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Costs of Inaction on Key Environmental Challenges

image of Costs of Inaction on Key Environmental Challenges

Countries today face numerous environmental policy challenges, such as climate change, air and water pollution, natural-resource management, natural disasters and environment-related hazards. The costs of not responding to them can be considerable, in some cases representing a significant drag on OECD economies. Estimation of these costs can be an important part of identifying areas in which policy interventions are required, as well as of establishing priorities for future action. There is, however, considerable uncertainty associated with all stages of “costing” the impacts of  environmental and resource degradation. Even when the costs of inaction are deemed important, identifying the areas where environmental policies need to be strengthened still requires careful comparison between the marginal costs of inaction versus action. This report provides introductory perspectives on the costs of inaction and discusses some of the future problems likely to be encountered in this very complex area.

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Executive Summary

When OECD Environment Ministers met in April 2004, they drew attention to the need for more analysis of the “costs of inaction” (COI) on key environmental challenges. This report is part of the response to that request. It is important to be clear at the outset about what is meant by the terms cost and inaction. OECD countries have made significant strides in addressing many of the environmental concerns discussed in this report. The term “inaction” must therefore be interpreted in this context. While the continued implementation of existing regulatory and market-based policy instruments at their existing level of stringency can hardly be characterised as “inaction” in a strict sense, adopting such a perspective is likely to be more instructive (and easier to apply) than ignoring the existing policy framework. As such, this report uses an assumption of “no new policies beyond those which currently exist” as the basis for its analysis of “inaction”.

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