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INDIA said we have talked a lot about the constraints developed countries are facing, but we need to keep in mind that the developing countries are also facing resource constraints that have become more severe over the last three to four years. More factual information is needed to examine the impact of subsidies on the poor and on income distribution.

POLAND commended the Secretary-General's report since it referred to the countries with economies in transition. He outlined several issues of relevance to his region that the report should have covered, including reports on soft loans, financial incentives, and the role of preferential and commercial loans in realizing sustainable development.

GERMANY noted that it is useful to redirect production and consumption patterns towards sustainable development. Taxes and subsidies that encourage unsustainable production and consumption patterns should be taken care of. On improving the operation of national environmental funds, the CSD might draw upon the work done in an inter-agency working group initiated by UNDP. However, placing national budgets in thematic sub-funds is regarded with skepticism. Donors and the IFIs have urged developing countries to organize their budgets according to the cross-presentation method. The splitting up of budgets into funds runs counter to integrating environmental activities into all policies, relieves the actors of the constraints of subjecting their proposals to internal prioritization, and leads to the submission of second rate project proposals. Donors have been urging developing countries to work on national sustainable development strategies. Since these often have conflicting requirements, more coordination is necessary.

The NETHERLANDS said there is need to shift from taxing labor to environmental taxation, while promoting employment. He noted that international competitiveness based on national interests has contributed to the inability to operationalize these principles. The Netherlands will be initiating a tax in 1996 in order to demonstrate how change can take place without destroying national initiatives.

CANADA said greater attention should be paid to the question of national instruments. Canada set up a task force to address this issue and has developed some programmes such as the tradeable permits on menthol-bromide (Montreal Protocol) and auto and tire purchase taxes. He stated that some of these programmes have been difficult to administer due to international competitiveness. He welcomed the Secretary-General's suggestion to undertake further studies on the subject. He also wondered if the CSD Secretariat intended to undertake a more technical study of the subject, what role other commissions might play, and who would implement the recommendations and how.

The PHILIPPINES noted that many developing countries in Latin America and Southeast Asia are actively engaged in the development of economic instruments. The Philippines is experimenting with market-based instruments for sustainable development. The Philippines is also completing its environmental impact assessment system, introducing a public expenditure programme and a core public investment programme, and planning to undertake minimization of subsidies. The problem areas include the government's weak administrative capacity in the implementation of environmental standards.

The US said that a unifying theme can be developed to enable developed and developing countries to work together at the national level. Through this collaboration, programmes and policies that would serve as the basis for sustainable development could be developed, which would form the basis for funding activities by different agencies and donors. Although the issue has not been addressed, domestic resource mobilization is important, in particular in developing countries and countries with economies in transition. Removal of subsidies and energy taxation that the World Bank has advocated should be implemented, as appropriate. The CSD must tread carefully around a multilateral approach to resources mobilization. As a first step, he proposed that UNEP should compile a list of existing data on resource mobilization for provision to a future meeting of the CSD in order to avoid duplication of efforts.

The REPUBLIC OF KOREA noted that economic instruments, such as environmental charges and taxes, are used in OECD countries, countries with economies in transition and some developing countries, including the Republic of Korea. Although economic instruments often have price and market distortions, their use should be encouraged and promoted because they induce changes in behavior. Obstacles to their use, such as concerns about competitiveness, need to be addressed. The CSD should offer solutions about how to overcome these obstacles.

COLOMBIA said that national efforts by developing countries to mobilize resources will only be effective if there is a favorable international economic climate and if international commitments are complied with. The possible protectionist effects of economic instruments, particularly against the exports of countries such as Colombia, have to be examined by the Commission. Economic instruments may lead to unstable macroeconomic policies that could lead to inflation and, thus, cancel their effects.

INDIA explained that while international competitiveness has to be addressed, it is also necessary to deal with economic incentive systems by utilizing technology. Tax imposition has to be complemented by technology transfer, including the provision of basic information on the technology available.

The PHILIPPINES, on behalf of the G-77 and China, said that developing countries should adapt, and not merely adopt, economic instruments, based on the internal conditions and national capacities of developing countries. In the treatment of subsidies, developing countries should not be put in a position where the social needs of their people are compromised. A multilateral consultative process should be avoided since it would give one group of countries an opportunity to dictate to another group. South-South cooperation should not supplant the commitments of the developed countries. He also raised the following points: 1) there should be a balance in environment, development and social objectives and concerns; 2) in the adoption and adaptation of economic instruments, a phase-by-phase approach is recommended; and 3) the international coordination of economic instruments, which could lead to an international superstructure, is unacceptable.

The EC said aid effectiveness depends largely on the recipient countries. She noted that policy dialogue is part of the mid-term objective of the current Lom´┐Ż IV review. Appropriate policies are necessary in increasing domestic resources and private resource flows, although the latter have been concentrated in a few countries. Thus ODA should be directed to those that do not benefit from private resources. There is need to address: whether taxation will raise additional revenue; the necessity for revenue neutrality as changes in economic incentives may change behavior but not necessarily the investment patterns; and the appropriateness of increasing the tax base of some countries.

MALAYSIA said that effluent and emissions charges and other environmental charges based on the polluter-pays principle would induce producers and consumers to change their ways. There may also be savings arising from subsidy reduction. The CSD could provide leadership in promoting interministerial consultations to discuss findings and policy implications of subsidy reductions.

PERU requested studies of the economic and social impacts of various economic instruments. Peru is not opposed to new modalities for the financing of sustainable development, but we should not exclude the commitments or the differentiated responsibilities of countries, as stated in Agenda 21.

JAPAN clarified that it is involved in tri-lateral cooperation and promotes South-South cooperation, not as a substitute for development assistance, but as a way to effectively assist developing countries to develop themselves.

CHINA emphasized that economic instruments, however important, are a means, not an end in themselves, and they should not be stressed as the panacea. They need to be country specific and implemented on a step-by-step basis. He pointed out that his country's attempts to increase the income of farmers by 17% in order to remove subsidies set off a chain reaction in all other sectors, which culminated in 18% inflation. Thus any economic instrument has to be applied with caution.

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