subsidy reform - teeb insights - by patrick ten brink of ieep 11 january 2010

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Subsidy Reform - TEEB insights - by Patrick ten Brink of IEEP. At the NRW representation, Brussels. 11 January 2010.

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  • 1. The real cost of subsidies: outlook from TEEB aligning todays costs to tomorrows prioritiesPatrick ten BrinkTEEB for Policy Makers Co-ordinatorHead of Brussels OfficeInstitute for European Environmental Policy (IEEP)Environmentally harmful subsidies a real threat to biodiversityPolicy Dialogue Brussels11th January 2010 Representation of the State of North Rhine-Westphalia to the European UnionBuilding on and borrowing from the work & insights of the wider TEEB team and contributors of supporting studies, call for evidence and other contributions3/18/2010 1

2. Presentation overview 1. Introduction 1. TEEB ambitions and process and approach 2. Subsidies types and issues 3. Overview of size of subsidies 2. Subsidies, their impacts & costs3. Policy response needs & tools for a way forward 3. TEEBs Genesis and progressPotsdam Initiative Biological Diversity 20101) The economic significance of the global loss ofbiological diversityTEEB Interim Report CBD COP-9, Bonn, May 2008TEEB Climate Issues Update Strmstadt September 2009.TEEB for Policy MakersBrussels 13 Nov. 2009 4. TEEBs goals1. Demonstrate the value to the economy, to society/individuals and wider environment what we have & what we risk losing. 2. Underline the urgency of action, benefits of action (opportunities), analyse costs of action 3. Show how the value of ecosystem services and biodiversity can be assessed and where it can be useful 4. Show how we (can) take into account the value of ecosystem services and biodiversity in our decisions and choices, 5. Identify / support solutions 6. Address the needs of policy-makers, local administrators, business and citizens (the end-users)Source: adapted from Pavan Sukhdev 5. TEEB D1: TEEB for Internationaland National Policy-Makers Part I: The Global Biodiversity Crisis and Framework for Policy Response Ch1 The global biodiversity crisis and related policy challenge Ch2 Framework and guiding principles for the policy responsePart II: Measuring what we Manage: Information & Tools for Decision-Making Ch3 Measuring to Manage our Natural Capital Ch4 Recognised the Value of BiodiversityPart III: Solutions: Instruments and measures Ch5 Rewarding benefits of Ecosystems and Biodiversity Ch6 Reforming Subsidies Ch7 Incorporating the costs of ecosystem and biodiversity loss Ch8 The Value of Protected Areas Ch9 Direct Investments in natural capital and ecosystem restorationPart IV: Synthesis Ch10 Conclusions and recommendations Available on http://www.teebweb.org/ 6. The context 7. In the policy jungle subsidies comein different shapes and forms: Direct 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) 8. Examples of EHS Coal miningFishingdirect transfers, Grants, guarantees, tax Water uselittle liability for damageNon resource pricingexemptions + no liability for damage to sea bed et al Source: www.treehugger.com Source: Guardian Source: www.wisebread.com Source: http://srforums.prosoundweb.com/ DeforestationEnergy: oil spillsAgricultureOnly partial liability /Direct payments + no liability no resource costs, no compensation for damage for eutrophication damage et alcompensation for damageSource: www.oilism.com 9. Subsidies Some are on-budget (visible in government budgets) others off-budget (not accounted in national budgets) transparency varies (Negative) Impacts on the environment can be direct (e.g. subsidies to convert forest to biofuels, road building in biodiversity rich areas) or indirect (e.g. tax breaks; climate change effects) Impacts can be immediate (convert land, road build, oil spill) , later / spread over many years (eg fisher capacity support, fossil fuel subsidies) Impacts can occur locally (subsidy for road build), nationally (eg subsidy for hydro), internationally (eg resource extraction impacts ), globally (eg climate change) Other impacts less clearly negative (e.g. hydro power; or subsidies with policy filters it depends); some generate environmental benefits (e.g. payments to farmers for ecosystem services) some redress market failures (e.g. rail) or level the economic playing field (e.g. renewable energy subsidies) Even subsidies apparently benign but may have negative effects, depending (e.g. subsidies for modernisation of fleet + decommissioning) 10. Subsidies, intention and design Subsidies generally launched with good intentions eg for food provision (CAP and CFP), for energy security (coal subsidies), to support industries/technologies (eg nuclear, renewables), for competitiveness (eg exemptions to taxes for energy intense industries), for poverty alleviation and social concerns (eg food, water, fuel, electricity subsidies), to address climate change (eg biofuels; renewables, energy conservation) and for the environment (PES HVN) Objectives can become outdated (eg food provision, energy security and coal). There can be a major difference between stated objectives and actual effects (eg biofuels). Some subsidies are blunt instruments for the objective either wrong instrument or badly designed They can have many (unforeseen at the time) impacts on the environment 11. A simple classification!the good still relevant, targeted, effective, positive impacts, few negative effectsthe badno longer relevant, waste of money, important negative effectsthe uglybadly designed eg inefficient, badly targeted, potential for negative effects Source: building on Sumaiia and Pauly 2007 12. Aggregate subsidy estimates for selected economic sectors Over $ 1 trillion per year in Subsidies Most sensible use of funds? Or potential for reform? 13. Presentation overview1. Introduction1. TEEB ambitions and process and approach2. Subsidies types and issues3. Overview of size of subsidies2. Subsidies, their impacts & costs- some examples3. Policy response needs & tools for a wayforward 14. Fisheries Subsidies Fisheries subsidies ~ US$30-34 bn/yr: only ~7bn good, 20bn bad Small compared to other subsidies Agriculture, transport, energy Large relative to sector (~ US$ 90bn/yr landed value) and Major impacts(stock collapse, species composition, damage to ecosystems) Figure: State of exploitation of selected stock / species groups, 200428% over-exploited, 52% fully exploited, remaining 20% moderately exploited or underexploited (some low margin/uneconomic) (FAO 2006 and FAO 2008) 15. Subsidies & Sunken BillionsContribution of fisheries harvest sector to the global economy ~US$ 50billion/ year less than it could be (World Bank and FAO 2008) Non optimal resource management, driven, in part, by subsidies leading to too many fishers chasing too few fish 16. Global Loss of FisheriesHuman Welfare Impact Half of wild marine fisheriesare fully exploited, with afurther quarter already over-exploited limits ofsubstitutability at risk : $ 80-100 billionincome from the sectorat risk : est. 27 million jobsbut most important of all..We are fishing down the food web1 bn people rely on fish as theirto ever smaller speciesmain source of animal protein,especially in developing countries.Reduce and/or reform/redirect subsidies as part of portfolio of instruments. One opportunity: redirect funds to support marine protected areas (MPAs) Source: Ben ten Brink presentation, Workshop: The Economics of the Global Loss of Biological Diversity 5-6 March 08, Brussels. Original source: Pauly (UBC) 17. Agricultural subsidy impacts 1. Agricultural subsidies are among the largest and merit specialattention given sectors critical role in food security anddevelopment. 2. Wide range of impacts: - eg from intensification:1. Loss of non-target species (eg pollinators)2. Reduced habitat diversity3. Loss of biodiversity-rich extensive farmlands4. Hydrological changes due to draining/irrigation5. Water pollution (surface waters, groundwaters)6. Eutrophication of freshwater and marine ecosystems7. Soil degradation and erosion3. Biodiversity impacts and also loss of ecosystem services 4. Costs to public purse + losses to range of parties from ESS losses+ complications for other policies (Eg climate change) 18. Since 60s - Europhication caused dead- zones: Regularly ~405 coastal dead-zones 19. Reforming agricultural subsidies long complex roadReduce / shift of funds away from production based allocations - decoupling / move from 1st to 2nd pillar fundingBetter targeting:cross compliance - linking payments to range of standards Reduce payments to those that dont need them : modulation Payments for provision of ecosystem services (PES) for high nature value ag.Progress is being made, but too slow / not enough. Wide range of additional costs to others due to ag practice encourage progress?increased water pre-treatment needs for water companiespayments by water companies (eg Vittel) to preserve mineral water qualityeutrophication fish loss, tourism impacts et alincreased costs for pollination given loss of natural pollinators.loss of public goods (biodiversity, clean water, landscape) Need move to public payments for public goods Need to strengthen application of polluter pays principle 20. BiofuelsAn example of complex relation

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