Environmentally harmful subsidies in Estonia need to be better mapped

4/7/2022 | 11:00 AM

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TALLINN, 7 April 2022 – Various economic measures which may counteract with environmental objectives – called environmentally harmful subsidies – need to be mapped and assessed, the National Audit Office finds in its overview published today. Identifying such economic measures and assessing their various impacts does not mean abandoning them immediately, but the need to establish a clear understanding of the socio-economic cost of the changes, the availability of better alternatives and the possible compensation mechanisms.

According to analyses by other countries and international organisations, the highest number of environmentally harmful subsidies in the world has been provided in the energy, transport and agriculture sectors. These sectors have the greatest environmental impact as well. The National Audit Office states that the need to identify and abandon environmentally harmful subsidies, especially the fossil fuels subsidies, has been pointed out for decades already by several international organisations, such as the UN, OECD, the International Energy Agency and the European Union. Methodologies have been developed to identify these subsidies and assess their impacts. In Italy, Germany and Finland, for example, the impact and financial volume of such subsidies have also been assessed at state level. A prerequisite for identifying and assessing these subsidies is that the person in charge and the necessary actions have been agreed upon.

The overview shows that in Estonia, just like elsewhere in the world, there are various support schemes, tax exemptions and reductions or incentives in place that have a negative environmental impact or in case of which the polluter fails to pay for all the costs and which hinder the achievement of environmental objectives. As the state also provides financial support towards achieving environmental objectives, such economic measures counteract the reduction of pollution and habitat loss and contribute to the use of non-renewable natural resources. For example, state funds are used in part to close the disposal site at the Vaivara hazardous waste treatment centre because companies that dispose of hazardous waste are not charged enough to cover all the necessary costs. However, this is contrary to the principle that the polluter must pay for the costs of its activities as well as for the damage caused to the environment.

In the responses sent to the National Audit Office, the ministries cited socio-economic or competition-related objectives as reasons for the subsidies related to their field, but at the same time, agreed to the need to independently and centrally identify environmentally harmful subsidies. Therefore, the National Audit Office finds that identifying and assessing the environmentally harmful subsidies could be one of the activities in the green deal action plan prepared by the Government Office.

Background

The size of the environmentally harmful subsidies varies from country to country and depends on the size of the country as well as the methodology used for the calculation (how narrowly or widely the subsidies are viewed). Germany, for example, assessed the size of these subsidies in 2014 to amount to 57 billion euros. In Italy, 19 billion euros were spent on these subsidies in 2019; in the Netherlands, the amount of the subsidies was estimated at 5–10 billion, in Finland, at 3.5 billion and in Ireland, at 4 billion euros. France estimated the volume of the environmentally harmful subsidies in the state budget only, and they amounted to 10 billion euros.

Priit Simson
Head of Communications of the National Audit Office of Estonia
+372 640 0102
+372 5615 0280
priit.simson@riigikontroll.ee
press@riigikontroll.ee
http://www.riigikontroll.ee/

  • Posted: 4/7/2022 11:00 AM
  • Last Update: 4/7/2022 11:14 AM
  • Last Review: 4/7/2022 11:14 AM

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