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Reforming environmentally harmful subsidies

How to counteract distributional impacts

image of Reforming environmentally harmful subsidies

Reforming environmentally harmful subsidies: How to counteract distributional impacts The report discusses the theoretical principles for an efficient environmental and distribution policy and offers a comprehensive survey of experiences from policy reforms in different countries. The reform survey forms a background to recommendations for implementation of sustainable policy reforms, taking care of environmental, economic and distributional concerns. It particularly brings in the Nordic experiences, both to enlighten the problems with environmentally harmful subsidies in these countries, and to discuss what can be learned from the experiences in a broader international context. The analysis has been carried out during the period October 2010 – May 2011. The study was carried out by Vista Analyse AS and commissioned by the Nordic Council of Ministers for the Environment.

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Experiences with subsidy reforms around the world

The estimates of environmentally harmful subsidies shown in chapter 2.1 indicate an extensive use of such measures around the world. However, over time many reforms have been made around both reducing public spending to environmentally harmful subsidies and reducing environmental tax exemptions/implementing new environmental taxes. This chapter reviews examples of such reforms. Some successful reforms are associated with compensation programs to avoid negative distributional effects. Other reforms have been less successful. In order to understand how to efficiently implement future reforms, valuable knowledge can be gained from earlier experiences.

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