Reforming Environmentally Harmful Subsidies

The reform of environmentally-harmful subsidies (EHS) is a key issue in relation to addressing climate change, advancing sustainable development and maintaining the EU’s international competitiveness. While the original reason for the subsidies may be positive (e.g. protecting social groups, ensuring food or energy security), the rationale might no longer apply today. Furthermore inappropriate subsidies can have significant negative impacts – they might lead to economic inefficiencies, stimulate resource intensive production, ‘lock-in’ yesterday’s technologies and ‘lock-out’ new technologies, and increase waste and pollution. This study, commissioned by the European Commission’s DG Environment, attempts to offer practical insights and recommendations for environmentally harmful subsidy reform. The report is a contribution to the work of the Commission in developing a roadmap for EHS reform, sector by sector, by 2008.

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