This chapter explores patterns in consumption and production to 2030, as well as developments in technological innovation which can either ameliorate or exacerbate some of the environmental impact of this growth. Environmental pressure from households is projected to significantly increase over the next few decades, in particular in the main emerging economies, as populations and incomes increase and consumption patterns change. Firms are increasingly factoring environmental concerns into their business strategies, but the scale of increasing production outweighs most efficiency gains. The chapter provides a series of policy responses that could help tackle the growing pressures of consumption and production on the environment, including setting clear environmental targets for firms, promoting environmental research and development, and using policy mixes (e.g. energy tax along with an energy-efficiency label.

This chapter examines the close relationship between population growth and demographics and the environment. Between 2005 and 2030, world population is expected to grow from 6.5 to 8.2 billion people. The enlarging population, mostly in developing countries, will put more pressure on the environment through increased production and consumption. The demographic features of ageing and migration are particularly relevant from an environmental perspective. Ageing populations have specific consumption patterns, some of which – such as expanded leisure time and income for travel – are associated with increasing environmental impacts. Migration can exacerbate pressures on local environments by increasing density in receiving regions. Environmental conditions will also influence population dynamics, such as through environmental refugees and environment-related disease outbreaks. The number of environmental refugees is expected to grow in the coming decades as a result of the impacts of climate change.

This chapter highlights key trends and developments in the world economy to 2030 and outlines the consequences of the projected economic growth on the environment. The implications of productivity growth are examined at both the regional and sectoral levels. Given the projected expansion of the global economy to 2030, failure to act on environmental challenges will have even more impact in the future than it does today. Natural resource sectors will find demand increasing for their output as large economies like Brazil, the Russian Federation, India and China (BRIC countries) continue to experience rapid growth. Sectors such as agriculture, energy, fisheries, forestries and minerals will need to have strong policies in place to reduce the environmental impact of this rapid growth.

Globalisation is one of the key drivers of economic and environmental change. The interactions between globalisation and the environment occur at different levels, and the impacts can be both positive and negative. The quality of environmental governance at all levels is crucial for realising the potential environmental gains from globalisation. However, current environmental policies and institutions are not keeping pace with economic globalisation, especially in developing countries, and need to be reinforced. Better integration of environmental issues with trade and investment policies is needed. Governments have an important role to play in creating a framework that promotes and supports environmental innovation and the dissemination of more environmentally-friendly technologies in global markets.

An estimated 60% of the world’s population will live in urban areas in 2030. Urban populations will expand particularly rapidly in developing countries, where the infrastructure needed to support human health and the environment – e.g. water supply, sewage systems, waste collection – is often not in place. A continuing trend towards urban sprawl, particularly in OECD countries, will put pressure on the environment in the coming decades through land use stress, fragmentation of natural habitats, long-term soil degradation and increases in transport-related greenhouse gas and air pollution emissions. A holistic approach is needed to integrate urban design with spatial planning, social objectives, transport policy and other environmental policies (e.g. waste, energy, water). The diversity of urban areas – in terms of history, geography, climate, administrative and legal conditions – calls for urban policies to be locally developed and tailor-made.

The Outlook Baseline assumes that, without any new policy action, world economic growth and globalisation to 2030 will follow similar trends as seen over the past few decades. This is just an assumption and should not be seen as a forecast of the future: it represents what might happen without any major new events or policies. This chapter explores some of the uncertainties associated with the Baseline, and examines how projections might vary with different assumptions about the productivity growth rate and the rate of globalisation. These variations to the Baseline suggest that higher medium-term growth would amplify impacts on the environment, and increased trade and changing patterns of production would lead to higher energy demands for the world as a whole. These variations illustrate the considerable differences that changes in a few key drivers could make to the nature of the world economy and its pressures on the environment.

This chapter examines the projected emissions of greenhouse gases to 2030, by country and sector, and the expected impacts in terms of temperature change and other effects. Without new policies, it is projected that greenhouse gas emissions will increase by about 37% in 2030 compared to 2005 levels, with a wide range of impacts on natural and human systems. The chapter examines the key drivers of increases in greenhouse gas emissions, and explores a range of policy scenarios for reducing these emissions. It finds that early action by all emitters, covering all sectors and all greenhouse gases, can achieve an ambitious emission reduction target at low cost. It highlights the need to share the burden of the cost of mitigation action amongst countries.

This chapter focuses on projected developments in outdoor air pollution, especially particulate matter and ozone, and on urban air quality. It outlines projections of concentrations between 2000 and 2030, and summarises the impact of three policy simulations on air pollution emissions. Most OECD countries have reduced air pollution in recent decades, decoupling it from economic growth. However, pollution from other countries is increasingly undermining local urban air quality management, effectively making it an international issue. Paying greater attention to marine shipping, dealing with precursors of ground-level air pollution (such as methane) and taking into account the transport of air pollution from one continent to another in domestic air quality policies are all important in combating air pollution.

Biodiversity loss is expected to continue to 2030, particularly in Asia and Africa. This chapter examines the sources of this loss – land use changes, unsustainable use of natural resources, invasive alien species, global climate change and pollution – and explores policy responses to halt further damage. Protected areas, which have grown significantly in number during the past few decades, will become increasingly important in the preservation effort as agricultural and urban land use expands. While many of the biodiversity “hotspots” worldwide are situated in developing countries, OECD countries have a role to play in helping to support their conservation and sustainable use through global and regional agreements, as well as through working together to address market and information failures.

Significant water scarcities already exist in some regions of the OECD and many regions of non-OECD countries. More than 3.9 billion people (47% of the world population) are expected to live in areas with severe water stress by 2030, mostly in non-OECD countries. This chapter examines trends and projections in water stress, public water supply, urban waste water treatment, nitrogen pollution and soil erosion by water. It highlights the good policy principles to address the main water challenges. Much progress remains to be made to integrate water management into sectoral (e.g. agriculture) and land use policies, ensure a more consistent application of the polluter pays and user pays principles through water pricing and reduce subsidies that increase water problems.

This chapter focuses on the material basis of the global economy, and municipal waste generation and management in OECD and non-OECD countries. With continuous growth in the global demand for materials and the amounts of waste generated and disposed of, conventional waste policies alone may not be enough to improve material efficiency and offset the waste-related environmental impacts of materials production and use. New integrated approaches – with stronger emphasis on material efficiency, redesign and reuse of products, waste prevention, recycling of end-of-life materials and products and environmentally sound management of residues – could be used to counterbalance the environmental impacts of waste throughout the entire life-cycle of materials.

Without more stringent policies to better address environmental concerns, the adverse health effects of air and water pollution are likely to increase in the future. The economic burden of environmental health is significant in both OECD and non- OECD countries, and recent analysis suggests that health damage associated with air and water pollution represents a significant share of GDP. This chapter explores the health impacts of outdoor air-pollution, unsafe water, sanitation and hygiene, as well as the costs and benefits of policy enhancements in these areas. Improving environmental conditions upstream in order to prevent downstream environmentrelated health outcomes, is often cost-efficient.

This chapter provides information on the “costs of policy inaction”, i.e. the costs associated with the negative environmental impacts of the existing policy framework. It highlights three key environmental challenges: health impacts of water and air pollution; fisheries management; and climate change. Estimates of aggregate “costs of inaction” can help to identify important environmental policy problems, but they are not sufficient on their own to determine policy priorities. Non-linear impacts, including the existence of ecological thresholds and irreversible changes, can have significant effects on the total costs of inaction.

This chapter examines agriculture’s impact on the environment. It outlines key trends and projected developments in the agricultural sector and the environmental impacts of these developments, and assesses policy options that could reduce negative environmental pressures from the sector. Agriculture is responsible for about 40% of land and freshwater use in OECD countries, and 70% of freshwater withdrawals worldwide. Currently, environmental pressures in OECD countries from agriculture are broadly stabilising, but they are increasing elsewhere, especially in those economies where population and economic growth will be largest to 2030. Measures that could help reduce agriculture’s harmful impact on the environment include policies to encourage more efficient use of water resources for agriculture (e.g. through moving towards full cost recovery water pricing) and continuing to de-couple support to farmers from production and environmentally harmful input use.

Without better fisheries management, overfishing and ecosystem damage is likely to lead to significantly reduced incomes or even the collapse of a number of fisheries in the coming decades. There will be severe consequences for local populations dependent on these resources for food and economic development. This chapter reviews the environmental pressures both from and on fisheries and aquaculture and projects the global trends in production and consumption. Looking to 2030, it will be important for governments to address gaps in the institutional and legislative framework for managing the environmental impacts of fisheries and aquaculture, and to strengthen implementation of the existing agreements. At the same time, environmental degradation driven by activities in other sectors is also affecting the economic viability of fisheries. Policies are needed to tackle pollution from land based sources and shipping, to reduce or halt the introduction of invasive alien species, and to help fishing communities adjust to the impacts of global climate change.

The transport sector is the second largest (and second fastest growing) source of global greenhouse gas (GHG) emissions. If developing countries follow the same path of private car dependence in the future as OECD nations have in the past, technological advances are unlikely to be able to offset the large increase in vehicle related emissions. Maritime shipping is another increasingly important source of environmental concern. Governments should prioritise policy action to reduce the energy intensity of transport. Policy options include applying carbon and fuel taxes, reforming vehicle taxation and regulating vehicle standards. Additional measures, such as implementing road pricing and investing in public transport infrastructure and spatial planning policies, can also help to improve the environmental performance of the transport sector.

This chapter examines the recent trends and future projections for energy demand and supply in different regions around the world to 2030. Despite continuing improvements in energy efficiency, world primary energy use is projected to grow by 54% between 2005 and 2030 under the Outlook Baseline. Fossil fuels are expected to continue to dominate the energy mix. Increasing energy production and use will affect the stability of ecosystems, global climate and the health of current and future generations. The chapter also outlines some of the key government policies that are needed to promote a lasting technology shift towards a more sustainable energy path, and examines some of the costs and environmental benefits of specific policy options.

The chemicals industry is one of the largest sectors of the world economy, and nearly every man-made material contains one or more of the thousands of chemicals produced by the industry. While OECD countries have seen a reduction in releases from the production of chemicals, policies are needed to address releases from the use and disposal of products which include hazardous chemicals. Adopting a science-based risk assessment approach is among the policies reviewed in this chapter as a means to ensure that adverse impacts are avoided in the most cost effective manner. With the rapid increase of chemicals production in non-OECD countries, greater attention is needed to international co-operation with these governments to build capacity, share information and promote effective chemicals management globally.

This chapter outlines the projected growth, environmental impacts and policy implications for four other industries: steel (and cement), pulp and paper, tourism and mining. The steel sector, a major contributor to several environmental problems (e.g. air pollution and climate change), is projected to increase production significantly to 2030, especially in Brazil, Russia, India, Indonesia, China and South Africa (BRIICS countries). The pulp and paper sector is also expected to grow in the coming decades. Regulatory approaches, economic instruments, voluntary approaches, cleaner production and other instruments are explored as possible means to offset negative environmental impacts of this growth. Tourism has an impact on the environment in the destination country and at the global level (e.g. through air travel). This chapter reviews sustainable tourism policies and other initiatives to reduce the environmental impact of tourism activities. The rapid expansion of mining activity in developing countries constitutes an important challenge. Host governments will need to put in place policies to strengthen the capacity and institutional set-up to effectively manage the environmental risks associated with this development.

This chapter examines how different types of policy instruments can be combined into an instrument mix to tackle environmental problems. It examines the benefits of combining instruments in a mix, and some of the challenges to avoid in terms of potentially overlapping or conflicting policy instruments. The chapter also examines a broad policy package to address a number of the key environmental challenges outlined in the Outlook report. It finds that significant environmental improvement can be achieved at relatively low cost to the economy, if the right mix of policies is used.

Government environmental institutions initiate and support the policy-making process, facilitate the development and implementation of environmental policies, and ensure compliance with environmental requirements. Several governments are moving away from the direct provision of services (e.g. water supply and sanitation, waste management) and towards regulating private markets for service provision. Although most OECD environment ministries have cabinet status, they often struggle to get approval for sufficiently ambitious environmental policies. Environment ministries need to work closely with other ministries, private sector and civil society for the development and implementation of environmental policies. This chapter examines recent trends and possible future developments in the institutions for developing and implementing environmental policies at the national and sub-national level. It identifies some of the main obstacles to successful environmental policy reform, and suggests how these can be addressed to build acceptance for ambitious environmental policies and to enhance the benefits of reform.

Many environmental challenges are inherently global: there is only one common atmosphere and many ecosystems provide global public goods. Watersheds cross national borders, and some pollutants travel across continents and oceans. Responding to global environmental challenges requires global solutions and international co-operation. This chapter summarises the key emerging trends in global and regional environmental co-operation. The chapter focuses primarily on the traditional means of government-to-government co-operation: multilateral environmental agreements on the “environment ministries track” and environmental aid on the “development ministries track”. Alternative co-operation mechanisms – such as intra-industry technology transfer, community-tocommunity de-centralised co-operation and sustainable development partnerships – are increasingly important, and are discussed briefly.

This annex summarises the Outlook’s main Baseline developments for a number of world regions, including the economic and social drivers of environmental change, and the main environmental developments to 2030. The key projections for each region are highlighted, and global indicators allow regional performance to be compared with global averages.

The analysis for the OECD Environmental Outlook has been supported by two modelling frameworks that have been coupled: i) the ENV-Linkages computable general equilibrium model for the economic variables; and ii) a set of environmental models linked to the Integrated Model to Assess the Global Environment (IMAGE). This annex provides information about the models, and the main assumptions used in developing the Outlook Baseline and policy simulations. Particular attention is given to the way these models have been connected together for use in the OECD Environmental Outlook. The annex includes a tabular overview of which environmental estimates were produced with what model. It also outlines some specific sources of model-related uncertainty.