Government subsidies for business practices and processes should be approached with caution, even when they seem to be environmentally friendly, writes a group of scientists and economists.
They argue that subsidies can alter market pressures, leading to unintended consequences that not only perpetuate harmful subsidies over time but also diminish the overall effectiveness of those intended to promote environmental sustainability.
Subsidies can be powerful motivators that further environmental and sustainability goals, say the authors. For example, the United States' Inflation Reduction Act of 2022 uses tax credits and incentives for things like electric vehicles , solar power, and wind power to meet its renewable energy and efficiency targets.
Take the case of EVs: Switching from gasoline-powered cars to EVs reduces greenhouse gas emissions. When subsidies for EVs and their technology create more inexpensive EVs, however, that market will expand, increasing overall vehicle use.But if subsidies instead went to increased infrastructure for and access to public transportation, more people might get rid of their cars, making the net positive environmental impact much greater.
The authors cite that U.S. agricultural input subsidies have been shown to drive 17% of nitrogen pollution, while production subsidies account for 14% of global deforestation. In 2018, nearly 70% of $35.4 billion in fishing subsidies went to increasing fishing capacity through aid like fuel purchases, capital investment, and infrastructure, all of which contribute to overfishing.
From an economic efficiency perspective, it's better to tax activities that generate negative effects, such as a carbon tax, says Segerson -- but they are a hard sell. "We can subsidize these greener production processes, but cautiously, and recognizing that we don't want to have a reliance on these subsidies over the long term," says Segerson.Kathleen Segerson, Stephen Polasky, Marten Scheffer, U. Rashid Sumaila, Juan Camilo Cárdenas, Karine Nyborg, Eli P. Fenichel, John M. Anderies, Scott Barrett, Elena M. Bennett, Stephen R.
Agriculture And Food Endangered Animals Energy And The Environment Sustainability Environmental Policy Energy Issues Environmental Policies Political Science
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