Environmentally Harmful Subsidies

Challenges for Reform

image of Environmentally Harmful Subsidies

Subsidies are pervasive throughout OECD countries and much of this support is potentially harmful environmentally. This report presents sectoral analyses on agriculture, fisheries, water, energy and transport, proposing a checklist approach to identifying and assessing environmentally harmful subsidies. It also identifies the key tensions and conflicts that are likely to influence subsidy policy making. The book concludes with a discussion of politically feasible subsidy reform strategies.



Executive Summary

Available data indicate that subsidies are pervasive throughout OECD countries and worldwide. Every year, OECD countries transfer at least USD 400 billion to different economic sectors. Much of this support is potentially environmentally harmful. Subsidies distort prices and resource allocation decisions, altering the pattern of production and consumption in an economy. As a result, subsidies can have negative effects on the environment that are unforeseen, undervalued or ignored in the policy process. For example, fuel tax rebates and low energy prices stimulate the use of fossil fuels and greenhouse gas emissions and subsidies for road transport increase congestion and pollution. Agricultural subsidies can lead to the overuse of pesticides and fertilizers, and in fisheries to the overexploitation of fish stocks...


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