sust-mar: perverse subsidies cost us

From: "Paul Falvo" <falvo@yk.com>
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Date: Fri, 21 Nov 2003 21:13:25 -0700
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The following article is a precis of a book by Norman Myers about perverse
subsidies.  There are countless examples of such perverse government
subsidies happening right now, right here in the Northwest Territories.  The
territorial Finance Minister can not figure out how we are in such debt when
we have such industry - surely more federal subsidies are the answer!??  In
fact, with such subsidies, you can never catch up by doing the same thing,
only harder.  Let us hope for insight and innovation towards truly
sustainable development:
The no-win madness of Catch-22 subsidies
By Norman Myers and Crispin Tickell
Published: July 27 2003 19:38 | Last Updated: July 27 2003 19:38
Economists and environmentalists are not always best friends. But on one
issue they can, and should, unite. That is to
oppose the propensity of governments to misuse fiscal instruments.
Few contest that such instruments, whatever their form, should be designed
to promote good policies and discourage bad
ones. Instead almost every government has created, almost without realising
it, an encrusted apparatus of subsidies which,
once established, proves almost irremovable. Worse, many of these subsidies
are harmful to our economies as well as our
environments. In different ways such perverse subsidies bedevil all our
economics. The public interest, which was their
justification, has been lost.
To take some examples. German coal mines are so heavily subsidised that it
would be economically efficient for the
government to close them all down and send the workers home on full pay for
the rest of their lives. That would also
reduce coal pollution in the form of acid rain, urban smog and global
warming. Here the economy and the environment are
the losers.
So, too, with marine fisheries. The annual global catch, well above
sustainable yield, is worth about $100bn at dockside,
where it is sold for some $80bn, the shortfall being made up with government
subsidies. The result is that more and more
fishermen chase fewer and fewer fish until stocks collapse. In 1992 one of
the richest fisheries in the world, that of the
Grand Bank off north-eastern North America, had to be closed because of a
shortage of fish. Dozens of businesses went
bankrupt.
Elsewhere in the US, one government agency subsidises irrigation for crops
that another agency has paid farmers not to
grow. To cite the economist, Paul Hawken: "The government subsidises energy
costs so that farmers can deplete aquifers
to grow alfalfa, to feed cows that make milk, that is stored in warehouses
as surplus cheese, that does not feed the
hungry."
In Britain the government subsidises the fossil fuel industries, in spite of
diminishing reserves of oil and gas in the North
Sea, and the government's own policies on the need to switch to clean
renewable sources of energy. The figures are
astonishing. Every year the government gives some £6-£8 ($10-$13) in fossil
fuel subsidies for every £1 to support clean
and renewable energy.
Worldwide, perverse subsidies are prominent in six main sectors:
agriculture, fossil fuels, road transport, water, forestry
and fisheries. In all cases the subsidies serve to undermine national
economies as well as environments. Subsidies for
agriculture foster over-loading of croplands, leading to erosion of topsoil,
pollution from synthetic fertilisers and pesticides,
and release of greenhouse gases. Subsidies for fossil fuels are a prime
source of pollution. Subsidies for road transport
also promote pollution. Subsidies for water encourage misuse and over-use of
supplies. Subsidies for forestry encourage
over-logging and other forms of deforestation. Subsidies for fisheries
foster over-exploitation of fish stocks.
It is hard to calculate the value of such subsidies worldwide, but they
probably amount to at least $2,000bn a year. On
both economic and environmental grounds, they defer the time when we can
achieve the holy grail of sustainable
development. The total of $2,000bn is 3½ times as large as the Rio Earth
Summit's proposed budget for sustainable
development, a sum that governments then dismissed as simply not available.
The Organisation for Economic
Co-operation and Development countries account for two-thirds of perverse
subsidies, and the US over one fifth.
A typical British taxpayer pays at least £1,000 a year to fund perverse
subsidies, then pays another £500 through
increased prices for consumer goods and through environmental degradation.
Yet perverse subsidies persist virtually
untouched. This is because subsidies tend to create powerful interest groups
and political lobbies. Were just half of these
perverse subsidies to be phased out, the funds released would help many
governments reduce or abolish their budget
deficits, reorder their fiscal priorities in the true public interest, and
repair environmental damage.
There are a few success stories. New Zealand has eliminated virtually all
its agricultural subsidies, even though - or
perhaps because - its economy is heavily dependent on agriculture. Today the
country has more farmers, more sheep, and
a healthier environment. In similar style, China and India have greatly
reduced their fossil fuel subsidies. Australia, Mexico
and South Africa are moving towards more intelligent pricing of their water
supplies to reflect their true cost. Our present
mode of exploiting the Earth and its environmental resources - unsustainable
exploitation for the most part - suggests we
view our planet as a business liquidating its capital, rather than one
profiting from the interest on it. Should we not live on
our planet as if we intended to stay, rather than as if we were visiting for
a weekend?
Professor Norman Myers is honorary visiting fellow of Green College Oxford
and has acted as scientific consultant to the
White House, the United Nations and the European Commission. Sir Crispin
Tickell is chancellor of the University of
Kent at Canterbury and chairman of the Climate Institute of Washington DC
____
The no-win madness of Catch-22 subsidies / The no-win madness of Catch-22
subsidies (LARRY JAMES 2003-07-28)

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