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How can the cost-effectiveness of environmental policies be improved?
Sustainability issues rank high on the government agenda in Austria and the population is ready to accept the costs associated with ambitious targets. The Austrian government has embarked on a far-reaching programme to reduce greenhouse gas emissions. Under the EU burden sharing agreement it accepted a cut in emissions of twice that of the rest of the EU. With emissions still above their 1990 level, a reduction of 20 per cent is now needed to achieve compliance. Realising such a cut in emissions is likely to be costly. While the target itself could be justified in light of the high public support for environmental issues, cost effectiveness can be improved by using more economic instruments, notably by widening the coverage of emitters subject to a tax of some sort. However, domestic abatement should only be promoted up to the point where marginal costs are equal to the price of emission permits in the EU market once it is operational, which would entail scaling back programmes where such costs are clearly excessive. If mishandled, the disposal of waste can cause long-lasting damage to ecosystems and to human health. Due to stringent governmental regulations and incentives, hierarchical waste management policies achieve very high recycling rates, in most cases mandated by EU legislation, but are associated with high costs for consumers and producers. These are in part induced by taxes aimed at minimising waste generation. Some parts of the programme may absorb more resources than are saved by recycling. More systematic use of the results of cost-benefit analysis in policy formulation would help to improve the cost-effectiveness of policies aiming at improving the sustainability of economic development.
What can be done to make development aid more effective?
The volume of the Austrian aid programme increased markedly in 2001 and is now very close to the OECD median effort. Also, the government aims at raising assistance further to the level of the Barcelona target of the EU (0.33 per cent of GDP). Until recently, a considerable part of it was oriented towards other European countries. This was a strategic objective for Austria but meant that less than one-quarter of aid went to least-developed countries. However, new legislation, effective from January 2004 onwards, provides for the creation of an Austrian Development Agency designed to enhance the efficiency of aid delivered. The lessons learned from assessing previous projects have encouraged a shift in priorities for aid to South East Europe away from physical infrastructure towards social services, mainly education and health, which now represent about half of Austria’s bilateral ODA. At the same time, an effort is being made to improve the capacity for foreign trade of developing countries. Such initiatives represent a modest share of Austrian aid but the authorities intend to expand them. To achieve maximum impact, these measures require multilateral action to further open trade for products from these countries including for agriculture.
ODA by individual DAC members
Source: OECD.
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