Greening taxes and subsidies in the Pacific islands

The final report of an IEEP-led study for the Pacific Community entitled ‘Towards greener taxes and subsidies in Pacific Island Countries and Territories’, produced within the scope of the wider RESCCUE project (Restoration of Ecosystem Services and Adaptation to Climate Change), presents information on existing environmentally harmful instruments and reform efforts to green taxes and subsidies in the Pacific Island Countries and Territories (PICTs).

The report includes examples from many PICTs, with a focus on Vanuatu, Fiji and French Polynesia. It looks at nine specific economic sectors: mining, fisheries, agriculture, transport, waste management, water management, urban development, tourism and energy.

The review of existing regimes reveals that many taxes and subsidies in the PICTs may have negative environmental impacts and could hamper the achievement of broader environmental objectives related to climate change, emissions reductions, habitat and biodiversity conservation, land, air and water quality, waste management and so on. Examples include:

  • Tax credits or exemptions in the mining, fisheries, agriculture, transport and tourism sectors
  • Fuel duty concessions in the fisheries, transport and energy sectors
  • Direct subsidies for activities such as crop production, marine and air transport, and to regulate fossil fuel prices, and
  • Inadequate fees for water and waste management services, which provide de facto subsidies for poor environmental management.

However, reform efforts and ‘green’ instruments are already in place in many PICTs. These instruments can bring about positive environmental impacts including sustainable resource use, improved waste and water management, renewables generation, reduced emissions and air pollution, and improved water and soil quality. Examples include:

  • Taxes or charges linked to resource use, including water, materials, waste generation and management, and tourism-related activities
  • Tax incentives to promote more environmentally friendly choices such as cleaner vehicles, renewables investments and waste management
  • Direct support for renewables, public transport, cleaner vehicles, water supply, climate-adapted and organic agriculture, and alternatives to conventional air conditioning, and
  • Fees for licences, permits or registration, e.g. for mining, fishing, access to conservation areas, and vehicle registration.

The range of examples included in the report indicates a mixed picture in terms of the greening of fiscal instruments and subsidies in the PICTs. Progress is undoubtedly being made and there is significant awareness of the potential of economic instruments to provide the right signals for beneficial environmental outcomes, but further reform of environmentally harmful taxes and subsidies in the PICTs is still needed.

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