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6.4
“People who love soft methods and
hate inequity, forget this – that reform
consists in taking a bone from a dog.
Philosophy will not do it”.
Late 19th century American political commentator
John Jay Chapman, quoted by Anthony Cox in OECD (2007).
Phasing out subsidies can not only alleviate environmental
pressures but also increase economic
efficiency and reduce the fiscal burden. Freed
funds can be used for more pressing funding needs,
like rewarding those who provide biodiversity
benefits (see Chapter 5). It is therefore important to
look beyond environmentally harmful subsidies and
also target subsidies that have clearly outlived their
purpose, are not targeted at their stated objectives or
do not reach their objectives cost-effectively.
Unsurprisingly, there are many calls for subsidy reform
and a lot of rhetorical support. More concretely, there
is some policy support and action. The OECD has
called for subsidy removal or reform in many fora and
agricultural and fisheries subsidies are on the WTO’s
Doha development agenda. The 2002 Johannesburg
World Summit on Sustainable Development also highlighted
the need to reform subsidies for agriculture,
fisheries and energy. In the realm of global environmental
policy, several multilateral environmental agreements
(MEAs), such as the Convention on Biological Diversity,
have drawn attention to the impacts of subsidies
on the environmental assets that MEAs protect (CBD
2004).
For energy, the G-20’s recent commitment to phase
out inefficient fossil fuel subsidies is a welcome step
which needs to be replicated by others and expanded
to other types of subsidy.
REFORMING SUBSIDIES
MAKING REFORM HAPPEN
Many countries already foresee priority action on subsidy
removal, possibly in the context of (environmental)
fiscal reform (World Bank 2005). A still small but increasing
range of successful subsidy reforms can
now been seen around the world (see Boxes in this
chapter). And yet, with few exceptions, progress is
too slow and protracted. The reasons are rooted
in the political economy of subsidy reform: in some
important cases they are also linked to technological
and institutional barriers.
6.4.1 ANALYTICAL TOOLS
A range of useful tools is available to help policymakers
identify subsidies whose reform offers potential
benefits and assess such benefits, including for the
environment:
• the ‘quick scan’ model (OECD 1998) addresses
the questions: “is the support likely to have a
negative impact on the environment?” and “does
the support succeed in transferring income to
the intended recipient”?
• the ‘checklist’ (Pieters 2003) provides some
policy guidance by addressing the question:
“is the subsidy removal likely to have significant
environmental benefits?”
• where the checklist delivers a positive result,
the integrated assessment methodology
(OECD 2007a) will help create a comprehensive
story on the effectiveness of the subsidy rather
than a pass-fail test, and look at alternative
policies;
• for ‘green’ subsidies, a specific checklist
(UNEP 2008b) provides minimum criteria any
subsidy should fulfil to prevent it from turning
perverse in the long-run (see section 6.5 and
Box 6.18).
TEEB FOR NATIONAL AND INTERNATIONAL POLICY MAKERS - CHAPTER 6: PAGE 26