Reforming environmentally harmful subsidies

How to counteract distributional impacts

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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.




The survey of reform experiences outlined in chapter 6 clearly shows that each case is different. How to manage the reforms from environmentally harmful subsides to more sound policy must be considered separately for each case. Particularly, there are great differences between low-income and high-income countries in several respects; the need for subsidizing low-income groups is higher in low-income countries, the budgetary burdens of the subsidies are higher, the effects of pollution and environmental degradation more severe, and the political systems less able to handle the needed changes effectively. Bearing these important differences in mind, we will summarise some core steps in the direction of optimal environmental policy.


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