Directorate for Food, Agriculture, and Fisheries 1 ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT ORGANISATION DE COOPÉRATION ET DE DEVELOPMENT ÉCONOMIQUES OECDOCDE THE OECD WORK ON ENVIRONMENTALLY HARMFUL SUBSIDIES EEB Seminar on Environmental Subsidy Reform, How to Tackle Harmful Subsidies 21 November 2003

Directorate for Food, Agriculture, and Fisheries 2 DEFINING ENVIRONMENTALLY HARMFUL SUBSIDIES Old definition: –“An environmentally harmful subsidy (EHS) is a subsidy that causes harm to the environment” –Not very useful!!! All subsidies are potentially environmentally harmful –Policy context is important –Need a tool to determine which subsidies are environmentally harmful and why  The OECD Checklist

Directorate for Food, Agriculture, and Fisheries 3 CHECKLIST APPROACH Identify those subsidies whose removal would lead to an environmental improvement, other things being equal Provides a “quick scan” ….. and not a substitute for detailed analysis

Directorate for Food, Agriculture, and Fisheries 4 CHECKLIST APPROACH (2) Two stage process –Identify effects of subsidies on consumer and producer decisions –Identify the link between these decisions and the environment Policy filter Technology lock-in Conditionality of subsidy

Directorate for Food, Agriculture, and Fisheries 5 OECD WORK ON EHS Three stage approach, with final report in May Definition and measurement Workshop in Nov 2002 Publication in Assessment ­ Checklist approach ­ Sectoral case studies ­ Workshop Nov Addressing obstacles to reform ­ Political economy of subsides ­ Identifying policy mechanisms to address obstacles

Directorate for Food, Agriculture, and Fisheries 6 LESSONS LEARNED FROM CASE STUDIES Checklist is a useful policy tool Sectoral characteristics –Highlights different aspects of the checklist –Resource endowments and environmental profiles “Learning by doing” is the way ahead Improved transparency Identifies data problems Holistic analysis required

Directorate for Food, Agriculture, and Fisheries 7 TECHNICAL PRIORITIES Continued data collection and improvement Additional case studies Maintain momentum achieved Holistic assessment needed

Directorate for Food, Agriculture, and Fisheries 8 IDENTIFYING POLICY OBSTACLES Special interests and rent-seeking behaviour Mythologies and mantras Policy convergence Concerns over competitiveness and distribution Lack of transparency Legal, technical and administrative constraints Perception of “entitlement” to subsidies

Directorate for Food, Agriculture, and Fisheries 9 OPPORTUNITIES FOR REFORM Challenge the mantras Identify policy options for meeting goals Improve targeting and design of subsidy programs Exploit windows of policy opportunity Increased transparency Remove structural impediments Transitional measures Competition policy reform

Directorate for Food, Agriculture, and Fisheries 1010 POSSIBLE DIRECTIONS FOR FUTURE OECD WORK Continue data collection Undertake and coordinate empirical application of the checklist Undertake in-depth reviews of reform of environmentally harmful subsidies Examine the economic and social implications of phasing out environmentally harmful subsidies Explore modalities for future work