From barriers to opportunities: Enabling investments in resource efficiency for sustainable development

Increasing investments in resource efficiency is considered essential for transitioning towards a sustainable model of economic growth. This article presents evidence on the complex incentives, trade-offs, and challenges associated with the economics and politics of resource efficiency investments, especially in light of the Sustainable Development Goals and the Paris Climate Agreement. By synthesising and evaluating a wide range of empirical evidence, practitioners’ insights, and policy perspectives, this article carefully examines the role of resource efficiency in reconciling environmental and economic objectives. It makes particular reference to the investment barriers and transitional implications of moving economies towards more circular and resource efficient pathways. In doing so, it provides a policy-oriented guide and toolbox to help overcome barriers, unlock the economic potential of resource efficiency, and highlight the challenges associated with the resource transition. Overall, this article brings together evidence, aiming to further develop and propose new strategies for improving the efficient use of natural resources to advance the sustainable development agenda

Carbon Price Efficiency Lock-in and Path Dependence in Urban Forms and Transport Infrastructure

International audienceThis paper investigates the effect of carbon or gasoline taxes on commuting-related CO2 emissions in an urban context. To assess the impact of public transport on the efficiency of the tax, the paper investigates two exogenous scenarios using a dynamic urban model (NEDUM-2D) calibrated for the urban area of Paris: (i) a scenario with the current dense public transport infrastructure, and (ii) a scenario without. It is shown that the price elasticity of CO2 emissions is twice as high in the short run if public transport options exist. Reducing commuting-related emissions thus requires lower (and more acceptable) tax levels in the presence of dense public transportation. The emission elasticity also depends on the baseline scenario (especially population and income growth) and increases over time. In the longer run, elasticities are similar in the scenarios with and without public transport, due to larger urban reconfiguration in the latter scenario. This analysis may help calibrate general equilibrium models by providing price elasticities that depend on socio-economic and public transport infrastructure scenarios. If the goal of a carbon or gasoline tax is to change behaviors and reduce energy consumption and CO2 emissions (not to raise revenues), then there is an incentive to increase the price elasticity through complementary policies such as innovation support and infrastructure development

The Triple Dividend of Resilience—A New Narrative for Disaster Risk Management and Development

To secure development gains and help eradicate poverty in the long run, it is critical to strengthen ex-ante disaster risk management (DRM) measures that build resilience at the household, firm and macro level. Decision-makers however often view DRM investments as a gamble that pays off only in the event of a disaster. This is despite increasing evidence that building resilience yields significant and tangible benefits, even if a disaster does not happen for many years. This chapter outlines the Triple Dividend of Resilience as a new analytical method to enhance the business case for investments in building resilience. The three benefits that are outlined are: (1) avoiding losses when disasters strike; (2) unlocking development potential by stimulating economic activity thanks to reduced disaster-related investment risks; and (3) social, environmental and economic co-benefits associated with investments. The second and third dividends in particular are typically overlooked in appraisals around investment decisions, and can accrue even in the absence of disaster events. Presenting evidence of additional dividends to policy-makers and investors can provide a stronger case for investment in DRM, helping to reconcile short- and long-term objectives. This chapter sets the conceptual basis for the more detailed assessments of the resilience streams and implications for decision-makers provided in the following chapters

Illicit dealings: Fossil fuel subsidy reforms and the role of tax evasion and smuggling

This study develops a computable general equilibrium model for Nigeria to study the impact of fossil fuel subsidy reform - and energy taxes - on key economic parameters, including consumption, income distribution, tax incidence, and fiscal efficiency. The model also examines the role of informality, tax evasion, and fuel smuggling, and shows that these factors can substantially strengthen the argument in favour of subsidy reform. The study shows that redistributing revenues from subsidy reform using uniform cash transfers has a strong progressive (i.e. pro-poor) distributional effect. Moreover, redistributing reform revenues by cutting pre-existing labour taxes not only increases fiscal effciency, but also reduces the welfare losses associated with tax evasion, which in turn reduces the welfare costs of reform by up to 40%. Regardless of the method of revenue redistribution, reducing subsidies diminishes the incentives for fuel smuggling, and hence the welfare losses associated with it.The authors gratefully acknowledge that this work was supported by a JSPS KAKENHI Grant (No. 16K03613).http://www.grips.ac.jp/list/jp/facultyinfo/hosoe_nobuhiro

The Economics and Political Economy of Fossil Fuel Subsidy Reforms

There is a strong international consensus that fossil fuel subsidies (FFS) are detrimental to sustainable development – including the economic, social, and environmental dimensions of sustainability. Yet, despite strong drivers, the overall progress in reforming FFS has been limited. Various failed FFS reform attempts have demonstrated the complex economic and political challenges that must be understood and addressed. This thesis provides a systematic account of the factors that policy makers must consider in order to design and implement effective reforms. It recognises that the rationale for FFS reforms is determined within a complex – and sometimes conflicting – context of fiscal, macroeconomic, political, environmental, and social factors. By considering FFS reforms from these different perspectives, this thesis provides a comprehensive analytical assessment which yields crucial insights for the design of reforms. Specifically, this thesis provides analytical estimates of the impacts of FFS reforms on poverty levels, household consumption, welfare, competitiveness, and macroeconomic performance. It finds that consumption shocks incurred by poor households can be substantial, though cash transfers can provide effective compensation and social protection. It also shows that firms tend to be able to absorb energy price changes into profit margins, and respond by adjusting their long-term energy mix. At the macro-level, it shows that illicit activities (including tax evasion and smuggling) can play a crucial role in determining the welfare costs of FFS reform. The thesis also argues that removing FFS alone may not yield the efficiency gains and environmental benefits that policy makers envisage: Market distortions create barriers for economic agents to adjust their technology and behaviour in response to increasing fossil fuel prices. Overall, this thesis shows that FFS reforms are not only about removing subsidies, but also require an integrated strategy featuring carefully designed and sequenced complementary policy measures. These are summarised in the final chapter, which distils the key insights and provides a policy blueprint for designing effective FFS reforms

Incidence and impact – a disaggregated poverty analysis of fossil fuel subsidy reform

This study uses household expenditure data from Nigeria to understand energy consumption patterns with respect to income levels, different energy goods, urban and rural livelihoods, and geographical distribution. Using the empirical subsidy simulation model by Araar & Verme (2012), this paper simulates 50% and 100% reductions of subsidies on petrol, electricity and kerosene. It presents the estimated effects of such reforms on consumption, poverty, and government revenue. This analysis also determines the minimum level of universal cash transfer that is required to achieve “poverty neutrality” of subsidy removal; i.e. the threshold at which direct cash compensation offsets increasing energy prices, such that the national poverty headcount rate is unchanged after the subsidy removal. By disaggregating this analysis to the state level, it is shown that poverty effects (and thus the required poverty neutral cash compensation) can vary significantly across states. Understanding these differences in vulnerability, and designing adequate compensation and social protection policies is critical for ensuring public and political support for subsidy reforms

Global air pollution exposure and poverty

Abstract Air pollution is one of the leading causes of health complications and mortality worldwide, especially affecting lower-income groups, who tend to be more exposed and vulnerable. This study documents the relationship between ambient air pollution exposure and poverty in 211 countries and territories. Using the World Health Organization’s (WHO) 2021 revised fine particulate matter (PM2.5) thresholds, we show that globally, 7.3 billion people are directly exposed to unsafe average annual PM2.5 concentrations, 80 percent of whom live in low- and middle-income countries. Moreover, 716 million of the world’s lowest income people (living on less than $1.90 per day) live in areas with unsafe levels of air pollution, especially in Sub-Saharan Africa. Air pollution levels are particularly high in lower-middle-income countries, where economies tend to rely more heavily on polluting industries and technologies. These findings are based on high-resolution air pollution and population maps with global coverage, as well as subnational poverty estimates based on harmonized household surveys

Lifelines : The Resilient Infrastructure Opportunity

From serving our most basic needs to enabling our most ambitious ventures in trade and technology, infrastructure services are essential for raising and maintaining peoples quality of life. Yet millions of people, especially in low- and middle-income countries, are facing the consequences of unreliable electricity grids, inadequate water and sanitation systems, and overstrained transport networks. Natural hazards magnify the challenges faced by these fragile systems. Building on a wide range of case studies, global empirical analyses, and modeling exercises, Lifelines lays out a framework for understanding infrastructure resiliencethe ability of infrastructure systems to function and meet users needs during and after a natural shockand it makes an economic case for building more resilient infrastructure. Lifelines concludes by identifying five obstacles to resilient infrastructure and offering concrete recommendations and specific actions that can be taken by governments, stakeholders, and the international community to improve the quality and resilience of these essential services, and thereby contribute to more resilient and prosperous societies. Document type: Boo