Sorting out subsidies: navigating fiscal reform for economic, social and environmental transformation
Governments all over the world are facing a fiscal crisis. Tax revenues fell during pandemic-induced lockdowns, while public spending increased. Now soaring commodity prices – oil, gas, wheat, palm oil, iron ore – mean that many governments are urgently cutting taxes further or increasing spending to help businesses and households pay for essentials.
Well-designed subsidies and tax exemptions can help to reduce poverty, stimulate economic transformation and mitigate environmental harm. Subsidies can improve the affordability of food and fuel for low-income households, and can boost productivity by enabling firms to purchase inputs at lower costs, such as energy and fertilisers, improving their competitiveness. They can also be designed to promote the uptake of greener goods and services, such as solar panels.
But too often, subsidies and tax exemptions are designed in ways that prop up consumption by the rich rather than meeting the essential needs of the poor. They favour inefficient production choices, with economic consequences paid for by taxpayers, and wasteful use of resources with environmental consequences borne worldwide. Moreover, subsidies carry a heavy opportunity cost: governments may be able to use those resources more efficiently to deliver inclusive, sustainable economic transformation – for example, through social protection or infrastructure investment.
For all of these reasons, subsidies require careful review to ensure that they deliver acceptable social, economic and environmental outcomes. The processes of subsidy reform must also be carefully managed to secure public support and avoid political backlash.
Against this global backdrop, ODI Nexus will convene leading experts to explore:
(1) how to design subsidies to simultaneously deliver against economic, social and environment goals
(2) how to navigate the complex politics of subsidy reform at the country level
(3) whether and how global processes can best support countries at this critical moment.
Join us on 19 September 2022 for this panel and Q&A discussion, chaired by Ipek Gençsü, Senior Research Fellow at ODI.
Senior Research Fellow, ODI (Chair)
Executive Director of Institute for Essential Services Reform (IESR), Indonesia
Executive Director, African Economic Research Consortium (AERC), Kenya
Non-resident Senior Fellow at the Institute of South Asian Studies at the National University of Singapore and Senior Research Associate, ODI
Senior Research Fellow at ODI