Governments Spend Billions Harming Environment Report Says Subsidies Do More Harm Than Good

The words “government subsidy” can make economists shudder and taxpayers fume, can discourage the poor and enrage environmentalists.

But while unpopular in theory, subsidies for people ranging from the richest industrialist to the poorest slum dweller have become permanent fixtures of governments around the world.

A study released Saturday by Worldwatch Institute, an independent environmental advocacy group, estimates subsidies cost governments and consumers more than $500 billion a year - and a violated environment.

The report advocates more selective use of subsidies, reserving them particularly for the poor. A dozen or more undeveloped countries target electricity subsidies at them through “lifeline rates” on utilities - discounts on the first modest units of power used each month.

General subsidies are far more common, however. Almost everywhere, the poor have little political power, unlike recipients of industrial subsidies - the ones that cause the greatest pollution.

Eliminating or trimming subsidies would reduce taxes, spur economic growth, improve health and prevent pollution, the report says. But Worldwatch says subsidies are kept in place through political pressure and donations, even bribery.

“Governments don’t intend to waste money or destroy the environment with subsidies,” said the report’s author, David M. Roodman. “But the fact is most (subsidies) are obsolete or ineffective and are hard to defend even before the taxpayer, consumer and environmental costs are added in.”

The report says subsidies supposed to help communities and economies often do the opposite through promoting environmentally harmful activities such as deforestation, over-fishing, even driving cars and trucks over roads built with public money using too-cheap gas. The actual amount may be far greater than the $500 billion, it said.

“With the global tax burden standing at roughly $7.5 trillion a year, subsidies effectively elevate taxes - on wages, profits and consumer spending - by at least 7 percent and perhaps much more,” the report said.

Examples:

Subsidies for the global fishing fleet have helped produce enough boats, hooks and nets to catch twice the available fish, contributing to overfishing and destruction of fisheries.

Local, state and federal governments in the United States pay $111 billion a year in road and driving costs in addition to gasoline, car and highway taxes - a subsidy worth $.70 for every gallon of gas or diesel fuel sold.

The cost of protecting a hard-coal mining job in Germany through subsidies is now $72,800 a year, which means it would be cheaper to shut down the mines and pay the miners not to work.

Building roads for loggers in Australia’s Victoria state costs the government $170 million a year more than it earns on the wood hauled out of the forests. In effect, the Australians pay timber companies to raze their forests.

“Losses like these lead to the perverse conclusion that taxpayers would be better off banning such resource-intensive activities on many public lands and splitting the savings with industry - in other words, paying ranchers not to ranch and loggers not to log,” the reports says.

In Western industrial countries food-production subsidies and market controls cost consumer-taxpayers $302 billion in 1995, or an average of $1,500 a year for a family of four.