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 Nordic countries

According to the abovementioned estimates, support to fossil energy consumption and environmentally harmful subsidies in general are most widespread in developing countries. A lower need to alleviate poverty in rich countries may be the most important reason for this difference. Also, higher awareness and economic possibility to prioritize both high income and a good environment imply more weight on sound environmental policies in rich countries. This is well-know from the so-called Environmental Kuznets Curve literature, studying the causes for the inverted U-curve between income and emissions (Stern 2004; Bruvoll et al. 2003).


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