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Oecd Workshop on Environmentally Harmful Subsidies SUSTAINABLE DEVELOPMENT OECD WORKSHOP ON ENVIRONMENTALLY HARMFUL SUBSIDIES SUBSIDIES AND THE ENVIRONMENT: AN OVERVIEW OF THE STATE OF KNOWLEDGE Gareth PORTER, Independent Consultant, United States Paris, 7-8 November 2002 This paper is presented in Session 2.1 at the OECD Workshop on Environmentally Harmful Subsidies, held at the IEA, (International Energy Agency) 9 rue de la Fédération, 75015 Paris. Registration is from 8h30-9h30 on 7 November 2002. An earlier version of this document was previously circulated to the 2-4 July 2002 meeting of the Joint Working Party on Trade and Environment, for INFORMATION, under the code COM/ENV/TD(2002)59. It has been revised and updated in light of written comments received from the delegations of Australia, Canada, Japan and the European Commission. However, the views expressed in this paper are those of the author and do not necessarily reflect those of the IEA/OECD or its Member countries. The workshop is organised by the Directorate of Food, Agriculture and Fisheries; in close co-operation with the Environment; Trade; and Science, Technology and Industry Directorates; the IEA and ECMT. Contact Person: Ronald STEENBLIK, ECH/TPL: Tel. (33-1) 45 24 95 29; Fax (33-1) 44 30 61 63; email: [email protected] TABLE OF CONTENTS SUBSIDIES AND THE ENVIRONMENT: THE STATE OF KNOWLEDGE......................................... 3 1. Introduction .................................................................................................................................... 3 2. Agriculture...................................................................................................................................... 4 2.1 Distinguishing characteristics of the sector ............................................................................. 4 2.2 Defining and estimating agricultural subsidies........................................................................ 4 2.3 Country-by-country agricultural subsidy data available........................................................... 6 2.4 Methodologies for measuring potential environmental impacts of subsidy removal................. 8 3. Irrigation Water ............................................................................................................................ 12 3.1 Distinguishing characteristics of the sector ........................................................................... 12 3.2 Defining and measuring irrigation water subsidies................................................................ 13 3.3 Country-by-country irrigation water subsidy data available................................................... 14 3.4 Methodologies for estimating potential environmental impacts of subsidy removal............... 15 3.5 Data gaps and additional research needed............................................................................. 16 4. Fisheries ....................................................................................................................................... 17 4.1 Distinguishing Characteristics of the Sector.......................................................................... 17 4.2 Defining and measuring fisheries subsidies........................................................................... 17 4.3 Country-by-country fisheries subsidy data available ............................................................. 18 4.4 Methodologies for measuring potential environmental benefits of subsidy reform................. 20 4.5 Data gaps and additional research needed............................................................................. 22 5. Forests.......................................................................................................................................... 23 5.1 General characteristics of the sector...................................................................................... 23 5.2 Defining and measuring forest subsidies............................................................................... 23 5.3 Country-by-country forest subsidy data available.................................................................. 24 5.4 Methodologies for estimating the potential environmental effects of subsidy reform............. 25 5.5 Data gaps and additional research needed............................................................................. 27 6. Energy.......................................................................................................................................... 27 6.1 General characteristics of the sector...................................................................................... 27 6.2 Defining and measuring energy subsidies ............................................................................. 28 6.3 Country-by-country energy subsidy data available................................................................ 29 6.4 Methodologies for quantifying the environmental impacts of subsidy reform........................ 31 6.5 Data gaps and additional research needed............................................................................. 33 7. Transport ...................................................................................................................................... 33 7.1 Major characteristics of the sector ........................................................................................ 33 7.2 Defining and estimating transport subsidies.......................................................................... 33 7.3 Country-by-country transport subsidy data available............................................................. 35 7.4 Methodologies for estimating environmental impacts of subsidy removal............................. 36 REFERENCES ....................................................................................................................................... 38 2 SUBSIDIES AND THE ENVIRONMENT: THE STATE OF KNOWLEDGE by Gareth PORTER, Independent Consultant, United States1 1. Introduction 1. This paper surveys the literature on subsidies and their impacts on the environment in five economic sectors — agriculture, fisheries, forestry, energy and transport2 — as well as in irrigation water. It aims to answer the following questions: (1) What are the different ways that subsidies in each sector are defined and measured? (2) What country-by-country data on subsidies to producers or consumers are either already available to researchers or could be used to construct such estimates? (3) What methodologies are in use or are available for estimating the impact of subsidy removal on the environment in each sector and what results have they produced, if any? and (4) What significant gaps or problems exist in the data on subsidies in each sector and what additional research is needed to establish an adequate database on subsidies and to measure the environmental benefits of subsidy removal? 2. The study was guided by terms of reference that called for consideration of six different categories of subsidies: budgetary transfers; market price support; subsidised and concessional credit; under-priced materials, water and energy; foregone tax revenues; and foregone resource rents plus uninternalised externalities. The study represents an inventory of existing conceptual frameworks, data sources and methodologies available for both documenting subsidies and for determining the impact of subsidy reform on the environment. The category of foregone resource rents is relevant to the definition of subsidy in some of the economic sectors covered, but not in others. The study notes the sectors in which each of these categories does play a role in the definition of subsidy. 3. Each of these sectors has distinct structural characteristics that have influenced the methods used to define and measure subsidies as well as the nature of the research done to analyse the environmental benefits of subsidy removal. No less than six different methods have been used to define and measure subsidies in the six sectors, and more than one method has been used in every sector except in the fisheries 1. Special thanks to Ronald Steenblik of the OECD’s Trade Directorate who provided frequent and extensive suggestions throughout. I also would like to thank Jean-Philippe Barde, Anthony Cox, Steven Perkins and Luis Portugal (all of the OECD Secretariat), and Ariel Dinar of the World Bank, for their helpful suggestions and advice on earlier versions of this paper. An earlier version of this paper benefited from comments made by several delegations to the Joint Working Party on Trade and Environment. However, any errors or omissions that remain are my responsibility. 2. The transport sector is defined the purpose of this study as ground transport, with the emphasis on passenger transport. It does not attempt to cover international air transportation systems or international shipping transport, which do not receive as much attention in the literature on subsidies in the transport sector. 3 sector, for which the aggregation of various support programs is accepted as the only method for quantifying subsidies. Aggregating the relevant support programs is at least one method for determining the size of the subsidy in agriculture, fisheries, forests and energy sectors (although analysts may differ in some cases over what specific programs should be included). 4. The discussion of data and analytical methods in regard to each of these categories of subsidies is not related to the analysis of
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