Advancing subsidy reforms: towards a viable policy package

Executive Summary: World subsidies may total some $800 billion, of which perhaps two-thirds occur in the developed economies of the OECD. Reforming subsidy regimes that damage the prospects for sustainable development is immensely complex. Simply calling for subsidy removal is unlikely to succeed. The complexity arises from the fact that subsidies are manifestations of rent-seeking, which, in turn is part of a wider category of unproductive activity in economic systems. Rentseeking involves redirecting economic resources to special interest groups rather than using resources productively. Interest groups then use those resources to reinforce their privleged positions. Subsidy reform will inevitably conflict with those special interests. The idea that subsidy reform is a ‘win-win’ policy is therefore misleading – there will always be losers, even if they are undeserving losers. In many cases, the most harmful subsidies will be those that are least easy to remove. Subsidy reform is therefore about dissipating rents, has to be part of a wider programme of macroeconomic and political reform. Subsidies are often linked to corruption, thus emphasising the difficulty of securing the political changes that are needed. Moreover, instituting democratic reform is not sufficient either: democratic societies have even larger subsidy regimes than less democratic societies. Political change has to be combined with economic reform. Some have advocated ‘sudden shocks’ whereby dramatic events are seized as an opportunity to institute reform. There is some evidence to suggest that if a crisis does occur, it may be best to implement subsidy reform along with other transitional measures in one large package. An alternative is to let the almost inevitable growth of subsidies produce economic bankruptcy, and then institute reform. But many societies have proved surprisingly resilient whilst sustaining extensive subsidy regimes, and the costs of waiting may not be acceptable anyway. In the absence of crisis, a gradual approach is best. Policies need to be pre-announced and gradual subsidy reduction needs to be combined with careful public awareness campaigns and efforts at political transparency and accountability. Bilateral and multilateral lenders have a strong role to play, even though reforming subsidies as part of a conditionality package is still controversial. Reform almost inevitably involves privatisation since exposure to market forces is essential for rent dissipation. Nonetheless, reform is complex and its success if difficult to guarantee: for example, privatisation may simply shift rents from the public to the private sector. Subsidy regimes seem peculiarly resilient to change

A pragmatic approach to evaluate alternative indicators to GDP

The serious economic crisis broken out in 2008 highly stressed the limitations of GDP used as a well-being indicator and as a predictive tool for economy. This induced the need to identify new indicators able to link the economic prosperity of a country to aspects of sustainable development and externalities, both positive and negative, in the long run. The aim of this paper is to introduce a structured approach which supports the choice or the construction of alternative indicators to GDP. The starting point is the definition of what a well-being indicator actually should represent according to the Recommendations of the Stiglitz-Sen-Fitoussi Report on the measurement of economic performance and social progress. Then the paper introduces a systematic procedure for the analysis of well-being indicators. The different phases of this procedure entail the checking of indicators technical properties and their effect on the representational efficacy. Finally, some of the most representative well-being indicators drawn from the literature are compared and a detailed application example is propose

What kind of expertise is needed for low energy construction

The construction industry is responsible for 40% of European Union (EU) end-use emissions but addressing this is problematic, as evident from the performance gap between design intention and on-site energy performance. There is a lack of the expertise needed for low energy construction (LEC) in the UK as the complex work processes involved require ‘energy literacy’ of all construction occupations, high qualification levels, broad occupational profiles, integrated teamworking, and good communication . This research identifies the obstacles to meeting these requirements, the nature of the expertise needed to break down occupational divisions and bridge those interfaces where the main heat losses occur, and the transition pathway implied. Obstacles include a decline in the level, breadth and quality of construction vocational education and training (VET), the lack of a learning infrastructure on sites, and a fragmented employment structure. To overcome these and develop enhanced understanding of LEC requires a transformation of the existing structure of VET provision and construction employment and a new curriculum based on a broader concept of agency and backed by rigorous enforcement of standards. This can be achieved through a radical transition pathway rather than market-based solutions to a low carbon future for the construction sector