Mobilising the Market to Shape Environmental Performance: experience in Ireland

Does Ireland's system of taxes and subsidies encourage positive or negative environmental behaviour? Are polluters made to pay for their damage, or are they in effect encouraged to pollute? These were the questions asked in a comprehensive ESRI study undertaken five years after Rio. Now, for RIO+10, this paper asks what progress has been made with implementing the market-based suggestions? Have the aspects that were highlighted as requiring further investigation been researched? The answer is that many subsidies are still poorly targeted or encourage harmful behaviour. While there is improvement in some areas, in others the continuing absence of taxes and charges is seen to stimulate use of the environment in a way that is ultimately unsustainable. An important challenge is the perceived regressive effects of market-based policies. The example chosen here is the (currently hypothetical) introduction of charges for water and waste-water services delivered to households, in order to meet rising costs. An ill-researched policy of zero charges creates financial difficulties for water agencies, is at variance with considered opinions held by the public, and promotes behaviour that could harm the environment. The argument that low-income households would necessarily be adversely affected by charges is seen to be groundless and there are several mechanisms whereby they could be compensated. Another challenge is the issue of competitiveness, which is often invoked to stem application of the polluter pays principle. Could globalisation be exploited on this issue? Could Rio+10 encourage a world body, such as the World Trade Organisation, to rule that countries that allow their industry free access to the planet's CO2 assimilative capacity are guilty of distorting trade?