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to Save the Planet? End $650 Billion in Obsolete Pollution Subsidies |
| Compiled by Badpuppy's GayToday
From Worldwatch Institute Reports
"These changes would allow us to put the power of the market to work to protect the environment, " said author and Worldwatch Senior Researcher David Malin Roodman. "Too many costs of industrial activity are not incorporated into markets. By translating environmental costs into prices, governments can grab business decision-makers by the bottom line and help consumers better understand the true environmental costs of their purchases and investments. If we're going to save the planet, prices must tell the ecological truth." Roodman argues that in order to put markets to work for the environment, we must adopt the "polluter pays principle," which says that when people act in ways that hurt the environment, they should be held accountable for the damage they do. This simple idea has been an economics textbook staple for more than 80 years, but it is practiced much less than preached.
Ending 90 percent of these subsidies could effectively cut the global tax burden, currently at $7.5 trillion a year, by $585 billion (8 percent). Most of these cuts would occur in industrial nations, which subsidize pollution the most. In the United States, Germany, and Japan, where taxes average $6,000-7,000 a person, there would be a net tax cut of roughly $500 per person, or $2,000 for a family of four. Second, Roodman makes the commonsense argument that we should shift taxes from things we want to encourage-like investment and payrolls-onto things we want to discourage-like pollution. Roodman estimates that another $1 trillion-roughly 15 percent of the global tax pie-can be gradually shifted to new environmental taxes, especially the greenhouse gases that promote global warming. Roodman suggests phasing in a tax on carbon from fossil fuel burning, starting low and rising gradually over time, allowing cars and factories to live out their useful lives and then be replaced by cleaner models. Announcing gradual tax changes would send a powerful signal about an economy's direction and encourage businesses to plan ahead. "A major advantage of this approach is that it makes environmentally sound choices cheaper and easier," said Roodman. "Harmful products will become more expensive, but high-mileage cars and recycling will become more affordable and convenient. "Using taxes instead of regulations, governments can set targets for environmental protection-and markets can do what they do best, finding the cheapest ways to hit those targets. And countries that make these subsidy cuts and tax shifts will spur their companies to develop clean technologies, giving them a competitive advantage in the global marketplace." Government officials do not usually set out to waste money and hurt the environment when they grant environmentally harmful subsidies. Most subsidies were initially intended to stimulate development, protect jobs, or aid the poor. Yet close examination shows that almost all are obsolete, ineffective, grossly inefficient, or self-defeating:
The greatest obstacles to making fiscal policy good for the planet are political, Roodman concludes. But a majority of workers are on the payrolls of the relatively clean service industries, from communications to insurance, that would come out ahead under the tax and subsidy changes. And everyone would benefit from a healthier environment. "Voters should know that for many of these subsidies, they're paying twice when they shouldn't be paying at all," Roodman said, "first in higher taxes and then in higher prices. In fisheries, our taxes are paying for the subsidies that are causing the fisheries to collapse. And then we're paying more at the market for the very fish our taxes are paying to deplete." Reform is tough because the special interests that would be hurt by subsidy cuts and tax shifting usually enjoy more legal recognition and are better organized and financed than those who would gain. For example, in the 1995-96 U.S. election cycle, oil and gas companies gave $11.8 million to congressional candidates to protect tax breaks worth at least $3 billion-250 times as much-over the period. Despite opposition from special interest groups, a number of governments have already begun slashing market-distorting subsidies:
A few subsidies should stay in place, Roodman argues-as long as they are targeted at deserving recipients. As examples, his book points to a program in Sri Lanka, which delivered kerosene subsidies to the poorer half of the population during the 1979 oil shock, and to subsidies in the Netherlands, Germany, and India that have fostered thriving wind power industries. Cutting harmful subsidies is an important first step towards correcting distortions in market prices. Roodman argues that to take full advantage of the power of the market, we should also use taxes more intelligently, taxing production of things we do not want, like pollution. One of the best examples of using environmental taxes to better inform the market is the water pollution levies in the Netherlands. Since 1970, gradually rising charges on emissions of organic material and heavy metals into canals, rivers, and lakes have spurred companies to cut emissions-without dictating how to make the cuts, the way regulations would. Between 1976 and the mid-1990s, emissions of cadmium, chromium, copper, lead, mercury, nickel, and zinc into waters managed by regional governments plummeted 72-99 percent-primarily because of the pollution taxes. The Dutch example illustrates the strengths of environmental taxes at their best. Companies for whom it was less expensive to clean up presumably made the largest reductions. Firms would also have passed part of the taxes on to their customers through higher prices, causing them to switch to less-pollution-intensive products. And demand for pollution control equipment has spurred Dutch manufacturers to develop better technology, triggering innovations that regulators could never have planned, lowering costs, and turning the country into a leading exporter of pollution control equipment. Malaysia used an adjustment in motor fuel taxes to make leaded gasoline more expensive than unleaded gas, allowing unleaded fuel to grab more than 60 percent of the market. Germany used taxes to cut the production of toxic wastes by 15 percent in three years, and Sweden used taxes to reduce emissions of sulfur-which cause acid rain-by 13 percent between 1989 and 1995. Australia, Denmark, and the United States used taxes on CFCs to help phase out these chemicals-pursuant to the 1987 Montreal Protocol, the treaty to protect the ozone layer-in less than a decade. The U.S. tax has raised $4.24 billion. Building a coalition to support raising taxes on a particular polluting industry can be difficult, because the benefits may not be compelling to enough of the voting population. But by advocating tax shifting, Roodman believes that environmental advocates can show the public a direct, pocketbook connection between a cleaner environment and personal tax cuts. Since 1991, six European nations-Denmark, Finland, the Netherlands, Spain, Sweden and the United Kingdom-have cut taxes on work and investment and raised taxes on air pollution, fossil fuels, or landfilling. Denmark is the leader with 3 percent of its taxes shifted thus far. Some governments have taken another approach to harnessing the market. Instead of taxing environmental harm, they identify environmental costs by auctioning or giving away permits for pollution and resource depletion. Businesses can then trade the permits among themselves, creating a market for the permits. For example, the U.S. government established a system of permits for the emission of sulfur dioxide in 1990. By 2000, this system will have reduced emissions to half the 1980 level, while saving utilities $2-3 billion, compared to the cost of regulations. Pollution permit trading will be a hot topic at the Buenos Aires climate change conference in November. "We need a fiscal system that will protect the ecosystems on which the global economy rests," Roodman said. "If we can't protect these ecosystems in the short run, we cannot have economic progress in the long run. And when you explain our current tax and subsidy policies to people, they overwhelmingly support cutting subsidies and shifting taxes." Polls in the European Union and the United States have found that 70 percent of the people support the idea of "green tax reform," once it is described. Many political parties in Northern Europe have endorsed it, as have groups like the European Trade Union Confederation. In a U.S. poll conducted earlier this summer for Friends of the Earth by International Communications Research, 71.5 percent favored shifting taxes from payrolls and income to fossil fuel energy sources, with support cutting across party lines.
Worldwatch Institute: www.worldwatch.org |
Ending $650 billion in obsolete subsidies for environmentally destructive
activities like clearcutting and fishing, and levying taxes on resource
depletion and pollutants like greenhouse gases, could provide $1.5 trillion a
year for income tax cuts, according to The Natural Wealth of Nations, a new book
from the Worldwatch Institute, a Washington, D.C.-based environmental research
institute. Under this proposal, a U.S. family of four would get a net tax cut of
$2,000.
Roodman argues for two major shifts in how governments raise and spend
money. First, he documents how governments are subsidizing environmentally
harmful activities like logging and highway building to the tune of $650 billion
a year, subsidies that are inefficient at creating jobs, boosting growth, and
helping the poor.
"There is a big political opening here for an enterprising politician who
understands the world we are really living in," said Roodman. "These
environmentally destructive taxes and subsidies are ready for the junk heap of
history. The first politician who gets this message across and taps into this
strong voter support is going to go far."
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