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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.

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When Removing Subsidies Benefits the Environment

Developing a Checklist Based on the Conditionality of Subsidies

The objective of this chapter is to develop a checklist that could help identify subsidies whose removal would benefit the environment most. The checklist focuses on two interrelated issues: the effects of subsidy removal on producers’ and consumers’ decisions; and the directness of the link between those decisions and the environment. The effects of subsidy removal on producers’ and consumers’ decisions depend on the overall policy setting of the subsidy (including environmental policy measures), on its conditionality, the availability of alternatives, and the nature of competition on factor and product markets. Since the environmental impact of subsidies depends on numerous factors, the checklist cannot substitute for a thorough analysis of the subsidies under consideration for removal. It can, however, serve as a first “quick scan” of subsidies that are likely to yield environmental benefits when removed and identify important elements that should go into an in-depth analysis.

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