Many green growth indicators bear directly on the interaction between economic growth and the environment. In so doing, they provide information on this nexus but for a considered interpretation they should be assessed against countries’ socio-economic context. Also, the available detail for indicators is sometimes limited and contextual information then becomes an imperfect yet important substitute. For example, data on environmental pressure is rarely available by industrial activity and consistent measures that combine environmental and economic information can only be constructed at the level of the entire economy. In such cases, it is important to supplement the economy-wide indicator with information on countries’ industry structure. Employment and developments on labour markets are at the heart of the Green Growth Strategy. The report Towards Green Growth explores at some detail the links between environmental considerations, the labour market, education, training and skills and provides quantification using an economic model. While such modelling is in the area of research and outside the remit of green growth indicators, the contextual data remains important. The section at hand provides such context with regard to economic growth, productivity and competitiveness, the industry structure of economies, along with key features of the labour market that are important to sustain the creation of jobs and facilitate adjustment processes, and some information on demography, health, education and inequality.

A central element of green growth is the environmental and resource efficiency of production and consumption and its evolution over time and space, and across sectors. Understanding this evolution and the factors that drive these changes, is an essential ingredient in developing green growth policies. Progress can be monitored by relating the use of environmental services in production (use of natural resources and materials, including energy, generation of pollutants and other residuals) to the output generated and by tracking decoupling in trends of production and environmental services. Decoupling at the national level can partly be explained by displacement effects - such as the substitution of goods or services produced domestically, and requiring high levels of environmental services, with imports - that don’t necessarily imply decoupling at the global level. Such shortcomings in production based measures can be addressed by focusing on the evolution of efficiencies, or otherwise, in relation to consumption. The main issues of importance to green growth include: .. Carbon and energy productivity that characterises among others interactions with the climate system and the global carbon cycle, and the environmental and economic efficiency with which energy resources are used in production and consumption, and that inform about the results of policies that promote low carbon technologies and cleaner energy. .. Resource productivity that characterises the environmental and economic efficiency with which natural resources and materials are used in production and consumption, and that inform about the results of policies and measures that promote resource productivity and sustainable materials management in all sectors. Important resources and materials include: mineral resources (metallic minerals, industrial minerals, construction minerals); biotic resources (food, feed, wood); water; and nutrients that reflect among others interactions with nutrient cycles and food production systems. Other issues of importance include consumer behaviour, and household and government consumption patterns.

Natural resources are a major foundation of economic activity and human welfare. Their stocks are part of the natural capital and they provide raw materials, energy carriers, water, air, land and soil, and support the provision of environmental and social services that are necessary to develop man-made, human and social capital (see box next page). The extraction and consumption of resources affects the quality of life and well-being of both current and future generations. This includes oil and gas extraction, mining, fishing and forestry. Natural resources differ in their physical characteristics, abundance and value to different countries or regions. Their efficient management and sustainable use are key to economic growth and environmental quality. The aim is to optimise the net benefits from resource use within the context of economic development, by: .. Ensuring adequate supplies of renewable and non-renewable resources to support economic activities and economic growth. .. Managing the environmental impacts associated with the extraction and processing of natural resources, so as to minimise adverse effects on environmental quality and human health. .. Preventing natural resource degradation and depletion. .. Maintaining non-commercial environmental services. Progress can be monitored by looking at stocks of environmental assets, along with flows of environmental services, and by using indicators that reflect the extent to which the asset base is being maintained in terms of quantity, quality or value. The main issues of importance to green growth include: .. The availability and quality of renewable natural resource stocks including freshwater, forest, fish. .. The availability and accessibility of non-renewable natural resources stocks in particular mineral resources, including metals, industrial minerals and fossil energy carriers. .. The biological diversity and ecosystems including species and habitat diversity, and the productivity of land and soil resources.

Environmental outcomes are important determinants of health status and well-being. They provide an example where production and income growth may not be accompanied by a rise in overall well-being. Degraded environmental quality can result from and cause unsustainable development patterns. It can have substantial economic and social consequences, from health costs to reduced agricultural output, impaired ecosystem functions and a generally lower quality of life. Environmental conditions affect the quality of life of people in various ways. They affect human health through air and water pollution, exposure to hazardous substances and noise, as well as through indirect effects from climate change, transformations in the water cycles, biodiversity loss and natural disasters that affect the health of ecosystems and damage the property and life of people. People also benefit from environmental services, such as access to clean water and nature, and their choices are influenced by environmental amenities. The main aspects of importance to green growth include: .. Human exposure to environmental pollution and environmental risks, the associated effects on human health and on quality of life, and the related health costs and impacts on human capital. .. Public access to environmental services and amenities that characterises the level and type of access that different groups of people have to environmental services such as clean water, sanitation, green space, or public transport. These indicators can usefully be complemented by subjective measures of people’s perceptions about the quality of the environment they live in (forthcoming in OECD(2011), How’s Life?).

Governments have an important role in fostering green growth by setting framework conditions that stimulate greener production and consumption through economic and other instruments; by encouraging cooperation and sharing of good practices among enterprises; by developing and promoting the use of new technologies and innovations; and by increasing coherence among policies. The main challenge is to harness environmental protection as a source of growth and as a source of international competitiveness, trade and employment. Businesses have an important role in adopting “greener” management approaches; developing and using new technologies; carrying out R&D and spur innovation. Business, governments and civil society also play an important role in providing consumers with the information needed to make purchasing choices that reduce the environmental impact of consumption. The main issues of importance to green growth dealt with in this section are: .. Technology development and innovation that are important for growth and productivity in general and for green growth in particular. They are important for managing natural resources and to minimise the pollution burden. Innovation also contributes to the establishment of new markets and leads to the creation of new jobs; .. Production of environmental goods and services that reflect an important, albeit partial aspect of the economic opportunities that arise in a greener economy; .. International financial flows that are key to the uptake and dissemination of technology and knowledge, foster the cross-country exchange of knowledge and are one important aspect in combining development and environmental objectives; .. Prices and financial transfers that provide important signals to producers and consumers and, along with regulations, are tools to internalise externalities and to influence behaviour of market participants towards more environmentally-friendly patterns. Ideally, indicators on economic instruments should be complemented by indicators on regulations. However, data availability and comparability of regulations across countries hamper the construction of such indicators. These indicators can also be complemented with indicators on international trade as a source of economic opportunities, including green growth opportunities. Since trade in “green” products provides a very partial picture of this role, no specific trade-related indicator has been put forward in this section. General indicators on international trade and competitiveness can be found in the section on the socio-economic context.