patrick ten brink of ieep oecd tools and reform flowchart at iddri event paris 1 june 2012

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Patrick ten Brink of IEEP OECD tools and reform flowchart at IDDRI event Paris 1 June 2012

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  • 1.Identification of Environmentally Harmful Subsidies:OECD methods and subsidy reform flowchart Patrick ten BrinkSenior Fellow and Head of Brussels Office, IEEP ptenbrink@ieep.eu Politiques contre nature ? Vers une rforme des subventions nfastes pour la biodiversitParis,Thtre de la Cit internationale universitaire, salle Galerie17, bd Jourdan 75014 ParisVendredi 1er juin 2012, de 9h30 18h00

2. Presentation Structure Environmentally Harmful Subsidies (EHS): Identification and Assessment Study contract 07.0307/2008/514349/ETU/G1 EXECUTIVE SUMMARYIntroduction: state of play on EHS Policy demands for EHS reform Institute for European Environmental Policy (IEEP)C Valsecchi, P ten Brink, S Bassi, S Withana, M Lewis Together with EcologicAssessing the OECD tools A Best, H Rogers-Ganter, T Kaphengst IVMF Oosterhuis& supporting expertC Dias SoaresFlowchart for EHS reform road map16 November 2009 Lessons and moving forward 3. Introduction: state of play on EHS 4. Subsidies general introductionThe last decade has witnessed increasing efforts for phasing out or reformingsubsidies in various countries & commitments mount. Yet, the overall level ofsubsidies remains remarkable Agricultural & fisheries subsidies of particular concern for biodiversity Water (full cost recovery) for resource availability/efficiency, water stress Globally, energy & transport subsidies of concern climate & energy security,technological lock in & other impacts Not all subsidies are bad for the environment. Not all subsidies with social objectives, reach those objectives design is critical Even green subsidies can distort markets, may not be well-targeted or cost-effective Critical to identify subsidies that merit reform, create evidence base & road map 5. Subsidies size - a snapshot Over $ 1 trillion per year in Subsidies SectorRegion Agriculture OECD: US$261 billion/year (2006-8) (OECD 2009)Biofuels US, EU and Canada: US$11 billion in 2006 (GSI 2007; OECD 2008b) Energy World: US$557 billion/year in 2008 (IEA 2010)Fisheries World: US$15-35 billion/year (UNEP 2008a)Transport World: US$238-306 bn/yr, of which EHS ~ US$173233 bn/yr (Kjellingbro and Skotte 2005) Water World: US$67 bn/year, of which EHS estimated at US$50 bn/year (Myers & Kent 2002)Source TEEB for policy Makers - Chapter 6 www.teebweb.org Most sensible use of funds? Reform win-wins ? eg budget, climate, energy security, water,biodiversity & social? Need identification of subsidies, assessment of potential benefits of reform 6. Subsidies come in different shapes and formsDirect transfers of funds (e.g. fossil fuels, roads, ship capacity) or potential direct transfers (e.g. nuclear energy and liability)Income or price support (e.g. agricultural goods and water)Tax credits (e.g. land donation/use restrictions)Exemptions and rebates (e.g. fuels)Low interest loans and guarantees (e.g. fish fleet expansion/modernisation)Preferential treatment and use of regulatory support mechanisms (e.g. demand quotas; feed in tariffs)Implicit income transfers by not pricing goods or services at full provisioning cost (e.g. water, energy) or value (e.g. access to fisheries)Arguably also, implicit income transfer by not paying for pollution damage (e.g. oil spills) and other impacts (e.g. IAS, damage to ecosystems)People may mean different things when talking of subsidies; what are considered subsidies may also depend on context (eg state aid, WTO etc) 7. Potential benefits of EHS reform Reduce the use of resource intensive inputs /activities (extraction, production,distribution, transformation, use), saving resources (eg water, energy), causing less pollution(hence saving on policy measures), lesser impacts on the environment Increase competitiveness by exposing subsidised sectors to competition and supporting future competitiveness by resource availability Level the playing fields / fix market distortions by making resource prices reflect resource value, and making polluters pay for their pollution. Overcome technological lock-in whereby more environmentally-friendly technologies/practices are unable to compete on an equal basis with the subsidised sector Improve (cost)-effectiveness of meeting objectives, including social objectives Release public funding, enabling governments to divert budget to other areas -e.g. education, energy saving and/ or reducing debt 8. We need an inventory and assessment ofEHS to identifythe goodSource: building on Sumaila and Pauly 2007still relevant, targeted, effective, positive impacts, few negative effects the bad no longer relevant, waste of money, important negative effectsthe uglybadly designed eg inefficient, badly targeted, potential for negative effectsNeed to understand which subsidies are which. Where benefits of reform might lie.Develop a road map for EHS Reform. 9. Policy calls for Subsidy Reform 10. International Commitments to Subsidy ReformGlobal - CBD Aichi Accord. CBD Strategic Plan 2011-2020Dec. X/44 on Incentive Measures / CBD Strategic Plan 2011-2020: Target 3By 2020, at the latest, incentives, including subsidies, harmful to biodiversity are eliminated, phased outor reformed in order to minimize or avoid negative impacts, and positive incentives for the conservationand sustainable use of biodiversity are developed and applied, consistent and in harmony with theconvention and other relevant international obligations, taking into account national socio-economicconditions.G20 commitment (Pittsburgh 2009 & Toronto 2010) phase out inefficient fossil fuel subsidiesEU - Roadmap for a resource efficient Europe.by 2020 EHS will be phased out, with due regard to the impact on people in need + Member States should:Identify the most significant EHS pursuant to established methodologies (by 2012);Prepare plans and timetables to phase out EHS and report on these as part of their National Reform Programmes (by 2012/2013).EC (2011) Roadmap to a Resource Efficient Europe (COM(2011)571), http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2011:0571:FIN:EN:PDF 11. ButOn subsidy reform..People who love soft methods and hate inequity, forget this thatreform consists in taking a bone from a dog. Philosophy will not do it.John Jay Chapman, 18621933,See OECD, 2007Need transparency, evidence, analysis, communication to have a chance of success 12. OECD Tools 13. Relevant questions for policy makersWhat do policy makers need to know to address the EHS issue?RELEVANT QUESTIONS IN POLICY MAKINGOECD TOOLS Is the subsidy likely to have a significant impact QUICK SCANon the environment? Will the EHS reform bring environmentalbenefits? CHECKLIST Which EHS would bring the most benefit fromreform and so should be prioritised? What EHS reform will make people better off? Integrated assessment framework 14. the Quick scanIs the support likely to have a negative impact on theenvironment? Impact on economy Policy filterAssimilative capacity of envSource: OECD, 2005, 2008Proportionality: Quick quick scan first, then more in-depth if additional effort merited. Use of Elasticities, econometrics, modelling can be valuable 15. ...example: Spanish water pricingWater pricing : ~0.01/m3 Pisuerga Valley (2003), ave. ~0.05 /m3 Spain (2007)Size: Pisuerga Valley: between 2.1 and 3.5 M /yr. & Spain ~ 165 M/yr Env impacts of irrigation: water overuse (between 20-70%), pollution (fertilizer use 20-50%), soil salination, biodiversity loss Demand elasticity: generally low but depends on local conditions (eg climate, soil) & water price change in crops requires time different effects on farmers income and water consumption 16. Selected findings from Checklist Economic activity linked to deterioratingnoSectoral Analysisreveals strong Policy filter limits damage? NO/littleenvironmental values. forward orbackward linkages. License/water trading >> some efficiency but limited # of yesyes transactions; issues of transparency and enforcementSectoral Analysis reveals: The economic activity or its linkages are Some subsidies to drip irrigation/modernisation >>subsidised. Other policy measures in place (policy filters) increased consumption (eg due to crop changes) yestechnology alone not enough!Subsidy removal might benefit the environment CAP cross-compliance: some signals of reduced water useChecklistDescription of all relevant subsidiesPolicy filter limits environmental damage More benign alternatives exist? YESnoimproved technology & monitoringMore benign alternatives are available or emerging price signals/ volumetric ratesyesprogrammes for crop changes Conditionally lead to higher productioncompulsory water use (good) practicesyesSubsidy removal might benefit the environment Does the subsidy leads to higherresource use? YES(Pieters, 2003) 17. Selected findings from Integrated Assessment 1. Features Scan Effectiveness Objectives of the subsidy Justification: support farmers income; not targeted (economic/social/environme Effect on budget: reduced public revenues (~165 M Es) ntal)? Effectiveness analysis: Are objectives achieved? Cost-effectiveness: More Incidental impacts cost-effective alternatives toEnvironmental impacts (as earlier) meet objectives? 2. Incidental ImpactsLong term effectiveness 3. Long-Term EffectivenessSocial aspects: Subsidy benefits all farmers (short term), no distinction on wealth/needs 4. Policy Reform: impacts ofAffordability: Water demand can be inelastic various reform scenarios? impact on farmers income EHS merits reformattention; care needed to Example of successful reform:identify better options toGuadalquivir area higher fixed + variable charge >>support farmers.30% water reduction; longer term resource availability Transition management key 18. OECD tools: conclusions & recommendationsConclusions re OECD tools Effective initial screening tools Avoid resource intensiveness / rigidities of general equilibrium models or CBA The tools can be applied at differen

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