Theory and Impact
Critical Issues in Environmental Taxation series
Edited by Larry Kreiser, Soocheol Lee, Kazuhiro Ueta, Janet E. Milne and Hope Ashiabor
Chapter 10: The political economy of subsidy reform: which factors are game-changers?
Over the past thirty years, a great deal of progress has been made on identifying and quantifying environmentally harmful subsidies in terms of volume and their impact on the environment, as well as on analysing the political economy of their reform, as exemplified by the work of the Organisation for Economic Cooperation and Development (OECD), the International Energy Agency (IEA), the World Bank, the International Monetary Fund (IMF), the European Commission and the European Environment Agency (EEA). The fiscal, economic and environmental benefits of subsidy reform are well known and understood (see the work of the IEA, the Organisation of Petroleum Exporting Countries (OPEC), the World Bank and the OECD, e.g. IEA et al. 2010). In part as a result of the research and awareness-raising efforts on the part of these international organisations, subsidy reform has entered mainstream political, fiscal and economic policy dialogue. In addition, since it began in 2008, the global economic crisis has unbalanced budgets in many countries, and has created considerable pressure on governments to spend scarce revenues more carefully. Thus, at the G20 summit in Pittsburgh in 2009, G20 members were prepared to agree, in principle at least, to phase out ‘inefficient’ fossil fuel subsidies (G20 2009). In the same year, Asia-Pacific Economic Cooperation (APEC) member countries were content to sign up to a similar declaration, while flagging up the importance of providing essential energy services for those in need (APEC 2009).
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