcomes. Wide involvement of
non-OECD countries is desirable for minimising the costs of emission reductions; and necessary to
achieve the objective of containing global emissions in the longer term within acceptable limits. But
securing limitation commitments from developing countries is a highly political issue, which will only be
successfully tackled by persuading these countries that such commitments serve their own self-interest.
30.
Sustainable development must be seen in a dynamic and long-term perspective. Integrating
sustainability criteria and objectives into economic strategies, in particular into investment decisions,
requires integration of the time dimension, for instance by applying an appropriate discount rate. Current
conventional discounting practices should therefore be assessed from the point of view of their impact on
sustainable development.
2.
The Human Capital and Social Dimension
31.
Work on the human capital and social dimensions of sustainable development is particularly
important in view of:
- the changing nature of the OECD jobs, with rising skill requirements, the implication of
worsening employment opportunities for low-skilled workers, and the need for substantial
investment in human capital formation;
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- the continuation of high and persistent unemployment in many countries. an indication of
chronic under-utilisation of human resources:
- the desire to minimise the extent of poverty and social exclusion;
- ageing populations in OECD countries and the implications this has for prospective living
standards, income and wealth distribution, and government expenditures.
These phenomena have a significant, but as yet not fully understood, effect on trends in consumption,
which deserves further exploration in view of the latter's environmental impact.
32.
The need for an integrated approach to policy is important in the area of social and human
capital. One partial approach, often used in the assessment of social insurance programmes, defines
sustainability in narrow financial terms, e.g. that anticipated payments should be covered by anticipated
contributions to the scheme. A more comprehensive approach to sustainability should take into account
other concerns, e.g. social expectations, the effectiveness of social programmes in meeting their
objectives, and their efficiency and employment impacts. "Balance" is the key for governments in
achieving sustainability of social programmes: too little social expenditure may result in poverty and
inadequate human capital formation; too much social expenditure could provide excessive public benefits
which do not generate worthwhile outcomes, reducing incentives for private provision and lowering work
incentives.
33.
The equity/efficiency trade-off perceived by many countries with their social, education and
labour market policies is central to the identification of sustainable policies. This trade-off is one of the
major social policy issues facing OECD countries (to be discussed by Social Policy Ministers at their
meeting at the OECD on 23-24 June 1998). However, the policy choices are more complex as equity
goals -- an adequate and sufficient income, health care and learning opportunities for all -- cannot be met
in a shrinking economy. And growth in aggregate incomes from which significant sectors of society are
excluded is illusory: it is "growth" in only a statistical sense if a growing pall of insecurity and social
tensions leads to a consensus that society is regressing, not progressing.
34.
An important challenge is to identify as precisely as possible key points of sustainability. which
will differ between countries on the basis of their prevailing social institutions, social norms and
employment experiences. A substantial body of work is now available on the nature, effectiveness and
deficiencies of education, labour market and social policies:
- In the education area, positive links have been found between investment in skills, on one
side, and economic growth and social cohesion on the other, though there is still uncertainty
over the nature of the linkages. Outcomes such as lower unemployment, higher productivity,
better health, more environmentally responsible behaviour, lower crime and higher levels of
social participation are all associated with more education and training. Long-term economic
growth is not sustainable without major and continued efforts by individuals, organisations
and governments to invest in human capital through lifelong learning. To produce
substantial benefits for individuals and society, education and training investments must be
well directed towards a broader range of economic and social goals.
- The follow-up to the OECD Jobs Study has produced detailed recommendations for countries
to reduce high and persistent unemployment and tackle the problems of low pay and poverty;
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these recommendations assign major roles to education and training, labour market and
social policies. Implementation is being monitored by a range of committees.
- We now have a good understanding of the nature of social programmes and recent reforms in
OECD countries, as a result of the Caring World synthesis project and the on-going social
assistance reviews in selected countries. This work will be reported to Social Policy and
Health Ministers at their meeting in June 1998.
3.
The Environmental Dimension
35.
OECD Member countries have made significant achievements in environmental policy in recent
decades. Reductions in emissions of sulphur dioxide and ozone-depleting CFCs, for instance, reflect
successful national and international policy-making processes, informed by careful scientific research.
However, major environmental difficulties remain to be solved. A number of OECD Member countries'
energy use and associated CO2 emissions show an upward trend. A variety of local problems remain
concerning waste disposal, water supply and water pollution. Globally, deforestation and the depletion of
some fish stocks are continuing.
36.
The ecosystem can be viewed as a life-support system whose functioning is essential to human
and other species' survival. The need to maintain its integrity for present and future generations, as
expressed in the Brundtland Report, provides a set of boundary conditions for economic development.
These conditions centre on ensuring that disturbances to ecosystems are not beyond such bounds and do
not therefore serve to adversely influence economic, social and environmental conditions. This has led to
the following principles for setting policy:
- Limiting the release of substances to rates within the absorption capacity of the environment
- this principle has bcen applied, for example, in international agreements on sulphur
emissions, national regulations on water pollution, and national regulations on radioactive
emissions based on international guidance;
- Managing renewable resources in a manner that ensures maintenance of their ecological
functions - this principle has been applied, in some cases, to forestry and fish stocks;
- Managing non-renewable resources in a manner that preserves their ecological function
within the potential of renewable resources to replace them - this principle is beginning to
be applied, for example, to soil management in some countries.
37.
The application of these principles requires the critical levels of resource use or pollution that
would lead to irreversible damage to human health or ecosystems to be identified. The causal links
between some activities and their environmental and human health impacts have been clearly
demonstrated, for example in the case of lead from gasoline or CFCs. Others remain the subject of
scientific uncertainty. The Precautionary Principle, which formed part of the 1992 Rio Declaration signed
by virtually all the world's nations, provides a basis for coping with this uncertainty, such that lack of full
scientific certainty about threats of serious or irreversible damage should not be a reason for inaction.
38.
In a sustainable development perspective, environmental protection has to be balanced with
economic growth when these are in conflict, although policy should be aimed at integrating environmental
concerns with economic and social imperatives and, whenever possible, exploiting complementarities.
Hence, the application of environmental principles must be put into a cost-benefit framework, because
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ecosystems and natural resources cannot be protected regardless of the cost to society. The overarching
objective is to maximise human welfare, and provide a sound economic, social and environmental base for
future generations.
39.
A mix of different instruments will be necessary to ensure the most cost-effective means of
achieving such aims. As mentioned in the remarks on the economic dimension, the presence of
environmental externalities and hence the divergence between private and social costs requires a range of
measures which attempt to take account of these factors. Since Council's recommendation in 1972 on the
application of the Polluter Pays Principle, numerous OECD reports have examined its practical
implications, and reviewed experience with economic and other instruments.
40.
A considerable effort has been made in Member countries and in the Organisation to develop
methods for evaluating environmental damage costs or externalities. In principle, these costs can be
internalised through environmental taxes. Placing values on environmental goods and services also
allows, in theory, for their inclusion in national accounts, forming a better basis for policy strategies.
Alternatively, risk analysis allows the application of concepts such as environmental "options" or
"insurance". Environmental criteria can also be introduced into economic processes as boundary
conditions. In this case, the most common policy solution so far has been regulation, although there is
also a role for economic instruments in ensuring that such constraints never bind. Again, the OECD has
carried out a great deal of analysis of the theory and practice of the various policy instruments.
41.
Several horizontal OECD studies have to some extent examined the relationship between
environmental, economic and social priorities with regard to specific issues. These include the work on
employment and the environment, trade and the environment, agriculture and the environment, sustainable
fisheries, "Regulatory Reform". "Linkages" and "Globalisation".
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ANNEX II
PROCEEDING WITH CONCRETE PROJECTS
42.
It is proposed that we develop and intensify our horizontal work on sustainable development by
elaborating on, and commencing the following specific, concrete projects:
- Climate change.
- A cross-organisation review of subsidies
- A cross-organisation project on technology development
- An integrated review of indicators of performance
The project on climate change, which builds on existing work in the OECD and the IEA. in response to
proposals from the US authorities in the context of the Economic Policy Committee, is further specified
below. The other three projects are briefly outlined in the last part of this Section. They will have to be
elaborated on and further specified, which I propose to do in my first Interim Report to Council in July.
1.
Further Work on Climate Change
43.
The agreement reached in Kyoto raises a number of issues which should be covered by future
work. These concern basically the following areas:
- Issues of clarification and implementation
- Effects of achieving the Kyoto targets
- Moving beyond Kyoto
Work in these three areas will involve a number of OECD directorates, as well as IEA and NEA. While
climate change is likely to remain on the agenda for the foreseeable future, this project will be organised
on a three-year time-frame. Through this period intermediate outputs will be produced, and strategic
check-points will allow course corrections to be made.
Issues of clarification and implementation
44.
The Kyoto Protocol established both a set of targets for future emission reductions to be
achieved by Annex 1 countries and a set of mechanisms for achieving these targets. However, the
Protocol also raises a number of questions concerning the exact meaning of both targets and mechanisms
for reaching them. In the near future, countries will have to find ways of agreeing on the exact
interpretation of its various clauses, and the OECD may continue to be a venue for such discussion.
45.
The economic costs of implementing the Kyoto agreement will, to a large extent, depend on the
use of the flexibility mechanisms built into the protocal. These include, apart from possibilities for
achieving least-cost emission cuts by differential cuts in the six gases covered, the use of sinks and of joint
attainment of emission targets (or "bubbles"), joint implementation mechanisms and banking of unused
emission rights.
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46.
While there has been some experience with the use of economic instruments to deal with
environmental issues at the national level, the use of these flexible mechanisms at the international level
raises questions of how they should be implemented, and of how to achieve low cost, reliable monitoring
and verification of emissions. There is also a wider need to monitor and ensure compliance with the
targets established under the Protocol.
47.
Costs will also depend on how individual countries go about achieving their national targets.
Use of the new mechanisms under the Protocol is to be accompanied by domestic action. The choice of
policy instruments at the domestic level will determine the overall environmental effectiveness, economic
efficiency and equity of implementation strategies. The OECD is a traditional venue for Member
countries to exchange policy experience, to review domestic strategies and identify good practice. In the
coming years, the OECD may be an important venue for such an exchange to occur on climate change
policy as countries move forward to implement Kyoto.
Effects of achieving the Kyoto targets
48.
The effects of achieving the Kyoto targets will depend on how much use is made of the flexible
mechanisms built into the agreement and on the way countries go about implementing emission cuts
domestically. Demonstrating the different economic impacts of achieving the desired emission cuts
depending on the use of mechanisms will be part of the OECD work programme. In addition to overall
production affected. and income levels, economic structures, trade patterns and transfers between countries will be
49.
At the same time as affecting the economic dimension of sustainability, the emission cuts to
achieve the Kyoto targets will have implications for the human/social dimension in that wealth and income
distribution will be affected. Depending on how implementation takes place in individual countries. the
domestic distribution of real incomes will be affected. Moreover, there will be an impact on income
distribution between countries. A particular issue in this context is how international investment patterns
may be affected and how international technology flows will respond to the implementation of the
agreement, including the clean development mechanism.
Moving beyond Kyoto
50.
Over the longer term, emission cuts concentrated on Annex 1 countries will both be costly in
terms of economic loss and insufficient to contain climate change. Thus, dealing effectively with the
challenge of climate change over time will have to involve a wider set of countries. This raises some
difficult issues. First, developing countries may not perceive it as being in their interest to incur economic
costs to achieve emission cuts that will benefit the much richer Annex 1 countries. Second, since existing
greenhouse gas concentrations reflect, to a large extent, past emissions by Annex 1 countries, asking non-
Annex I countries to contribute to future emission cuts on an equal footing with the Annex 1 countries
may be perceived as unfair. Third, the benefits of achieving emission cuts will not be equally distributed
across countries since the costs of climate change differ across countries.
51.
Against this background, incentives will have to be created for the integration of more countries
into future agreements to cut greenhouse gas emissions. These incentives may take different forms, such
as side payments. or could be integrated into initial allocations of tradable emission permits. One
important aspect of future OECD work will be the examination of what incentives are necessary to achieve
in the future more broad-based agreements, and on how such incentives can be established.
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52.
Another important aspect of future work will be to look to the long term and to consider how to
assist OECD Member countries to achieve deeper reductions in greenhouse gases. Long term solutions to
climate change can only be achieved through technical and social change in individual countries. OECD
countries are an important source of technological and social innovation and, in particular, can play a
critical role in making climate friendly technologies available for the future. OECD may play an
important role in assessing alternative OECD policy strategies to achieve the technical, social and
behavioural change needed to reach long term greenhouse gas reduction objectives.
Integrated work by the individual directorates involved
53.
This work programme will begin by developing a common approach to the above issues, and
will involve several Directorates, the IEA and the NEA, working in close collaboration and under the
guidance of a co-ordination group chaired by the Deputy Secretary-General responsible for this project.
The relevant committees will discuss individual pieces of work which will fit into the overall project.
Committee discussions and the papers that feed into them may be considered both as final outputs of
individual pieces of work and as intermediate inputs to a final report on the current phase of this work
which will be delivered to the OECD Ministerial Council Meeting in 2001. Main lines of the work
undertaken by individual directorates are briefly outlined below.
- ECO's work will follow a three-stage process. A first stage, lasting until spring 1999, will
include a general evaluation of the Kyoto agreement focused on its macroeconomic effects, a
review of implementation issues, and an assessment of how incentives can be established for
a wider set of countries to participate in future agreements. The main vehicles for the vetting
of this work will be WP1/EPC. A second stage, continuing through year 2000, will review
the policies pursued by individual countries to implement the agreement. It will be based in
part on the first-phase work for WP1 and should be examined by EDRC as part of that
committee's work on how countries move towards sustainable development in the
environmental dimension. (The analytical framework for the non-climate change elements
of these country reviews will also be provided through WP1/EPC, and will draw on work by
a number of other directorates.) The third phase, which will feed into the report for the 2001
Ministerial, will consist of drawing out the cross-country implications of the review of
individual countries' progress and will be considered jointly by WPI/EPC/EDRC.
- ENV will consider climate change along two main lines: first, on the international dimension
of climate change focusing on input into UNFCCC and the Kyoto Protocol and second on
domestic policy options and strategies. Along the international dimension, ENV will
contribute analysis on emission trading and other implementation mechanisms and help to
advance monitoring and compliance under the Protocol, including support for the joint
IPCC/OECD/IEA programme. The second line of work will concentrate on domestic policy
options and strategies with an initial focus on environmentally sustainable transport. Beyond
looking at transport, ENV will also assess government purchasing policies, domestic tradable
permit systems and compensation policies to redress the distributive effects of climate
change responses. The work will be undertaken by the Environment Policy Committee
drawing on its subsidiary bodies and the Annex 1 Expert Group. The Forum on Climate
Change, which is a horizontal activity, and provides for multi-stakeholder participation, is
also an important means of identifying emerging issues and sharing experience on promising
domestic policy options.
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- DCD will lend its support to a review of the implications for development co-operation of the
Climate Change Convention. This work, undertaken by the DAC Working Party on
Development Co-operation and Environment, will seck to identify practical ways for donors
to help developing countries meet their obligations under the Convention. Building on the
existing body of work in the area of capacity development for cleaner production, emphasis
will be placed on exploring new financial mechanisms and opportunities for public-private
partnerships.
- AGR is examining the contribution of agriculture to greenhouse gas sinks and emissions (for
which indicators are also being developed), and is planning to analyse the possible impacts of
climate change on agriculture.
- The CCNM programmes include policy dialogue in relation to climate change, which is
described in Annex IV.
- The Development Centre has recently produced a draft paper using the GREEN model to
simulate various scenarios for the Kyoto Protocol. Further work in this area could be
envisaged, as needed by the Organisation in preparation for COP4 and beyond. A
comparative modelling project, involving Member countries and outside experts can also be
envisaged.
- ECMT has completed a survey of policies adopted in OECD/ECMT countries to reduce CO2
emissions from transport, and this will be followed up with work to assess their impact.
Following the adoption of a joint declaration of Ministers and Industry Representatives on
reducing CO₂ emissions from new passenger cars, work will be undertaken to monitor the
implementation of the agreement.
- The IEA will contribute, inter alia, with an in-depth study of relationships between CO,
emissions from energy and economic growth, using IEA data covering about 140 selected
countries and region. The IEA is following a five-part approach to the energy aspects of
Kyoto; explaining the Protocol; elaborating the new mechanisms; identifying the energy
challenges and opportunities; designing policies and measures; and engaging non Annex 1
countries.
- The NEA will consider the implications of targets for emission reduction on nuclear energy
use. Seventeen of the Annex 1 parties generate a fifth or more of their electricity from
nuclear sources, with eight of them having a nuclear contribution of two-fifths. It is
estimated that current use of nuclear energy avoids the addition of a further 8 per cent to the
world's emissions of carbon dioxide from energy production and use. For many countries
significantly relying on nuclear energy, meeting targets for emission cuts will probably
require maintaining as many as possible of their current nuclear power plants in operation,
for their full expected or licensed lives if not beyond. Two factors that will have a large
influence on the availability of nuclear electricity in the next two decades are technology and
economics of life extension, and public attitudes to nuclear energy if there continues to be a
lack of satisfactory demonstration of spent fuel disposal. The NEA is working with its
Members on the technological and economic aspects of plant life time extension, and spent
fuel/highly radioactive waste management and disposal.
54.
Work by the individual directorates will proceed based on co-ordination and collaboration. This
will include exchanges of comments and ideas at the initial stage of designing individual pieces of work,
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through the work process, and when outputs become available. To ensure that co-ordination and
collaboration will proceed smoothly - and that intermediate outputs are consistent - the consultation group
on Climate Change chaired by the Deputy Secretary-General, already established, will co-ordinate this
activity. The group will report as appropriate to the Steering Group on Sustainable Development chaired
by the Secretary-General. One will also aim at joint committee meetings as appropriate.
2.
Other Projects
Environmental impact of economic subsidises
55.
A second project under the sustainable development initiative would deal with the environmental
impact of economic subsidies and resource pricing. "Getting the price right" was suggested as a crucial
factor in the effective pursuit of sustainable development. The suggestion is for the OECD to launch a
project under the sustainable development initiative that deals horizontally across the Organisation (for
example, ECO, ENV, AGR, IEA, others) with the critical issue of subsidies, building upon, for example,
the recent report on "Impacts of Economic Support Measures on the Environment" that will be submitted
to the Council at the Ministerial level. There is much experience on measuring and analysing subsidies in
the OECD. This topic is central not only to sustainable development and follow up to Kyoto, but also to
the strategic goals of regulatory reform, market liberalisation and global investment. In doing so. it would
have to be recognised that not all subsidies are inherently "bad", since they may be put in place to meet
different types of policy objectives, and their removal may disproportionately affect some groups in
society; indeed, new subsidies and incentives may be important elements of governments' policy packages
to meet Kyoto targets and sustainable development goals.
Impact of technology progress
56.
Provided the signals delivered by incentives built into the system are right, the potential for
solutions which will enhance resource productivity arising from new knowledge, from product and process
innovation, from advances in technology, and from social innovation is considerable. This would involve
technologies for more efficient conversion of energy, more efficient processes for product manufacture,
redesign of product composition to use less material and energy, re-conceptualisation of the service
(product) being offered to seek radical reductions in materials consumed both during production and over
the entire lifetime of use. At the same time, the potential implications for the sustainable use of resources
resulting from developments in biotechnology, GMOs, and the use of hormones in agriculture, fisheries
and human health, present challenges to policy makers. Two dimensions of OECD work in this area will
be important: how to get the signals right; and how to maximise international sharing of relevant
knowledge, transfer of key innovations, and co-operation in the development and application of suitable
advanced technologies.
57.
A coherent effort is needed to ensure that incentives delivered by framework conditions (taxes,
subsidies, resource pricing), and national innovation systems are conducive to increasing resource
productivity. This will stimulate much-needed technological developments to improve the efficiency of
energy transformation and of natural resource use in the full range of human activities, Progress on these
fronts will be essential if we are to meet global targets for reducing greenhouse gas emissions while
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bringing about the targeted reductions in poverty and general improvements in quality of life Initiatives
to stimulate technology developments will, however, succeed only if the social and cultural context in
which they take place are properly understood and factored into policy-making. The Climate Technology
Initiative (CTI) offers particular opportunities for international collaboration.
58.
The importance of the link between technology and sustainable development was recognised as
one of the top priorities for further work at an informal OECD workshop of experts in October 1997 on the
subject, Economics of Sustainable Development: A Next Generation Work Programme for OECD.
Participants agreed that new innovations are likely to be among the most important mechanisms to de-link
economic growth from environmental degradation and should thus be one of the areas to which OECD
should give highest priority.
59.
A horizontal project could investigate the impact of technology progress, international R&D
collaboration and market diffusion of new technologies conducive to enhancing resource productivity,
against a backdrop of new global environmental challenges and changing concerns on energy security.
This may include: identifying best policy practices in innovation strategies in support of sustainable
development, encompassing the effects of different environmental policy instruments on technology
progress; identifying and assessing the potential environmental contribution of new technologies;
advancing the use of new technologies (such as bio-technology) for cleaner industrial products and
processes. A possible IEA contribution on the role of energy technology could focus on the clean and
efficient use of fossil fuels; renewable energy sources; and improved efficiency at all stages of the energy
cycle, from production to consumption.
Work on indicators of sustainable development
60.
A large number of indicators is already available in the OECD -- or in the course of being
developed -- which are relevant for an assessment of progress towards sustainable development. These
include standard economic indicators and indicators of structural reform, used in the context of EDRC
reviews; social indicators, first introduced in the late 1970s and early 1980s, and more recently indicators
of education and human capital; environmental indicators, used in Environmental Performance Reviews,
and agri-environmental indicators; indicators on energy use, undertaken by the IEA; development
indicators undertaken by DAC; and, more generally, indicators on subsidies and taxes, including PSEs in
agriculture. relevant to framework conditions for sustainable development. Some of these are described in
Annex III.
61.
Although the OECD has been in the forefront in developing indicators of performance in the
economic, environmental, and social domains, a concerted effort will be needed to improve analytical
soundness, relevance and timeliness of indicators in several areas. Indicators are particularly needed to
link. at the sectoral level. economic activities and environmental and natural resources; to link the
environment and social factors (e.g. pollution and health, income and other social indicators): to improve
the quantitative understanding of issues of particular concern, such as biodiversity, waste, toxic
contamination, water use and quality. and soil erosion; and to measure the implementation and results of
policies. In this process, the OECD would aim at developing, in an integrated and manageable way,
4.
The transport sector is responsible for 25 per cent of global CO2 emissions from fossil fuel use, and emissions are
expected to double by 2020 in the absence of new mitigation measures. Innovation to reduce vehicle energy intensity
and to switch to alternative fuels could dramatically reduce emissions; only 10-40 per cent of emission reductions are
estimated to be achievable without increasing the overall cost of transport. [Michaclis. 1997, Sustainable Transport
Policies: CO2 Emissions From Road Vehicles].
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indicators of performance; these indicators would be used to improve policy analysis of key aspects of
sustainable development in OECD countries and contribute to better integrated policies. While the
selection of an appropriate set of indicators requires an improved analytical framework and understanding.
an iterative process where work on indicators inspires work on the analytic framework, and vice versa,
seems a good approach.
62.
An OECD in-house task-force should be established with the mandate to agree on a limited and
manageable set of indicators covering key aspects of the three dimension of sustainable development, to
recommend on their integration, and to advise on their use in the context of country reviews to monitor
progress towards sustainable development. This body should build on existing OECD work, as well as on
national and international work being developed in this field (e.g. in the UNCSD and the Word Bank). A
synthesis of this work should be presented in the context of the above mentioned OECD Report on
Sustainable Development to the Ministerial Council Meeting in 2001.
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ANNEX III
MEASURING PERFORMANCE: ON-GOING OECD WORK ON INDICATORS
63.
Indicators have three basic functions: simplification, quantification, and communication (policy
influence). They simplify complex phenomena to make them quantifiable, so that information can be
easily communicated. In the context of work on sustainable development, indicators aim at measuring
socio-economic and environmental variables in a way so as to allow an integrated approach to policy.
How to best achieve this integration is an open issue. Attempts to integrate the environmental impact of
economic activities within the traditional system of economic accounts raise difficult and controversial
problems for the monetary valuation of environmental resources which command no market values. More
broadly. development goals of equity, cultural aspiration or political stability are difficult to quantify and
impossible to value in monetary terms. While synthetic indexes of 'human' developments have been
developed outside the OECD, the loss of transparency due to arbitrary assumptions and aggregation of
these various dimension of sustainable development makes such approaches impractical. An alternative
route is that of developing a manageable set of indicators, covering the most important dimensions of
sustainable development, and using it to assess progress towards sustainable development.
64.
Indicators currently available in the OECD -- or in the course of being developed -- which are
relevant for the assessment of progress towards sustainability are presented below for specific types of
resources, such as the environment and natural resources; and human capital, including knowledge, skills
and health status of the population. Some of these indicators are developed at both national and sub-
national level. Indicators of progress towards sustainability for developing countries, agreed by DAC, are
also presented.
Environment
65.
A programme on environmental indicators was initiated at the OECD in 1990, following a
request at the 1989 G-7 Summit. This programme has led to the definition of a conceptual framework, to
the selection and measurement (for a number of countries) of a selected set of indicators and to their
regular use in the OECD analytical work and environmental performance reviews. Indicators that measure
progress in environmental conditions and trends. i.e. the OECD Core Set of environmental indicators, are
shown in Annex III, Table 1, grouped according to the environmental issue they address. These indicators
may be separated into indicators measuring pressure on the environment due to human activities;
indicators of environmental conditions, relating to the quality and quantity of the environment and of
natural resources; and indicators of societal responses to environmental changes and concerns. While
experience has shown that environmental indicators are cost-effective and powerful tools, data quality and
timeliness remain insufficient, calling for further progress in this area.
66.
In addition to indicators of environmental performance, other sets of indicators have been, or are
in the process of being, developed to allow the integration of environmental concerns into sectoral
policies, such as agriculture, energy and transport. Work is underway to identify and quantify the
environmental impacts -- both harmful and beneficial -- of agriculture and agricultural policies. This is
currently directed at establishing an analytical framework for defining consistent definitions and
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measurement of agri-environmental indicators (AEIs)⁵. Indicators for the integration of environmental
concerns have also been developed for transport and energy policies.
67.
A third set of environmental indicators aim at integration of environmental concerns into
economic policies more generally, through environmental accounting. Satellite accounts, aimed at
complementing the economic information of national accounts with a valuation of stocks of natural
resources and of non-market services of the environment, have led to the development of the UN System
of Integrated Environmental and Economic Accounting (SEEA) and to the elaboration of indicators of
environmentally adjusted net domestic product (EDP). Natural Resource accounts, providing information
on physical flows and stocks of natural resources, have been developed in several OECD countries, and
used to calculate indicators of sustainable use of specific resources.
68.
Also in the context of indicators of environmental conditions, a specific role should be attributed
to the energy system. The IEA has developed a well defined set of macro energy indicators, e.g., energy
intensity, CO₂ intensities (CO,TPES, CO./GDP, CO./population), and different elasticities used for
international comparisons and for a number of IEA products (Country Studies, WEO). The IEA is also
developing new indicators at the micro level that deal with energy intensities of specific processes,
activities and technologies. These are fully compatible with the present set of indicators published by the
OECD Environment Directorate in its biannual compendium of environmental data and in related
environmental indicators publications.
Human capital and the social dimension
69.
The OECD has played a pioneering role in the development of educational indicators. More
recently, in response to a request by the OECD Ministerial Council, the OECD prepared an analytical
report on Indicators of human capital, to be presented to the April 1998 Ministerial Meeting of the
Council. Available OECD indicators cover human capital stocks and investment: and returns to education.
Most of these indicators relate to formal education attained in youth, while measures of how skills and
competencies are gained and lost throughout life, and how effectively they are used, are more limited. A
first step in measuring some types of skills is represented by the International Adult Literacy Survey
(IALS). Data limitation in this area contrast with the policy recognition that rapid change causes current
knowledge to depreciate faster than before; this recognition is reflected in the adoption by the OECD of
the "lifelong learning" concept to ensure that human capital is regularly renewed. The OECD contribution
to the analysis of human capital is partly about maintaining its existing indicators, and partly in addressing
the data bias towards initial schooling and tertiary education.
70.
Work on social indicators dates back to 1970, motivated by an appreciation that economic
indicators alone were an inadequate measure of the welfare of countries. In 1982 the OECD published a
list of thirty-three Social Indicators, to assess improvements in the well-being of the population over a
broad range of areas including health; education and learning; employment and the quality of working life;
time and leisure; income and wealth; the physical environment; the social environment; and personal
safety (this list of Social Indicators is included as Annex III, Table 2). While the regular measurement of
this set of indicators requires comprehensive population surveys which were at that time rarely available,
these data are now available for a greater number of countries. In fact, except for data derived from time-
use surveys (which were reviewed in a study on non-market activity carried out for the Statistics
Directorate) and survey data on fear of crime, all indicators in the 1982 list are published on a regular or
5.
OECD (1996), Environmental Indicators for Agriculture, identifies thirteen agri-environment issues for which
indicators are being developed.
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occasional basis by DEELSA. In the light of the stronger rationale for, and increased availability of, social
Social Policy Ministers.
indicators, work is underway in ELSA to prepare a new list of Social Indicators for the June meeting of the
71.
In recent years, the perception that traditional health outcome measures such as mortality and life
expectancy, are becoming inadequate has led OECD countries to identify more accurate health outcomes
indicators, such as disability-free and health-adjusted life expectancies and years of remaining life.
Progress with the development of comprehensive summary indicators of health status was discussed by an
experts' group in December 1997. In response to this need, the OECD has focused on both the
methodological challenges and requirements for the development of summary measures of health status;
and explored the development and use of performance and quality-of-care indicators, as available in
several OECD countries, which are often considered as suitable proxies for health outcomes
Indicators for sub-national areas of OECD countries
72.
Most of the indicators reviewed refer to the national level. Sustainable development has
however an important spatial dimension, and its requirements apply to communities and areas within
national economies. As part of the "Activity on Territorial Data and Rural Indicators", TDS has launched
a project on Rural Environment and Amenity Indicators (RENVI)". This has led to the construction of a
territorial data base covering the entire OECD area and distinguishing over 2000 sub-national units that
can be aggregated according to different typologies. Indicators covering demographic settlements and
migration; economic structure and performance; well-being and cohesion; ecology and amenity, were first
published in 1994, with more comprehensive report in preparation by the end of 1998.
Indicators for non-Member countries
73.
A coherent and synthetic set of "Indicators of Development Progress" was agreed by DAC
Members and other multilateral agencies in early-1998. These indicators will be used for monitoring
development progress in meeting key goals as formulated in Shaping the 21st Century - The Contribution
of Development Assistance. While limits in statistical information and differences in policy priorities
account for the specific selection of indicators, these indicators cover-the three dimensions (economic,
environmental, and social) that were identified as main elements of sustainable development. The 22
indicators should allow monitoring progress in reducing extreme poverty (economic well-being); in
extending primary education, improve gender equality, reduce infant-, child- and maternal mortality, and
extend reproductive health services (social development); and ensuring that current trends to a loss of
environmental resources are effectively reversed (environmental sustainability and regeneration). A list of
such indicators is provided in Annex III, Table 3. While work is underway on a publication on this core
set of indicators, efforts continue to improve data coverage and comparability (in the area of good
governance and participatory development. as well as on indicators for land use, marine environment and
air quality), and to address remaining conceptual issues (as in the case of the indicator of "extreme
poverty").
6.
The Project on Rural Environment and Amenity Indicators (RENVI) has two main aims: Provide a territorial
breakdown of existing environmental indicators on soil, water, air, flora and fauna. and developing conceptual bases
for missing indicators concerning more complex cco-systems such as topography, settlements, habitats, natural and
cultural landscapes. The project is undertaken in consultation with other OECD indicator activities like the Agro-
environment. environment Indicators project, which focuses on an important. but specific sectoral policy aspect concerning the rural
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Table 1. Summary of OECD Core Set Indicators' by Environmental Issue
Issues
Indicators of virontmental pressure
Indicators
Immental
conditions
Indicator
of
societal
response
Climate change
Index of greenhouse gas
S/M
Atmospheric concentrations of
S
Energy efficiency
M/L
emissions
greenhouse gases (CO₂ CH4,
Energy intensity (i.e. total
S
N20)
primary energy supply per unit
of GDP or per capita)
CO, emissions
S
Global mean temperature
S
Economic and fiscal instruments
M
CH4 emissions
S/M
(e.g. prices and taxes,
N2O emissions
S/M
expenditures)
CFC emissions
S/M
Ozone
layer
Index of apparent consumption
M
Atmospheric concentrations of:
S/M
CFC recovery rate **
M
depletion
of ozone depleting substances
ozone depleting substances
Apparent consumption of CFC
S/M
Ground
level
UV-B
M
and halons
radiation **
Stratospheric ozone levels
Eutrophication
Emissions of N and P in water
L
BOD/DO. concentration of M
S/M
Population connected to
M/L
and soil (nutrient balance)
and P in inland waters
biological and/or chemical
sewage treatment plants
N and P from fertiliser use and
S
and in marine waters
M/L
Population connected 10 sewage
S
from livestock
treatment plants
User charges for waste water
M
treatment
Market share of phosphote-tree
S/M
defergents
Acidification
Index of acidifying substances
M/L
Exceedence of critical loads of
M/L
% of cur fleet equipped with
S/M
pIl in water and soil
catalytic converters
Emissions of NOx and SOx
S
Concentrations
in
acid
S
Capacity of SOx and NOx
M/L
precipitation
abatement equipment of
stationary sources **
Toxic contamination
Emissions
of
heavy
M/L
Concentration of heavy metals
L
Changes of toxic contents in
L
metals
& organic compounds in COV.
products and production
media and in living species
processes
Emissions
of
organic
L
Concentration of heavy metals
S/M
Market share of unleaded petrol
S
compounds
in rivers
Consumption of pesticides
S/M
Urban
Urban air emissions: SOx, NOx.
M/L
Population exposure to air
L/M
Green space (Areas protected
M/L
environmental
VOC
pollution **, 10 noise
from urban development)
quality
Urban traffic density
M/S
Concentrations of air pollutants
S
Economic, fiscal and regulatory
M
instruments
Urban car ownership
S
Ambient water conditions in
M/L
Water treatment and noise
S/M
urban areas **
abatement expenditures
Degree of urbanisation
S/M
Biodiversity
Habitat alteration and land
L
Threatened or extinct species as
S
Protected areas as % of
S/L
conversion from natural state
a share to total species known
national territory **, and by
To be further developed
type of ecosystem
Key ecosystems
M
Protected species
S
Cultural landscapes
Indicators to be further developed.
Waste
Generation of waste:
Waste minimisation (to be further
L
municipal waste "
S
developed)
industrial waste
S/M
Recycling rates
S/M
nuclear waste **
S
Economic and fiscal instruments,
M
hazardous waste ..
S/M
expenditures
Movements of hazardous waste
S
Water resources
Intensity of use of water resources
$
Frequency, duration and extent of
M/L
Water prices and user charges
M
**
water shortages "
water supply
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Forest resources
Intensity of use of forest resources
M
Area, volume and structure of
S/M
Forest area management and
M/L
(Actual harvest / productive
forests "
protection "
capacity) "
Fish resources
Fish catches
$
Size of spawning stocks
M
Regulation of stocks (quotas)
M
Soll
degradation
Erosion risks**
M/L
Degree of top soll losses
M
Rehabilitated areas OR
M
(desertification and
Change in land use
$
erosion)
General indicators,
Population growth & density "
Environmental expenditures
not attributable to
Growth of GDP"
Pollution control & abatement
specific Issues
Private & government finai
expenditures
consumption expenditure
Public opinion ..
Industrial production
Structure
of
energy
supply "
Road traffic volumes **
Road vehicle stocks "
Agricultural production -
Notes:
a) Indicators of the core set proposed by the OECD Group on the State of the Environment. It presents "main core" Indicators (pointed out by a double asterisk).
complementary indicators to accompany the message conveyed by "main" indicators, and proxy indicators when the "main" indicator is currently not
measurable. The indicators Included in the 1994 publication are printed in Italics. Each indicator is followed by 0 character specifying its availability:
S= short term, basic data currently available for a majority of OECD countries;
M
= medium term, basic data partially available, but calling for a supplementary effort 10 Improve their quality (consistency, comparability) and their
geographical coverage (number of countries covered):
L
=
long term, basic data not available for a majority of OECD countries, calling for a sustained data collection and conceptual efforts.
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Table 2. The 1982 List of Social Indicators
Title
Current title
Where published or available
Population
Survey data
Needed
Available
Life expectancy
Eco Santé
Perinatal mortality
Eco Santé
Short term disability
REVES
Long term disability
REVES
Regular educational experience
Years of schooling
Educational indicators
X
XX
Adult education
Education participation rate (adults)
Educational indicators
Literacy rate
Functional literacy rate
Literacy survey
X
Unemployment Rate
LFS Part III
XX
Involuntary Part time work
EmO 199?
X
Discouraged workers
EmO 199?
X
Average weekly working hours
Annual hours worked
EmO annex
x
Paid annual leave
X
Atypical work schedule
EmO (?)
Distribution of earnings
Quintile distribution
EmO 1996
Fatal occupational injuries
EmO 1989(7)
Free time
X
(time
X
use)
Free time activities
X
(time
use)
Distribution of income
Quintile distribution
LIS
study;
1997
ECO-
x
XX
DEELSA project
Low income
Share in lowest quintile
LIS
study;
1997
ECO-
XX
DEELSA project
Material deprivation
Relative Poverty Rate, using "old
LIS study: 1997 ECO-
X
XX
OECD" (sic) equivalence scale
DEELSA project (but using
"new" OECD equivalence
scale)
Average Poverty Gap
ECO-DEELSA study
Distribution of wealth
Quintile wealth distribution
Resources in retirement study
Suicide rate
Eco santé
Fatal injuries
Death rate from accidents
Eco santé (?)
Serious injury
Incidence of injuries
x
?
Fear of personal safety
Percent expressing fcar for personal
Netherlands social reports
safety at night
Work environment nuisances
Percent reporting exposure to
no
specific nuisances
Indoor dwelling space
Distribution of persons per room
Housing
census
Access to outdoor space
Per capita access to outdoor capita
Basic amenities
Per capita access to housing
Housing
amenities
census
Proximity of selected services
Per capita access
X
no
Exposure to air pollutants
Population exposed (percent)
Exposure to noise
Population exposed (percent)
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TABLE 3. Agreed Indicators of Development Progress
Goals
Agreed Indicators
Economic well-being
Reducing extreme poverty
The proportion of people living in extreme poverty in
1.
Incidence of Extreme Poverty
developing countries should be reduced by at least one'
2.
Poverty Gap Ratio
half by 2015.
(Copenhagen)
3. Inequality of Consumption Distribution
Child Malnutrition
Social development
Universal primary education
There should be universal primary education In all
2.
Net Enrolment in Primary Education
countries by 2015.
3.
Completion of 4th Grade of Primary Education
(Jomtien, Beiling. Coponhagen)
Literacy Rate of 15 to 24 Year Olds
Gender equality
Progress towards gender equality and the empowerment
2.
of women should be demonstrated by eliminating gender
Ratio of Girls to Boys in Primary & Secondary Education
Ratio of Literate Females to Males (15-24 Year Olds)
disparity in primary and secondary education by 2005.
(Cairo, Beijing, Copenhagen)
Infant & child mortality
The death rates for Infants and children under the age of
2.
Infant Mortality Rate
five years should be reduced in each developing country
Under 5 Mortality Rate
by two-thirds the 1990 level by 2015.
(Cairo)
Maternal mortality
The rate of maternal mortality should be reduced by
2,
Maternal Mortality Ratio
three-fourths between 1990 and 2015.
(Calro. Beljing)
3.
Births Attended by Skilled Health Personnel
Total Fertility Rate
Reproductive health
Access should be available through the primary health-
2.
Contraceptive Prevalence Rate
care system to reproductive health services for all
HIV prevalence in 15-24 year old pregnant women
individuals of appropriate ages, no later than the year
2015,
(Cairo)
Environmental sustainability and
regeneration
Environment
There should be a current national strategy for
2.
Countries with National Sustainable Development Strategies
sustainable development, in the process of
3.
Population with Access to Safe Water
implementation, in every country by 2005, so as to
4.
Intensity of Freshwater Use
ensure that current trends in the loss of environmental
5.
Biodiversity: Land Area Protected
resources effectively reversed at both global and
6.
Energy Efficiency: GDP per Unit of Energy Use
national levels by 2015.
(Rio)
Carbon Dioxide Emissions
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ANNEX IV
ACTIVITIES IN RELATION TO NON-MEMBERS
74.
In recognition of their global nature and importance, some dimensions of sustainable
development have been a growing element of OECD's work in relation to non-Member economies. In
particular, OECD's policy dialogues and analytical work through CCNM programmes and the
Development Centre, and policy co-ordination through the DCD/DAC and the Club du Sahel have been
addressing the economic, environmental and social dimensions of the development of non-Members,
including the "Big Five" (Brazil, China, India, Indonesia and Russia).
Co-operative relations with non-Members
75.
Co-operative relations with non-Members on the environment side has involved:
- environmental performance reviews of a number of transition economies (a review of Russia
is underway);
- policy dialogue with a wide range of emerging and transition economies, including through
participation in the Climate Change Forum (the "Big Five", and some other Asian and Africa
countries will attend the next Forum), as well as in sectoral meetings covering sustainable
agriculture and rural development policies;
- a series of DAC Guidelines on Aid and Environment has been designed to promote best
practices in strengthening developing countries' capacity to address environment challenges
and implement their national strategies for sustainable development;
- since 1993, the OECD has served as the Secretariat to a Task Force to facilitate the
implementation of an Environmental Action Programme for Central and Eastern Europe; and
- research and modelling, including maintenance by the Development Centre of the OECD's
"GREEN Model".
76.
Further OECD work on sustainable development, should involve increasing co-operation with
non-Member countries. As discussed in "The World in 2020", the "Big Five", along with the United
States, Japan and Germany, could disproportionately shape future global environmental trends. Together
these countries already account for more than half the world's population, its economic output, its carbon
emissions and its forests.
77.
Looking ahead to 2020, a large shift in economic weight from the OECD area towards non-
OECD economies is in prospect. This holds the potential of promoting sustainable development, as
economic growth can be decoupled from pollution generation and resource consumption, for example
through a shift of production from 'materials-based' manufacturing to 'knowledge-based' services;
development and diffusion of cleaner technologies; alleviation of poverty and the associated
environmental effects in non-OECD economies; the assurance of agricultural sustainability and the sound
management of resources; and the generation of additional wealth to finance environmental improvement.
Nevertheless, overall resource consumption and pollution may well increase due to increasing economic
activity and population.
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78.
Thus, non-OECD countries will likely account for a growing share of the world's environmental
challenges. For example, a high growth scenario could see a doubling of greenhouse gas emissions from
1992 to 2020. The "Big Five" could account for over 40 per cent, and the non-OECD area for over three-
quarters. of this increase in emissions unless action is taken to modify such a scenario. Non-OECD
economies may also add to environmental pressures regionally, nationally and locally. This may occur
through rising volumes of hazardous and other wastes, the concentration of populations in "mega-cities",
more intensive agriculture, timber and fisheries exploitation, and growing demands for fresh water
resources'. There are already indications that these pressures could intensify insecurity and conflict within
and between countries.
79.
These possible trends suggest that deepening the Organisation's co-operation with non-OECD
economies in the sustainable development area, especially in relation to climate change, should be an
important clement of the OECD's future work. This could take the form of: i) strengthening the policy
dialogue activities, particularly with the "Big Five" -- initial emphasis on their national sustainable
development priorities can create the confidence required for deepening co-operation for the more
difficult, global challenges. such as climate change; ii) continuing research and improving quantitative
measures of sustainable development through use of the GREEN model (notably in the Development
Centre); iii) examining specific mechanisms for facilitating the adoption and diffusion of cleaner
technologies in non-OECD economies; and iv) strengthening co-operation and links with multilateral
financial institutions and others working with non-OECD economies, drawing on OECD's accumulated
experience and networks in environmental management co-operation in the "Big Five" and other transition
and emerging economies.
Development co-operation
80.
Policy co-ordination work in the development co-operation field is geared to OECD's Partnership
Strategy for the 21st Century. Adopted by the Development Assistance Committee in May 1996, this is
now the basic framework for the Organisation's work in development co-operation, incorporating long-
range developmental goals for economic well-being, social development and environmental sustainability
and regeneration. Thus, the work of DCD/DAC will continue to give a great deal of weight to economic,
social, environmental and political sustainability, based on experience showing that developing countries
have an even more unforgiving margin of error than OECD countries, in getting these balances right.
There is room for more exchange of experience between these groups of countries on achieving this
integrated balance.
81.
In helping Members to implement the DAC Shaping the 21st Century Strategy the OECD will
make constructive contributions to helping developing countries play their part in responding to global
sustainability problems, as well as building their own national capacities. The focus on capacity
development (human, institutional and financial) is crucial to sustainable development. The political
choice and public policy management needed to promote sustainable development put a premium on good
governance, effective participation, and conflict management. OECD/DAC Members have helped
highlight global strategic goals for sustainable development, and advancing these goals in practice will be
the focus of the Organisation's development co-operation work. Monitoring of progress will build on a
working set of core indicators for economic well-being, social development and environment recently
worked out by OECD/DAC, the World Bank, UN and others. While many of this core set of indicators
7.
Around 80 per cent of increased food demand over the next twenty years could originate from the non-
OECD countries. with half of it coming from China and India alone.
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applying to developing countries would be viewed as "threshold" indicators for developed countries, the
processes of their selection, and use, may make useful contributions to wider indicators work in OECD.
82.
The Club du Sahel brings strength to the OECD development co-operation approach by
providing catalytic support for the formulation of coherent policies in a vulnerable sub-region. These
efforts focus on the many dimensions of sustainable rural development, integrating natural resource
management, food security issues and agricultural change, including the implementation of the
Desertification Convention. Impact indicators, yet to be developed, are seen as important tools to address
the regional concern for sustainability of natural resource use.
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ANNEX V
SOME RECENT OECD, ECMT AND IEA PUBLICATIONS
RELEVANT TO SUSTAINABLE DEVELOPMENT"
Global Warming. Economic Dimensions
and Policy Responses.
OECD, 1996
Energy Technologies for the 21st Century
IEA, 1997
Towards Sustainable Fisheries: Economic Aspects
of the Management of Living Marine Resources
OECD, 1997
Sustainable Development: OECD
Policy Approaches for the 21st Century
OECD, 1997
Reforming Energy and Transport Subsidies
Environmental and Economic Implications
OECD, 1997
C02 Emissions from Transport
ECMT. 1997
Environmental Taxes and Green Tax Reform
OECD, 1997
Energy Policies of IEA Countries
IEA, 1997
Energy and Climate change: An IEA Source Book for
Kyoto and Beyond.
IEA, 1997
The World in 2020. Towards a New Global Age
OECD, 1997
Cleaner Production and Waste Minimisation in OECD
and Dynamic non-Member Countries
OECD, 1997
Applying Market-Based Instruments to Environmental
Policies in China and OECD Countries
OECD, 1997
Agriculture and the Environment: Issues and Policies
OECD, 1998
Efficient Transport for Europe:
Policies for Internalisation of External Costs
ECMT, 1998
1.
The list indicates some recent publications pertaining to work relevant to sustainable development. More
detailed overviews can be found in "Sustainable Development", June 1997 and "Climate Change
Catalogue", November 1997.
30
NBRE DE PAGES 32
MEMORANDUM
COUNCIL OF ECONOMIC ADVISERS
February 26, 1998
TO:
Janet Yellen
FROM:
Rebecca Blank
SUBJECT:
OECD and Climate Change
A couple of key issues you'll want to know about prior to your OECD trip next month:
1)
There is a proposal before the OECD from the environmental group to make "sustainable
development" an overarching priority, meaning that every directorate and committee will
need to find a way to address sustainable development issues in their working plan.
Within the U.S. delegation, Bondurant has evidently heard from CEQ and EPA and is
leaning toward support this proposal, while John Weeks is very hesitant about it. On
Wednesday, Rubin was meeting with the OECD Secretary General Johnston. Weeks had
just acquired Rubin's talking points the evening I left, and they essentially said, "I believe
environmental issues are important, but they should be dealt with in their appropriate place
within a broader context. They should also be dealt with inside of existing budget
resources." I suspect you're sympathetic with Rubin's viewpoint here, and may want to
reiterate that with Bondurant and others when you talk to them.
2)
A key issue is budget -- in part because of U.S. budget cuts, the OECD has experienced
what clearly feels like severe budget pressures recently, with significant cuts in staff. The
ECO directorate is particularly concerned about the sustainable development initiative
because they fear it will even further reduce the resources they have for the agenda they
want to pursue, forcing them to put more expertise into environmental issues.
This is one reason why the U.S. proposal for more work on global warming by ECO has
hit some resistance coming at the same time as this OECD-wide sustainable development
initiative, it's getting caught up in the larger argument over that; in addition, in the midst of staff
cuts in research groups, people are feeling stretched very thin and reluctant to take one big new
projects.
Thorvald Moe clearly wants ECO more involved in environmental issues, and strongly
supports having them do more work on global warming, along the lines you suggest. There was
also general support among WP1 delegates for the proposals the U.S. (i.e., me) laid out for
further research on global warming (and Moe suggests there's support by Ignazio Visco and
others within ECO). His comment to me was "If Janet wants to see this happen, tell her she'll
need to really make that clear and push for it next month. She'll get support from ECO and from
the Chalet (i.e., Moe) and that should assure that it happens. But she's got to push for it."
2
The primary agenda I talked about (in the meeting, with Moe, and with Bondurant and
U.S. staff): First, look at the instruments and mechanisms by which international emissions trading
systems can be established, including monitoring and enforcement mechanisms (with clear
attention to the non-OECD countries as well.) Second, evaluate the usefulness of various
domestic mechanisms to reduce emissions (such as R&D policy, regulatory policies, voluntary
policies, etc.) Third, look at how such domestic policy choices may interact with an international
trading scheme. I think that's consistent with your letter to Moe and our conversations. The
most enthusiasm is for taking on the first of these issues -- which I think is fine to start with, but
you want to keep pushing for the second part of the agenda as well, I suspect. You will have to
have at least some answer for the issue that I kept being asked about -- "If the U.S. want to
expand the agenda, why are they cutting our budget?"
I think the delicate task you'll face when you visit the OECD next month will be to
strongly support further work on global warming, without necessarily lending support to the
broader sustainable development proposal which sounds like a not-very-good idea.
CC:
JR
MEMORANDUM
COUNCIL OF ECONOMIC ADVISERS
17th February 1998
TO:
JANET YELLEN
FROM:
JEREMY RUDD BR
Subject:
OECD Work on Climate Change
At next week's WP-1 meetings, Dr. Blank will be expected to communicate a sense of where the climate
change work of the OECD should be headed. I wanted to sound out your preferences on the matter, so that
these can be communicated to Dr. Blank.
For your reference, I have enclosed the relevant background papers for the WP-1 meeting. The "Issues for
Discussion" paper and Annex Two are probably most relevant. I gave Randy and Joe copies of these last
week; Dr. Blank also solicited their help in briefing her for WP-1. (Note that Dr. Blank has scheduled a
delegation meeting for tomorrow afternoon.)