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Environmental fiscal reform is a way of reducing poverty while also improving the management of the environment. The two goals can go hand-in-hand. This kind of fiscal reform can contribute to poverty reduction directly by addressing environmental problems that impact on the poor, such as water contamination and air pollution. Or it can help indirectly, by generating or freeing up resources for anti-poverty programmes in areas like water supply and sanitation, health and education.
But if the benefits of environmental fiscal reform are so clear why don’t we see more of it? The OECD DAC brought together fiscal, environmental, and development experts to explore this question, drawing from experience in OECD countries as well as China, South Africa, India, Mauritania, Thailand and many other developing countries. It was found that designing and implementing such reforms requires a sound understanding of environmental and fiscal policies. This requires co-operation between fiscal and environmental experts, who often have very different concerns, formal training and sets of jargon.
But after all, confronting different perspectives and facing difficult tradeoffs is precisely what sustainable development is about.
Understanding the political economy of reform and overcoming the political, social and institutional barriers to change is key. Environmental fiscal reform can mean tax increase or price rises. So identifying likely “winners” and “losers” from proposed reforms is vital. Potential coalitions for change may need to be developed and nurtured, and strategies put in place to deal with various interest groups.
This publication is primarily intended for decision makers and development policy experts in donor organizations. It provides insights and good practice on how development co-operation agencies can help developing countries take advantage of these sorts of approaches. But the analysis and recommendations will also be of use to policy makers and experts in developing countries, as well as to representatives of civil society groups and the private sector in those countries.
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How Mauritania is using environmental fiscal reform to improve its fisheries.
Mauritania had been looking for ways to increase the benefits it got from granting access to its fisheries resources to foreign fleets. The agreement made with the European Union in 2001 provided for significant increases in financial compensations, greatly increasing the sector’s contribution to the national budget. But it also included specific provisions for developing the local fisheries sector and improving the control and surveillance of fisheries activities, helping to conserve the resource.
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