DAC Guidelines and Reference Series Environmental Fiscal Reform for Poverty Reduction A DAC Reference Document ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT The OECD is a unique forum where the governments of 30 democracies work together to address the economic, social and environmental challenges of globalisation. The OECD is also at the forefront of efforts to understand and to help governments respond to new developments and concerns, such as corporate governance, the information economy and the challenges of an ageing population. The Organisation provides a setting where governments can compare policy experiences, seek answers to common problems, identify good practice and work to co-ordinate domestic and international policies. The OECD member countries are: Australia, Austria, Belgium, Canada, the Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, the Slovak Republic, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States. The Commission of the European Communities takes part in the work of the OECD. OECD Publishing disseminates widely the results of the Organisation’s statistics gathering and research on economic, social and environmental issues, as well as the conventions, guidelines and standards agreed by its members. This work is published on the responsibility of the Secretary-General of the OECD. The opinions expressed and arguments employed herein do not necessarily reflect the official views of the Organisation or of the governments of its member countries. Also available in French under the title: Lignes directrices et ouvrages de référence du CAD LA RÉFORME FISCALE ÉCOLOGIQUE AXÉE SUR LA RÉDUCTION DE LA PAUVRETÉ © OECD 2005 No reproduction, copy, transmission or translation of this publication may be made without written permission. Applications should be sent to OECD Publishing:
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[email protected]). FOREWORD Foreword I t is an unfortunate fact that fiscal and environmental experts seldom communicate with one another. They each have very different concerns, formal training and sets of jargon. You could even say that they speak a different language. But so much is to be gained if we could create incentives for them to work more together. Examples abound of thoughtfully designed fiscal measures (so-called market-based instruments) that, when effectively implemented, can raise revenue while helping to further environmental goals. This paper tells of many examples, and offers much new material highlighting the potential poverty reduction benefits – surely an added incentive to work together. If joint reform of fiscal and environmental measures – or “environmental fiscal reform” (EFR) – can protect the environment, as well as raise revenue and free up resources – which can be allocated to poverty reduction efforts – why don’t we see much more of it? For a start, designing effective EFR requires a sound understanding of environmental and fiscal policy, as well as how each is regulated in practice. This requires co-operation between fiscal and environmental experts, as well as colleagues in development. But designing a sound proposal for EFR is only half the story. Expe