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Greening the Budget

Budgetary Policies for Environmental Improvement

Edited by J. Peter Clinch, Kai Schlegelmilch, Rolf-Ulrich Sprenger and Ursula Triebswetter

Greening the Budget regards the fundamental cause of environmental degradation as government and market failure and proposes the use of budgets as an instrument of environmental policy to rectify this problem. The book focuses on the elements of the public budget which currently affect the environment and explores the scope for greening both revenue and expenditure through specific measures.
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Chapter 12: Assessing subsidies in a second-best world: The case of forestry in Ireland

Budgetary Policies for Environmental Improvement

J. Peter Clinch


J. Peter Clinch INTRODUCTION This chapter1 discusses the assessment of the appropriate magnitude of state subsidisation of projects using a case study of forestry in Ireland. Forests comprise just 8 per cent of the land area in Ireland, the lowest proportion in the European Union (EU). Most of the forest estate had been cleared by the end of the seventeenth century and the conditions necessary to encourage the longterm investment required for growing trees rarely existed, and only on the part of a few. Yet, now, Ireland has the highest rate of afforestation in the EU. This has been driven by the heavy subvention of afforestation by the Irish government, co-financed by the EU. The Community Support Framework (CSF) has been the vehicle for the funding of afforestation in Ireland, beginning with the EC Forestry Operational Programme in 1989 followed by the Operational Programme for Agriculture, Rural Development and Forestry in 1994. Tax-free grants (which cover the cost of establishing a forest) and annual incomes (premia) are provided by the Forest Service to those establishing forests. These are cost-shared by the EU at a rate of 75 per cent. The success of these schemes is shown by the dramatic change in the afforestation rate with over 24 000 hectares (ha) having been planted in 1995 compared with just over 5000 ha in 1984. Figure 12.1 shows that the private sector has been the driving force behind the increase in the size of the forest estate. The Irish government’s latest and...

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