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REFORMING SUBSIDIES
Redoubled efforts are needed to reform subsidies. With a few exceptions, progress in reforming subsidies
is generally too slow and protracted. The reasons are rooted in the political economy of subsidy reform and in
some important cases are combined with technological and institutional barriers. Current public expenditure
under the stimulus programmes of many countries will require stringent budgetary consolidation policies in the
future. Subsidy reform therefore needs to be a key element of current recovery measures and future
budgetary consolidation policies so as to free up increasingly scarce public resources and re-direct them
towards more pressing areas.
The recent commitment of the G-20 to phase out inefficient fossil fuel subidies in the medium term is laudable
and needs to be urgently expanded to other relevant subsidies and of course implemented. At the global level,
the removal of capacity-enhancing or effort-enhancing fisheries subsidies and the continued and
deepened reform of production-inducing agricultural subsidies, still prevalent in most OECD
countries, are priority areas for reform for better conservation of ecosystems and biodiversity. Depending
on national circumstances, most OECD countries need to complement these global priorities with prioritised
reform efforts in other sectors, particularly those provided in the water and transport sectors in addition
to energy subsidies. These sectors are also interesting candidates for subsidy reform in non-OECD countries,
with specific priorities to be determined in light of national circumstances.
Governments should, in the short run, establish transparent and comprehensive subsidy inventories
and assess their effectiveness against stated objectives, their cost-efficiency and their environmental impacts
– bearing in mind that the size of a subsidy does not necessarily reflect the extent of its harmful effect. Based
on these assessments, governments should develop prioritised plans of action for subsidy removal or
reform, for implementation in the medium term (up to 2020). Windows of opportunity for earlier subsidy
reform, arising within the existing policy cycles, should be proactively and systematically seized.
TEEB FOR NATIONAL AND INTERNATIONAL POLICY MAKERS - CHAPTER 6: PAGE 3