Green Budget Reform

Taxes, subsidies and incentives. Not exactly the sexiest of subjects even at the best of times. Yet consider the magnitude of government budgets - the USA's alone topped a cool trillion in 1991 - and the profound impact that changes in fiscal policy have on our daily lives. A rising tide of new books shows that a goldmine of practical experience already exists to unleash positive fiscal forces on communities and ecosystems. One idea is that, contrary to popular belief, these 'economic instruments' don't have to entail costly economic penalties or damaging additions to government deficits. For instance, one set of incentives referred to as Budget Neutral Instruments (or BNIs) lays all penalties squarely on the shoulders of those that perform the most abysmally within a sector, according to some yardstick like pollution emissions or recycling. The benefits, on the other hand, accrue to the sector's best performers. The upshot may be a healthy dynamic to improve the performance of problem sectors like mining or manufacturing, without penalizing the economy as a whole or adding to the deficit. BNIs and other economic instruments are now being used successfully in places like the USA, Germany, Sweden, Canada and the UK. Another more radical idea is ecological tax reform - shifting the tax burden onto less sustainable activities. For example, taxes should be reduced on labour and income, and increased on pollution and one-time use of virgin materials. [government budgets as environmental and social management tools]

Economic Instruments n. government policies for environmental protection that make use of fiscal incentives (subsidies) and deterrents (taxes), as well as market measures (like tradeable emissions permits), rather than regulating specific outcomes.

von Weizsäcker, Ernst U. and Jesinghaus, Jochen. Ecological Tax Reform. London: Zed Books, 1992. 90 p.

Gale, Robert and Barg, Stephan with Gillies, Alexander (eds.) Green Budget Reform. Winnipeg: IISD, and London: Earthscan. 1995. 368 p. (Also ask about IISD's summary, Making Budgets Green.)

NOT HOT

- Perverse Subsidies

Perverse subsidies are those which provide immediate relief to one problem but lead to long-term negative consequences. Many governments spend billions subsidizing car travel by building elaborate road networks. By comparison, research budgets for alternative fuels and alternative community plans and transportation systems are just a drop in the bucket. Agriculture remains another problem area. Farmers in California's Central Valley for example pay next to nothing for water transported, at great distance and expense, to keep their economic livelihood from withering on the vine. Only recently was a rail transportation subsidy for Canadian Prairies grain removed despite its longstanding encouragement of overproduction and monoculture. Tax breaks for other environmentally and socially dubious activities like Ôdeveloping' land by clearing it still require urgent attention in many corners of the globe

Making Budgets Green - 23 case studies from Western Europe, Canada and the US.