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OSLO (Reuters) - Green bonds could raise hundreds of billions of dollars a year to spur a shift to cleaner economic growth if governments set strong environmental goals such as for slowing climate change, the OECD said on Wednesday.
In a review of efforts to promote greener growth, it urged more innovation to favor investments in clean energies such as wind or solar power and a drive to place more value on everything from public health to clean water.
"There is scope for scaled up issuances of green bonds (in the hundreds of billions per year)," the Paris-based Organization for Economic Co-operation and Development said.
The 34-nation group said the market size of all green bond issuances to date was about $11 billion, "a drop in the ocean" amounting to about 0.012 percent of the capital held in global bond markets estimated at $91 trillion.
But a condition for a more liquid market for green bonds was "transparent policies based on long-term, comprehensive and ambitious political commitments," it said.
Last year, governments agreed at U.N. talks in Mexico to a goal of limiting a rise in global average temperatures to below 2 degrees Celsius (3.6 F) above pre-industrial times to try to avoid more devastating droughts, floods, heatwaves and rising sea levels.
But the United Nations says promised cuts in greenhouse gas emissions, stoking global warming, are too small to keep below the 2C ceiling.
The OECD report said there were some signs of progress toward greening the world economy, such as a surge in patents for clean energy technologies. "Green technology development is accelerating in some areas," it said.
It pointed to a 24 percent rise in the number of patented inventions for renewable energies from 1999-2008, a 20 percent gain for patents for electric and hybrid vehicles and an 11 percent gain for energy efficiency in buildings and lighting.
That compared with a 6 percent overall increase in patents in the period, it said. Japan, the United States and Germany led patent applications in clean technologies.
"Innovation will play a key role," it said of a need for a shift to greener growth in coming years.
It said the world needed to widen economics beyond conventional yardsticks of gross domestic product (GDP) to include non-market values such as clean air and water, health and education or the diversity of animal and plant species.
The costs of fighting climate change could be halved on average if the world placed a monetary value on longer lifespans caused by a move from high-polluting fossil fuels.
The United States would benefit most, according to the estimates. Gains in life expectancy through reduced air and water pollution "would overcome the monetary cost of climate change mitigation by a significant amount," it said.
"The scale of adjustment should not be overstated," the OECD said of a shift to green growth. "Significant reductions of greenhouse gas emissions can be achieved with only limited effects on the pace of employment growth."
The OECD pointed to estimates that it would cost $46 trillion to adapt to and combat climate change in the four decades to 2050 -- about $1 trillion a year.
(Editing by Janet Lawrence)
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