Economic incentives to encourage greening of EaP SMEs

This chapter examines some of the economic tools that governments can use to support the greening of SMEs. This includes tax privileges such as incentives and exemptions. The chapter also examines the role of direct subsidies for consulting services, which can help increase SMEs’ awareness and secure their initial engagement in green practices. At the same time, to both ensure the sustainability of practice, as well as the perceived value of the assistance, the chapter also points to the need to gradually shift to a fee-based system for technical assistance. Greening public procurement is also a powerful tool that governments can deploy. The chapter explores how it can impact entire value chains and provide an important lever to support greening. The chapter also notes that while public financial institutions are an important piece of the puzzle, it is also important to enhance the role of private banks and insurance companies in providing incentives for good environmental performance of SMEs, through better loan or insurance policy conditions to businesses with green credentials.