gentilonibeyondgdpconference-briefing-fia-final
Dieses Dokument ist Teil der Anfrage „Beyond Growth Conference DG Wirtschaft“
of workers to acquire the right set of skills. Inequality of
opportunity can also lower potential growth by making it difficult
for companies to find workers with the right set of skills and
reducing the incentives for disruptive innovation.
Greening the economy implies a shrinking of polluting activities
to the benefit of clean ones. For workers not to be left on the
side-lines, investment in new and higher skills is a necessary
complement to the green transition. By delivering on the
promise of equal opportunities, we connect achievement to
effort. By empowering the workers, we increase the resilience of
the economy and enable our society to fully reap the benefits of
structural change.
Fairness is a political imperative for this Commission. To
address the social dimension of sustainability [together with the
economic and environmental dimensions], we must take a
holistic view to policy design and reform, intervening not just
at the so-called post-market stage [through the tax and benefit
system], but also at the pre-market and in-market stages.
Policies that intervene at the pre-market stage – such as
education and healthcare provision – help to deliver equality of
opportunity, so ex ante equity. Policies intervening at the post-
market stage, through redistribution, help to mutualise the cost
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of risk and to cushion negative income shocks, so they
contribute to ex post equity.
To this package, we need to add policies intervening at the in-
market stage, in product, labour, and capital markets, to make
sure that these markets are well-functioning and that actors
intervening in these markets are able to adjust smoothly to
shocks over the cycle as well as to structural shocks, such as
technological change. Well-functioning markets are key to
achieving the efficiency objective, i.e. an efficient allocation of
resources. Well-functioning markets provide individuals with the
right incentives to invest in human and physical capital.
[The sustainability objective requires an additional set of
instruments, namely frameworks that ensure that the
environmental and social cost of economic activity is correctly
priced, and that distributional concerns associated to growth
sustainability are addressed.]
This holistic approach to inclusive growth is already present in
our policy instruments. The European Semester has a clear
focus on inclusive and sustainable growth. The European Pillar
of Social Rights spells out 20 principles that guide our reflection
on simultaneously achieving efficiency and equity objectives.
The Country Specific Recommendations cover the pre-, the in-,
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and the post-market stages, while tailoring advice to the specific
needs of each Member State.
At the pre-market stage, Member States are encouraged to
increase the inclusiveness of initial education and vocational
training systems and the effectiveness of public spending on
lifelong learning. At the in-market stage, Member States are
encouraged to improve the quality of institutions and the
functioning of product, labour, and credit markets. At the post-
market stage, Member States can improve the growth
friendliness of their tax systems and the adequacy as well as
the sustainability of their social safety nets.
The key challenge facing our generation is containing and
reversing the damage associated with climate change. At the
same time, we need to make sure that the transition to a more
sustainable growth model is inclusive and fair. This focus
implies an increased effort to assess the distributional
consequences of policies and to evaluate the ability to meet
binding environmental and resource constraints at the
national and EU levels.
o The mainstreaming of Sustainable Development Goals
in the Semester underpins our commitment to global
sustainability principles.
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o The EU growth strategy (ASGS) gives high prominence
to improving the quality of life, with particular attention to
the most vulnerable groups in society. Specific policies
are put in place to identify and address the potential
regressive features of the green transition, making sure
that environmental sustainability does not come at the
cost of fairness.
o Our focus is on policy actions that build the foundations
of sustainable economic growth. The EU’s
NextGenerationEU and REPowerEU initiatives
encourage investment packages and structural reforms
that facilitate the green and digital transitions and
reinforce social cohesion.
Economic models
The organisers asked us to speak about economic models. This
request allows two different interpretations: Firstly, a
sustainable model for our economy, one that works for the
people and the planet. This shift in paradigm is what the
European Green Deal is all about. Secondly, the use of
economic modelling for the design of evidence-based policy. I
will argue that the latter is crucial to support the former.
We all agree that an economy in which people’s material
wellbeing necessitates an ever-increasing use of finite
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resources and produces ever more waste and emissions is not
a sustainable ‘model’. With the Green Deal we have set
ourselves the ambition to reduce greenhouse gas emissions to
net zero, protect biodiversity and reduce the draw on resources
by promoting a circular economy.
This is urgent, and it is very ambitious. Many citizens worry
about the cost of the transition. Here is where the second
element – evidence-based policy design – comes in. The
Commission uses a range of economic models for assessing
and comparing policy options and their distributional
consequences. For climate mitigation, our models have helped
comparing the impact of regulations and emissions pricing and
the benefits of using the revenues e.g. for easing the social
impact of the transition or boosting green technology. We have
also recently used these models to advise on the design of
policies to alleviate the energy crisis.
In the area of climate policies, we have the privilege to build on
several decades of interdisciplinary research between climate
scientists and macroeconomists.
By contrast, our knowledge base is weaker when it comes to
staying safely within planetary boundaries. We are far from
quantifying the impact of economic activity on all natural assets
and the consequences of their degradation for the economic
possibilities of our children and grandchildren. Further efforts
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are urgently needed - in academia and among those designing
policy - to link the bio-physical underpinnings of critical natural
systems to the economic system.
Building an economy that works for the people and the planet -
that achieves material wellbeing, fairness and environmental
sustainability - is a formidable challenge. Integrated
environmental and economic models can guide us in this
difficult task.
Beyond GDP
We all recognise that a pure focus on GDP does not give a full
picture of the welfare and sustainability impacts of our
economies, but that the underlying economic accounts are of
importance in modelling welfare and sustainability outcomes.
GDP is designed as a composite measure of economic
performance. It is relevant for some policy purposes (for
example in the fiscal domain). For a broader context - in
particular about social wellbeing and environmental pressures
and impacts - there is a need for deeper analysis where
different parts of the economy are visible, as driving forces for
employment, emissions, resource use, and the distribution of
goods and services.
There is already a wealth of statistics available on
environmental and social performance, and it is improving all
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the time in coverage, quality and timeliness. Some of those data
are fully aligned to the GDP allowing for detailed analyses of
the interactions between economic, social and environmental
outcomes, notably with input-output modelling or more detailed
sectoral models.
Europe is a world leader in economic environmental statistics.
For example, Eurostat publishes quarterly statistics on the
greenhouse gas emissions from the EU economy, showing how
changes in the energy mix and the type of activity can decrease
(or increase) emissions.
It is important to communicate social and environmental
developments alongside economic changes to help
policymaking and raise awareness that statistics can be used in
transparent models to link relevant issues together.
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Background
Beyond GDP
This session is not specifically aimed at discussing “Beyond GDP” as such, but the
underlying theme of the overall Conference turns around the idea that there is excessive
policy focus on GDP growth, disregarding the impacts (and feedback loops) of the economy
on the environment and social welfare. Some other keynote speakers will likely mention
arguments for dropping GDP completely or changing its nature fundamentally to become a
broader welfare measure; some may even say that GDP perpetuates an unwelcome form of
capitalism.
GDP is a long-standing economic measure since the 1940s. It has the advantages of being
well known (albeit not necessarily well understood), internationally harmonised, timely, and of
high quality in most developed countries. It is heavily rooted in ‘hard’ source data such as
government accounts, business surveys, jobs surveys, etc. Within Europe it has a very
heavy use for administrative purposes (e.g. as the major component the Budgetary One
Resource based on GNI), and is therefore closely monitored for quality and comparability.
The “Beyond GDP” initiative is not new. A major step forward was the Stiglitz-Sen-Fitoussi
report already in 20091 which made a series of recommendations, including to improve the
availability of relevant statistics on environmental and social aspects. Another step forward
was the UN agenda 2030 (sustainable development goals), which dates from 20152.
The work since has largely moved forward in four ways:
i) Through the introduction of the Sustainable Development Goals (SDGs), and indicators
to measure them, which cover economic, social and environmental aspects. These have
been taken on in Europe and form part of the European Semester process, based on data
from Eurostat but also non-statistical sources (e.g. from the European Environment Agency
(EEA))3.
ii) Through development of the System of National Accounts (SNA), the worldwide
standard for national accounts, which we follow in the ESA in Europe. The SNA is now in an
update process which should be completed in 2025, and which will give more prominence
(amongst other aspects) to impacts of depletion of natural resources, and the distribution of
household income, consumption and wealth.
iii) Through development of complementary accounting frameworks, such as the System
of Environmental Economic Accounts (SEEA), where Europe is in the lead worldwide,
having legislated on statistical reporting since 2011 and continuing to develop new modules,
such as forest accounts on forest area, timber, jobs and investments in the wood industry to
support climate and forest resource policies.
1
See https://web.archive.org/web/20150721025729/http://www.stiglitz-sen-
fitoussi.fr/documents/rapport_anglais.pdf
2
See https://sdgs.un.org/2030agenda
3
See https://ec.europa.eu/eurostat/web/sdi
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iv) Through the establishment of dashboards and scoreboards which put GDP-related data
alongside environmental and social indicators, and in some cases as composite indicators
(adjusted GDP-related data through the weighted impact of selected indicators).
The landmark progress in developing indicators for the SDGs has generated a broader
interest in society and a steadily increasing set of statistics. To represent the dependencies
and trade-offs that exist between economic, environmental and social priorities, there is a
need for solid analyses of many different kinds. Dashboards and scoreboards put data
alongside each other, and serve to identify what are the important factors to consider.
Composite indicators have the simplicity of “one number” (like GDP), but a broader dataset
can ideally also be used to create a better understanding on the causality and bring more
clarity into how sectoral policies can be redefined to meet also the long term goals.
At worldwide level, there is an ongoing UN process within the statistical community to
discuss how GDP and Beyond can be concretely taken forward with a focus on the social
statistics based on a report from 20214.
Within the Commission, two Inter-Service Working Groups are underway to look more
closely into related aspects:
ISG - STATISTICS THAT INTEGRATE SUSTAINABILITY AND ECONOMICS FOR
POLICY – led by Eurostat, with a focus on ways in which the existing statistical SNA
and SEEA frameworks can be communicated and improved in future, to provide
policy-relevant statistics for EU decision making.
ISG – SUSTAINABLE AND INCLUSIVE WELLBEING – led by JRC, the focus is on
how adjusted-GDP type measures can be progressively developed.
Moreover, DG RTD has commissioned a study and held a workshop with the EEA and the
Club of Rome to develop a ‘beyond GDP’ monitoring set.
From the environmental perspective, the SEEA has a wealth of statistics in both monetary
and physical terms (e.g. tonnes of CO2 emitted), which can be closely related to traditional
national accounts/GDP as they share common foundations and classifications. SEEA also
allows to go beyond the scope of the GDP as regards natural capital and ecosystem
services. The summary information (provided in the form of aggregates and indicators) can
be applied to issues and areas of the environment which are the focus of decision makers.
The detailed information, which covers some of the key drivers of change in the environment,
can be used to provide a richer understanding of the policy issues. The environmental
accounts data can also be used in models and scenarios designed to assess the national
and international economic and environmental effects of different policy scenarios within a
country, between countries and at a global level.
4
See https://unsceb.org/valuing-what-counts-united-nations-system-wide-contribution-beyond-gross-
domestic-product-gdp
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Use of models for evidence-based policy
The Directorate-General for Economic and Financial Affairs in the European Commission
applies different economic models in their analysis. These models largely build on the Solow
growth model, in which growth derives from higher inputs of labour and capital, and/or from
higher total factor productivity (TFP) growth. Historically growth in per capita income is
mainly explained by the latter. But in more recent decades we also observe a decline in the
rate of technical progress. One of the models applied by DG ECFIN is a (semi)-endogenous
growth model , which links TFP growth to research efforts and so endogenises growth,
making it dependent on population growth and human capital investment. This helps us to
analyse how R&D promoting policies and skill investments can support TFP growth.
All these macroeconomic models helps us to analyse the effects of economic policies, like
the economic impact of the Single Market, and the economic and distributional effects of
structural reforms.
Three recent applications of these models are worth mentioning here as they highlight how
they help in economic policy decision making.
The first example is the model-based quantification of the macroeconomic impact of Next
Generation EU. 5 This workstream has found that the financial support for reforms and
investment provided by NGEU can boost GDP significantly, by 1-1½% over six years, and
have long lasting output effects. Crucially, the model suggests that the EU-wide GDP effects
are around one third larger when explicitly accounting for the spillover effects from individual
country measures. For small open economies with smaller NGEU allocations, spillover
effects account for the bulk of the GDP impact.
Another model application focussed on the economic costs of the transition towards a low
carbon economy. 6 The required shift in investment needs will have significant welfare
implications for consumption, but these costs are negligible compared to costs of no-action.
The model shows that GHG taxes create revenue that can be recycled to mitigate the
transition costs. Recycling revenue to support low-income households can overcome
important equity concerns. Technological progress in renewable energy is a key determinant
in these model simulations, and a policy conclusion from this model is that supporting
technological transformation with capital/clean subsidies can have strong mitigating effects.
Third, we have studied the effects of structural reforms on the functional distribution of
income in the EU. 7 In general, reforms which aim at increasing the employment rate of low
skilled workers are associated with a relative decline in their wages. While there can thus be
a trade-off between growth and equity for labour market reforms, there is generally
complementarity for product markets reforms and human capital investment.
5
Pfeiffer, P., Varga, J. and in ’t Veld, J. (2022), “ Quantifying spillovers of coordinated investment stimulus in the
EU”, Macroeconomic Dynamics, 2022. https://economy-finance.ec.europa.eu/system/files/2021-
07/dp144_en.pdf
6
Varga, J. , Roeger W. and in ’t Veld, J. (2022), “E-QUEST - A Multi-Region Sectoral Dynamic General
Equilibrium Model with Energy: Model Description and Applications to Reach the EU Climate Targets”.
Economic Modelling, 114.
7
Roeger, Varga, In ‘t Veld and Vogel (2019) A model based assessment of the distributional impact of structural
reforms.
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