Forwarded message: The IISD (Winnipeg) mentioned in this piece is at URL: http://iisd1.iisd.ca/ It may even be that the document quoted is to be found there. MichaelP ==================================== Has the world gone mad? Subsidies to the tune of trillions of dollars allow industries to wreak destruction on a vast scale By Norman Myers The GuardiaN Wednesday June 3, 1998 Can you believe that you pay �2,000 per year in taxes to degrade the environment and undermine the economy simultaneously - and then pay another �2,000 to clear up the environmental damage, plus economic costs such as higher food prices? You find yourself in this absurd situation thanks to 'perverse' subsidies, ie, those that are bad news for the environment and the economy. Such subsidies worldwide now total $1.5 trillion per year, so they are highly distortive of our economies, while their capacity for environmental mayhem is spectacular. Example: the oil and car industries receive myriad subsidies. The overall costs of the car culture in this country - including grand-scale pollution, congestion, and road accidents - amount to �50 billion per year. Yet the motorist pays only a small fraction of these costs, the rest being picked up by the subsidising taxpayer, as well as citizens at large whose 'payments' through such things as pollution constitute indirect subsidies. Consider, too, the massive underpinning of farmers' incomes via the EU's Common Agricultural Policy. Thanks to taxpayer subsidies, there have been milk lakes and butter mountains. And the taxpayer pays again to store the excess food and even to get rid of it. In Britain, the taxpayer forks out at least �350 per year in agricultural subsidies, and stumps up a further �200 in increased food prices (plus environmental costs, such as pollution of water supplies through pesticide and fertiliser wash-off, and degraded landscapes). Subsidies in US agriculture are just as whimsical: one government agency subsidises irrigation for crops that another agency pays farmers not to grow at all. Equally grotesque is the case of marine fisheries. The global catch - way beyond sustainable yield - is annually worth more than $100 billion at dockside, whereupon it is sold for some $80 billion - the gap being made up with government subsidies. Result: depletion of major fisheries to commercial extinction, followed by bankruptcy for fishing businesses and unemployment for tens of thousands of fishermen. An even more extreme example lies with the German government's support for coal mining. So huge are the subsidies - equivalent to more than �4 billion, or almost �50,000 per miner per year - that the economy would come out ahead if the government were to close down all the mines and send the workers home on full pay for the rest of their lives. There would less coal pollution, such as acid rain and global warming. During a recent analysis of perverse subsidies, carried out for the International Institute for Sustainable Development (IISD), Winnipeg, Canada, we looked at five sectors: agriculture, fossil fuels/ nuclear energy, road transportation, water, and fisheries. Subsidies for agriculture foster overloading of croplands, leading to erosion of topsoil and pollution. Subsidies for fossil fuels aggravate effects of pollution such as acid rain, urban smog and global warming. Subsidies for road transportation promote pollution, plus excessive road building, with destruction of the landscape. Subsidies for water encourage mis-use and over-use of often-scarce supplies. Subsidies for fisheries foster over-exploitation of depleted fish stocks. Of course, subsidies sometimes help. They can offset deficiencies of the marketplace, just as they can support disadvantaged sectors of society. Were we not to inject some positive distortion into our economies, we might never get as much as we want of non-polluting and renewable sources of energy. The same applies to recycling, agricultural set-asides, and a host of other subsidies that help the environment and the economy. Subsidies in the five sectors total around $1,900 billion per year, and perverse subsidies $1,450 billion. Perverse subsidies foster unsustainable development. The total of almost $1.5 trillion is two-and-a-half times greater than the Rio Earth Summit's budget for sustainable developments - a sum that governments dismissed as unthinkably huge. The total is also larger than all but the top five national economies, and larger than the top 12 corporations' annual sales put together. It is twice as much as global military spending per year. In addition, there are indirect costs to economies through knock-on and multiplier effects. Perverse subsidies benefit the few at the expense of the many, and the rich at the expense of the poor. They increase governments' costs and budget deficits, leading to higher taxes and higher prices. They distract governments' attention from better options for fiscal support. They induce businesses to be less efficient and they undermine investment decisions. They foster forms of environmental degradation, which further sets back the economy. Reducing perverse subsidies would supply a double dividend. There would be fewer road-blocks imposed by the subsidies on sustainable development. A huge stock of funds would be released for a new push to sustainable developments. In the case of the US, for instance, the funds would amount to more than $300 billion - more than the Pentagon budget and two-and-a-half times as much as the federal deficit. Were just half the world's perverse subsidies to be phased out, half the funds released would enable many governments to abolish their budget deficits, engage in a fundamental re-ordering of fiscal priorities and to safeguard their environments more than through any other single measure. There is now a propitious political climate for reform of these subsidies. As more governments espouse the gospels of the market-place and privatisation, there is a premium on reducing government intervention and general over-spending. India's subsidies total over 14 per cent of gross domestic product, but the new government wants to reduce its fiscal deficit to under 4 per cent of GDP. Fortunately, there is now a solid record of attempts to reduce or even abolish perverse subsidies: Russia reduced its fossil-fuel subsidies from $29 billion in 1990-91 to $9 billion in 1995-96; China from $25 billion to $10 billion. Reductions have been achieved in India, Poland and Belgium. New Zealand has eliminated virtually all its agricultural subsidies, even though - or perhaps because - its economy is more dependent on agriculture than most OECD countries (four million people with 55 million sheep). New Zealand's agriculture is thriving as never before and there are more, not fewer, farmers. Several Latin American countries, notably Chile and Argentina, have started to reduce their agricultural subsidies. Several Asian countries have found that excessive application of nitrogenous fertilisers, stimulated by extravagant subsidies, are wasteful in economic terms (decline in marginal benefits) and highly polluting in environmental terms (eutrophication of waterways, threats to drinking-water supplies). Pakistan has reduced its fertiliser subsidies from $178 million to $2 million a year and Bangladesh >from $56 million to zero. Of course, beneficiaries of the subsidies will resist. In Washington DC, lobbyists spend $100 million a month to support special interests, top of the list being subsidies. A sound way to counter-attack is to promote public awareness of perverse subsidies. What if citizens were to learn that their taxes are going down a subsidies rat-hole that then hits them again through higher consumer costs? Norman Myers is honorary visiting fellow, Green College, Oxford University.The IISD report, Perverse Subsidies: Tax $s Undercutting our Economies and Environments Alike, by Norman Myers with Jennifer Kent, is available to Guardian readers for �10 (usual list price �12.95) from Greenleaf Publishing in Sheffield (fax 0114-267 9403. ** NOTICE: In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. ** All the Best, Caspar Davis Victoria, B.C., Canada Never wrestle with a pig: You both get all dirty, and the pig likes it. --------------------------------
