Environmental Harm of Hidden Subsidies: Global Warming and Acidification

Posted by Jeroen Van Den Bergh in Government No Comments»

In debates on environmental policy the complementary need for removing environmentally harmful subsidies has received little attention. Such subsidies typically increase the size and pollution intensity of economic activities, often without clear, compensating social benefits. The environmental impact of direct or on-budget subsidies has been well recognized. Indirect or off-budget subsidies, not visible in government budgets, are at least as important. Research on this topic is scarce. We report findings on greenhouse gas (GHG) and acidifying emissions arising from off-budget subsidies in the Netherlands and show that particularly subsidies in agriculture, energy and transport contribute importantly to GHG emissions. Effective climate policy therefore needs to consider removal of off-budget subsidies.