US embassy cable - 05PARIS3416

UNCLAS SECTION 01 OF 04 PARIS 003416 
 
SIPDIS 
 
FROM USOECD 
 
STATE FOR EUR/ERA 
EPA FOR OIA/JAYRES, JCLIFFORD AND JMORANT 
EPA FOR OAR/KMASON AND JLEGGETT 
STATE FOR OES/CARTUSIO AND ABEDNAREK 
 
E.O. 12958: N/A 
TAGS: SENV, ETRD, KSCA, FR, OECD 
SUBJECT: OECD REPORTING: ENVIRONMENTAL POLICY COMMITTEE AND 
HIGH LEVEL SPECIAL SESSION MEETING ON "COST OF INACTION," 
APRIL 13-15, PARIS, FRANCE 
 
 
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SUMMARY 
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1. The OECD Environment Policy Committee (EPOC) held its 
meeting on April 13th and 15th, 2005.  In addition, EPOC 
held a High Level Special Session on the Costs of Inaction 
on April 14, 2005.  Judith E. Ayres, EPA Assistant 
Administrator for International Affairs, led the delegation. 
The major actions and decisions taken included: 1) renewal 
of the Mandate for EPOC's Working Party on Global and 
Structural Policies (WPGSP); 2) agreement that the WPGSP and 
the Annex I Experts Group (AIXG) should, to the maximum 
extent practicable, annually hold consecutive meetings and 
improve coordination and communication concerning Climate 
Change work; 3) agreement that a meeting of the Environment 
and Development Ministers would be useful; 4) establishment 
of a task force to draft a Strategic Vision for the OECD 
Environment Program; and 5) election of  a new EPOC Bureau. 
 
2. The High Level Special Session on the Costs of Inaction 
included presentations and discussions on three issues: (a) 
human health impacts from pollution; (b) climate change, and 
(c) loss of biodiversity; and discussions about possible 
next steps for the EPOC on costs of inaction. END SUMMARY 
 
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Renewal of Mandate for EPOC's Working Party on Global and 
Structural Policies (WPGSP) 
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3. The U.S. has had concerns with the proliferation of OECD 
work on climate change, and has refused to renew the WPGSP 
mandate as a result.  At this meeting, countries agreed to 
hold back-to-back meetings of the WPGSP with the Annex I 
Experts Group as frequently as possible.  The Secretariat 
agreed to notify climate contact points in delegations 
whenever an OECD body intends to conduct work with 
significant climate elements. As a result, the U.S. and 
other countries agreed to renew the WPGSP mandate. 
 
4. The new WPGSP mandate includes the following language on 
climate change: "...to analyze the environmental and 
economic aspects of climate change, focusing on strategies 
and policies and to provide information and analysis to 
policy-makers and main stakeholders to enable them to better 
understand mitigation and adaptation options, including 
approaches which would benefit from international co- 
operation." 
 
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Possible Joint Environment and Development Ministerial 
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5. Following the suggestion of the Development Assistance 
Committee (DAC) and the Environmental Policy Committee 
(EPOC) in late 2004, the EPOC Chair introduced the 
discussion of a joint meeting, its substance and its 
potential timing.  It was suggested that the meeting may 
happen in May 2006 as a back-to-back meeting with the DAC 
High Level meeting to be held at that time.   Following a 
discussion that reiterated the necessity of the Environment 
and Development Committees of OECD to work more closely 
together, delegates, including the U.S., noted that the 
proposed agenda was too ambitious for a one-day meeting. 
Suggestions for tightening the Agenda were made and the 
Secretariat committed to a) discussing with each delegation 
 
SIPDIS 
their suggestions; b) sharpening the draft agenda; c) 
proposing a revised agenda and budget to EPOC in the near 
future; and d) reporting back to the DAC on the comments and 
suggestions by the EPOC delegations. 
 
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Efficient and Effective Partnerships Project Update 
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6. The Secretariat reviewed a revised work proposal, which 
was generally agreed to by delegations.   Further financial 
support from delegations was not forthcoming and the 
Secretariat will proceed to secure assistance in-kind from 
 
SIPDIS 
member countries and the project budget will be covered 
within the existing program of work and budget for 2005-2006 
already approved.  The U.S. supported further work in this 
area as did Australia, the European Commission, the 
Netherlands, Japan and others.  The U.S. noted its recent 
success in sponsoring partnerships such as the "Methane-to- 
Markets" program. 
 
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Development of a Strategic Vision for the OECD Environment 
Program 
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7. The Chair led a discussion about the need for and 
potential content of a Strategic Vision for the OECD 
Environment Program.  The U.S. stated that if work on a 
strategic vision moves forward, decisions to improve 
efficiency by strengthening ongoing work and identifying 
areas of lower-value added from which to reduce or cut 
resources should be a goal of the new strategic vision. 
Furthermore, the U.S. noted that the strategic vision should 
be consistent with the objectives in the OECD Environmental 
Strategy for the First Decade of the 21st Century, which was 
adopted in 2001.  The U.S. proposed an "electronic" 
discussion of the Strategic Vision amongst interested 
delegations. A decision by Chair Mats Olsson was made to 
bring together a small steering group of former and current 
Bureau members for a discussion in the end of June, to be 
followed by further electronic discussions. The results of 
this discussion will be presented to the extended EPOC 
Bureau session on November 9-10, 2006 in Paris. 
 
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Update on Ongoing Environment Directorate work 
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8. Presenters from the Directorate discussed progress on (a) 
the Work Program on Sustainable Development; (b) the 
Environmental Policy and Firm-Level Management study; (c) 
Towards an Integrated and Pro-Active Outreach Strategy for 
the EPOC; and (d) progress on the next OECD Environmental 
Outlook. 
 
8a. The work program on sustainable development: a 
presentation and suggestion was made that the potential 
joint meeting of the DAC and EPOC would present an 
opportunity to identify areas of common interest, best 
practices, and lessons learned through environmental 
auditing efforts associated with multilateral environmental 
agreements. 
 
8b. Firm-Level environmental management: a presentation on 
the initial results of the survey of firms' environmental 
management activities generated engaged discussion amongst 
delegations.   The final results of this survey work will be 
presented at the forthcoming OECD/US-EPA/Environment Canada 
Conference on "Public Environmental Policy and the Private 
Firm, to be held in Washington D.C. on 14-15 June 2005. 
 
8c. EPOC Outreach Strategy: discussion amongst delegates 
ranged from Germany's comment that outreach capacity of OECD 
is by necessity limited due to resources and existing work 
loads, to Norway's enthusiastic support for additional 
outreach, to the U.S. position which noted that the U.S. 
strongly supports the development of an outreach strategy to 
non-member countries that is geographically diverse and that 
we support the participation criteria of "mutual benefit" 
and "major player".    In particular, the U.S. endorsed the 
inclusion of Brazil, Russia, India, Indonesia, China, South 
Africa, Israel and Chile in the work of EPOC and other 
related OECD bodies. 
 
8d. Developments of the next OECD Environmental Outlook: 
Directorate's Rob Visser discussed the economic modeling 
that will be used for the Outlook to evaluate a set of 
"policy packages" that will be determined over the coming 
six months or so. 
 
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EPOC Bureau Elections and Other Business 
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9. EPOC Chair Mats Olsson noted the resignation of Judith E. 
Ayres as the Vice Chair of the EPOC Bureau (due to the 
expiration of her term of service) and thanked her on behalf 
of the Bureau and all delegations for her diligent service 
to the Bureau and OECD.   Elected to the Bureau are two new 
Vice Chairs, Mr. Kevin Keefe, Assistant Secretary, 
Department of Environment and Heritage, Australia and Ms. 
Nicole Ladouceur, Director General, International Relations 
Directorate, Environment Canada.   In addition, Chair Mats 
Olsoon was reelected, along with Paolo Soprano of Italy, 
Kazuhiko Takemota of Japan and Kamil Vilinovic of the Slovak 
Republic. 
 
10. EPOC delegates agreed to hold the next meeting in 
plenary session on 1-3 March 2006 in Paris.  Chair Olsson 
also reported to the group on discussions with the Polish 
government to hold the EPOC meetings on 25-27 October 2006 
in Krakow, Poland due to the upcoming renovations of the 
OECD Headquarters in Paris.  Final arrangements are 
proceeding.   Finally, Chair Olsson noted that the European 
Environmental Bureau will not be able to participate in 
future stakeholder sessions of the OECD Environment 
Directorate due to the expiration of financial grant support 
from the government of Greece. 
 
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High Level Special Session on the Costs of Inaction 
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11. At the request of Environment Ministers in the fall of 
2004, a High Level Special Session was held to discuss the 
costs of inaction.   The session was divided into three 
presentations on specific issues (human health, climate 
change and biodiversity) and a discussion session amongst 
delegates on the significance of the issue and possible next 
steps. 
 
12. The health impacts discussion highlighted the current 
differences in methods and assumptions that are used to 
place a value on morbidity and mortality.   The need for 
additional benefit estimation methods development was 
emphasized and questions of health effects thresholds, 
discount rates, time horizons, chronic -vs.-acute effects, 
and method transparency were noted.  Second, presenters and 
discussants noted the necessity to extend these health 
effects benefits estimation methods to environmental 
problems beyond air pollution, and more specifically beyond 
particulate matter air pollution.  Other environmental 
problems needing monetization were mentioned.   These 
included water pollution; chemicals and toxics; particularly 
PBTs; waste issues; and habitat degradation. 
 
13. The third topic of the health impacts discussion 
concerned the current application of these methods by policy 
makers.  The World Banks' application of their cost of 
environmental degradation model; the Australian's efforts to 
place a value on and modify use practices concerning the 
Great Barrier Reef; Mexico's valuation of air pollution 
reduction benefits; the Czech Republic's quantification of 
electricity generating externalities; Norway's estimates of 
PCB cleanup costs; and Canada's assessment of childhood 
asthma, school attendance and possible reduced future 
productivity all indicate a robust demand for and use of 
these cost-benefit tools.  The U.S. noted that the U.S. EPA 
bases most of its governmental mandate to make further air 
pollution reductions in the transport and utility sectors on 
these analytic tools. 
 
14. A fourth area of the group's discussion focused on the 
difficult social and ethical issues associated with the 
application of these tools.   Delegates noted that 
politicians are making decisions about ethical issues such 
as the worth of a child's life -vs.- that of an elderly 
person and the worth of a poor person's health -vs.- that of 
a relatively wealthier one.  Discussants noted that these 
choices are usually, in the end, beyond the decision-making 
capacity of economists, yet decisions on assumptions are 
being made as the demand for the application of these tools 
rapidly multiplies. 
 
15. Following this session, the delegates heard 
presentations on the costs of inaction with respect to 
climate change, focused on a paper by Dr. William Cline. 
The EU generally used this as an opportunity to press on the 
need for early action on climate change.  The U.S. and Japan 
noted that the choice of the discount rate determines the 
long-term costs, and that this was a difficult choice. The 
U.S. felt the issue was poorly framed - that it makes more 
sense to speak of the benefits of action, as opposed to the 
costs of inaction. EPOC agreed that no further work was 
needed beyond that being conducted under the WPGSP on 
benefits of climate action. 
 
 
16. The final cost of inaction session concerned the Costs 
of Inaction with Respect to Biodiversity Loss.   Dr. 
Geoffrey Heal of Columbia University presented a paper 
commissioned by the Secretariat.  This was followed up by 
presentations from Dr. Jackie Van Goethem of the Royal 
Belgian Institute of Natural Science and Mr. Ian Dickie, 
Senior Economist, Royal Society for the Protection of Birds. 
Heal's presentation centered around the point that 
biodiversity does matter for the functioning and survival of 
ecosystems.  Ecosystems provide services of all kinds and 
the functioning of natural systems are key and biodiversity 
is a big part of why ecosystems matter.   It is vital to 
agriculture, climate change and a host of other issues.  His 
paper discussed how to value biodiversity noting the 
difficulty of presenting such value in national income 
accounts.   In the discussion that followed, Portugal noted 
that while doing a cost-benefit analysis on biodiversity 
will be tough, they support this work because of its impact 
on humans; Australia discussed trying to place a value on 
natural resource systems, particularly the Great Barrier 
Reef which is important to tourism, chemistry, commercial 
fisheries and other end uses.  The U.S. stated that finding 
the benefits of environmental investments is something we 
have pioneered and used for the past thirty years. 
 
17. The three papers will be issued under the author's 
recognizance, with no OECD or member country endorsement. 
 
18. EPOC members decided that the Secretariat should prepare 
a summary of existing work in the OECD on cost-benefit 
analysis and suggest additional case studies, if any, that 
might be pursued.  The U.S. and Finland offered financial 
assistance for the next phase of this project once the final 
course is determined. 
 
MORELLA