Paying the Polluter

Paying the Polluter

Environmentally Harmful Subsidies and their Reform

Edited by Frans H. Oosterhuis and Patrick ten Brink

Pledges to reform environmentally harmful subsidies (EHS) have increased over the past few years, at both global and national levels. Paying the Polluter addresses the most important issues to be considered when embarking upon these necessary reforms.

Chapter 10: Reforming EHS in Europe: success stories, failures and agenda setting

Jacqueline Cottrell

Subjects: environment, environmental economics, environmental politics and policy, politics and public policy, environmental governance and regulation, environmental politics and policy


This chapter sketches progress within Europe in the understanding of the linkages between fiscal policy and the environment, including a brief history of subsidy reform, and looks at successes, failures and policy processes that may offer routes to accelerate the rate of subsidy reform in the future. The chapter starts by looking at existing European policy processes and strategy documents relating to subsidy reform, such as the EU Sustainable Development Strategy, the Resource Efficiency Roadmap, negotiations of the EU budget and the EU Energy Tax Directive, and the European Semester process. The chapter goes on to delineate some lessons learned in relation to both successful and unsuccessful approaches to reform of environmentally harmful subsidies in European countries, and at European Union (EU) level. Examples include the reduction of subsidies for nuclear energy and the phase-out of coal subsidies in Germany, reform of company car taxation in the UK, and the gradual introduction of water charging, leading to phase-out of subsidies on water use in Ireland. These analyses also highlight interactions between national and European levels, such as the influence of the State Aid Scoreboard on subsidy reform and extract lessons learned for future EHS reform. Finally, the chapter will highlight some of the most important developments and policy processes in the EU in the current context of ongoing fiscal and economic crisis that may drive forward subsidy reform in the years leading to 2020, the year in which the Resource Efficiency Roadmap has stated that 'EHS will be phased out, with due regard to the impact on people in need' (European Commission, 2011b).

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