Fiscal Instruments

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Insights

The GGKP Knowledge Partner, CDKN attended the Global Green Growth Week was held in Jeju, Republic of Korea, 5-9 September.

Steven Stone, UNEP, discusses the link between sustainability and financing and the various mechanisms and instruments in place - existing, and to be created - to finance the green economy transition.

For a long time, the international community has talked about the benefits that can be created by removing wasteful fossil-fuel subsidies and freeing up expenditure for more worthwhile things—but little analysis has looked at how this works out in practice.

Although the private sector plays a vital role in the development and diffusion of new technologies, short-term financial planning practices create market failures that can hinder the expansion of green industries. Governments can use fiscal instruments to facilitate innovation, stimulate green markets, and help phase out environmentally or socially harmful activities.

The use of public spending, including green subsidies and carbon pricing, to leverage private investment can help to create the enabling conditions for a green economy. Meanwhile, fiscal incentives targeted at consumers can encourage them to shift their consumption patterns towards greener goods and services. Reforming or phasing out environmentally harmful subsidies can also play an important role in the transition to a green economy. For instance, phasing out fossil fuel subsidies will discourage over-consumption and encourage higher energy efficiency while levelling the playing field for renewable energy investments.

The Green Fiscal Policy Network, a partnership between the IMF, GIZ and UNEP, provides useful resources, country profiles and case studies focusing on fiscal instruments in the context of green growth.

Relevance to the SDGs

Sustainable Development Goal (SDG) 12 on sustainable production and consumption calls for phasing out and restructuring environmentally-harmful subsidies in the fossil fuel industry.

SDG 12.c
Phasing out Subsidies

Publications

Phase-out 2020_Monitoring Europe's fossil fuel subsidies
Overseas Development Institute (ODI), Climate Action Network (CAN) Europe
Using credit lines to foster green lending_opportunities and challenges
I4CE – Institute for Climate Economics, Agence Française de Développement (AFD), Inter-American Development Bank (IDB)
Small-scale Fisheries and Subsidies Disciplines_Definitions, Catches, Revenues, and Subsidies
International Centre for Trade and Sustainable Development (ICTSD)

Learning Products

Partnership for Action on Green Economy (PAGE)
Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), Emerging Markets Dialogue on Finance, Natural Capital Finance Alliance (NCFA), UN Environment Finance Initiative (UNEP FI), Global Canopy Programme (GCP)

Projects

Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ)
Climate and Development Knowledge Network (CDKN)
Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH

Batumi Initiative on Green Economy (BIG-E)

Organisation for Economic Co-operation and Development (OECD)
Organisation for Economic Co-operation and Development (OECD)