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6.1
Subsidies have been firmly on the international agenda
for twenty years. Spurred on by studies by major international
and non-governmental organisations in the
1990s, considerable analytical work has been undertaken
in the last decade on their implications for the
cost-effectiveness of government expenditures, social
objectives and the environment.
Practical guidance is now available on identifying and
reforming harmful subsidies. This builds on the considerable
reform efforts made in various countries –
efforts which in some cases have been successful.
Lessons learnt from their experience indicate that
subsidy reform or removal can increase economic
efficiency and reduce the burden on government
budgets while alleviating environmental pressures.
REFORMING SUBSIDIES
SUBSIDIES AND
THEIR IMPLICATIONS
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6.1.1 WHAT ARE SUBSIDIES?
Subsidies come in many shapes and forms. They
can include direct transfers of funds and potential
direct transfers (to cover possible liabilities e.g. for
nuclear accidents). They may consist of income or
price support (e.g. for agricultural goods and water),
tax credits, exemptions and rebates (e.g. for fuel),
low-interest loans and guarantees, preferential treatment
and use of regulatory support mechanisms (e.g.
demand quotas). They can take the form of implicit
income transfers when natural resources or services
are not priced at full provisioning cost (e.g. water,
energy).
Some subsidies are on-budget (clearly visible in government
budgets or can be estimated from budget
accounts) while others are off-budget (not accounted
for in national budgets).
There are two internationally-agreed definitions of a
subsidy but other key terms and definitions are also
relevant and are used differently depending on the
context (see Box 6.1).
Similarly, different measurement approaches are used
for different purposes, sectors or contexts (e.g. international
trade). Each approach to measurement has
its own specific indicators.
TEEB FOR NATIONAL AND INTERNATIONAL POLICY MAKERS - CHAPTER 6: PAGE 5