11.9. TREND OF INCREASING USE OF ECONOMIC INSTRUMENTS IN FOREIGN COUNTRIES
To provide insight into trends in the use of economic incentives, the 1994 OECD report compared the extent of incentives in eight countries (Finland, France, Germany, Italy, Netherlands, Norway, Sweden, and the United States) in 1987 and 1992. (These were the only eight countries for which data had been collected for both years of the comparison.) Because the 1987 survey studied subsidies and other mechanisms not studied in 1992 and because the 1992 survey included more data sources, the comparison of the two years is difficult. In general, however, the report concluded that increases had been "minor in France, Germany, and Italy, moderate in the Netherlands and Norway and extensive in Finland, Sweden and the USA."OECD (1994a), p. 106.
Examining the countries not included in the OECD comparison and the period since the comparison, the trend remains. Many of the incentive mechanisms described above had not been implemented at the time of publication of the previous version of this report (1992). New incentive mechanisms appear to far outnumber the mechanisms that have been eliminated.
Further evidence of the trend of increased use of economic instruments is found in the European Union's recent environmental policy statements. The Union's fifth environmental action program adopted in 1992 stated that the "traditional regulatory approach would be continued but supple-mented with a wider range of instruments such as the use of economic and fiscal measures (i.e. 'market-based' instruments)." In 1994, the Union "published a new framework of controls over the availability of state aid for environmental purposes." In 1995, the Union prepared a proposal for a Council Directive introducing a tax on carbon dioxide emissions and energy. Chance (1995). (However, the Union stopped short of adopting a carbon tax directive.) The Union's initiatives on eco-labeling and eco-management and auditing were discussed above.
The Organization for Economic Cooperation and Development has also expressed interest in increasing the use of economic incentives. The Communiqué from the OECD Environment Policy Committee Meeting held on February 19-20, 1996 stated, "[OECD environment] Ministers welcomed the expanding use of market-based instruments within OECD countries both to improve efficiency and to address dispersed sources of pollution, which are difficult and costly to manage through regulation alone." The ministers urged the OECD to conduct within two years "a wide-ranging analysis of the effects of subsidies and tax disincentives to sound environmental practices in various economic sectors, and the costs and benefits of their elimination or reform, as proposed by the G-7 Environment Ministers in May 1995" and by 1997 "a further examination of the potential for environmental (or "green") tax reform." DEN, February 21, 1996, E5-6.
The United Nations has also expressed increased interest in economic instruments. After a two-week session of the U.N. Commission on Sustainable Development in April and May of 1996, the Commission chairman said that economic incentives for businesses to protect the environment would be a major goal of a 1997 U.N. General Assembly meeting. IER, May 15, 1996, p. 392.
A related trend is several countries' incorporation of environmental considerations into the design of their taxation system in an attempt to shift the tax burden from labor and capital to the use of natural resources and the environment. This principle played a role in recent tax reforms in the Netherlands, Denmark, Norway, Sweden, and Finland. Even in some other countries that have introduced environmental taxes outside the context of major tax reforms, the environmental tax revenues have sometimes been recycled back to the population or compensated by reductions in other taxes. Indicative of this trend, Table 11-22 shows that the percentage of total tax revenues derived from environmental taxes has risen in many countries.
Less developed countries have also implemented many economic incentives and expressed interest in adding new ones and improving the existing ones. In 1994, for example, China launched a comprehensive two-year study of its charge system with the intention of expanding and enhancing it. Potier (1995), p. 18.