Worldwatch Paper #133: Paying the Piper: Subsidies, Politics, and the Environment

December 1996
David Malin Roodman
ISBN: 1-878071-35-1
80 pages

Around the world, government policies shunt at least $500 billion a year toward activities like logging, mining, overfishing, and driving that hurt the environment and thus undermine the global economy. These subsidies contribute to environmental problems ranging from deforestation to air and water pollution. The money ultimately comes out the pockets of consumer and taxpayers, effectively increasing taxes on work, investment, and consumption that discourage these very activities, thus placing additional drag on economies.

Yet governments rarely set out to degrade the environment and waste money when they create these subsidies. Rather, they usually justify them as stimulating economic development, protecting jobs, enhancing national security, or helping the poor. In practice, however, few of these subsidies do much good on their own terms and at reasonable cost. Most are obsolete, inefficient, ineffective, or even self-defeating. The case for comprehensive reform is thus compelling. It will make subsidies work better, cut taxes, result in cleaner air and water, and cause a shift from pollution- to labor-intensive industries.

Early reform will ease dislocation and accelerate the inevitable economic benefits. But the greatest challenge for reformers may be making subsidy reform a political reality. subsidy recipients are adept at exploiting avenues of political influence such as campaign contributions, and even corruption, in order to thwart change. Subsidy reform, then, and environmental and economic progress in general, are bound up with the broader task of making government more equally accountable to all the governed.