The Telegraph
Since 1st March, 1999
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Activities often generate private benefits for economic agents but impose costs on society. Thus regulation or corrective taxation may be required to align private and public incentives with the need for environmental protection. Especially harmful are government policies, such as direct or hidden subsidies, that send the wrong signals by pricing environmental resources inappropriately. Reducing environmentally damaging subsidies is often far more cost-effective than directly regulating economic activity. Reflecting environmental costs in market prices...also promotes environmentally sound practices and sustainable use of natural resources.

Prices for irrigation water are an important example. Even though water is becoming more scarce in many countries, it tends to be provided to users almost free of charge. That approach promotes waste, increases soil waterlogging and salinization and discourages farmers from investing in water conservation. Other environmentally damaging policies include subsidies that promote large-scale commercial fishing and forestry and excessive use of agricultural chemicals such as fertilizers and pesticides.

Topping the list of damaging subsidies, however, are those for fossil fuel consumption. Worldwide, their value exceeds all foreign aid from all sources. There is growing consensus that energy subsidies should focus on expanding access to technology, developing and disseminating cleaner fuels and increasing end use efficiency — not promoting consumption...

The lower unit costs of renewable energy technologies benefit both rich countries and developing countries considering their adoption. Policy interventions should also account for the impact of economic activities on environmental assets. National income accounts...should differentiate between income from sustainable use of natural resources...and from activities that reduce stocks of natural capital...These accounts should also include the effects of economic activities on environmental quality and productivity, such as soil and water degradation. Such “green” accounts place environmental problems in a framework that economic ministries understand. They also encourage decision-makers in finance, planning and sector ministries to pay more attention to environmental degradation...

Environmental degradation rarely stops at national borders, yet many environmental policies and institutions do. International watersheds, fisheries, pollution and climate change pose environmental policy challenges that must be addressed by countries working together-because the actions of one country affect the welfare of others. Compounding the problem are the unequally distributed benefits of environmental services and the costs of managing them within and between countries.

Several international environmental agreements have drawn attention to the need to manage the global environment. But implementation of these agreements could be improved...

Intergovernmental processes tend to be difficult to organize and slow to execute, but they are the only realistic way to address cross-border pollution and ecosystem degradation. International agreements should share burdens equitably and ensure that the benefits of better environmental management accrue to the local people who bear the direct costs and lost opportunities of environmental resource protection ...Although rich countries produce most of the emissions that lead to global warming, the effects are felt all over the world. Meanwhile, progress on curbing these emissions has been mixed.

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