Properly designed and applied government subsidies won’t be a choice between the environment and the economy. That was the consensus of panelists on an October 25, 2016 Canada’s Ecofiscal Commission live panel discussion, “When are subsidies win-win for the environment and the economy?”
Moderated by Chris Ragan, chair of Canada’s Ecofiscal Commission and economics professor at McGill University in Montreal, the panel agreed good subsidies are those that work to modify consumer behaviour.
A subsidy that “does something that wouldn’t otherwise be done” and results in a public good should be considered good for both the environment and the economy, said Martha Hall Findlay, a former Member of Parliament and current president and CEO of Canada West Foundation.
“Subsidies should never be the first tool out of the box,” said David Popp, Professor and Ph.D. Program Co-ordinator, Public Administration and International Affairs, at Syracuse University in Syracuse, New York, but added “start-up subsidies can ensure better uptake in a program”.
Popp said electric vehicle subsidies are an example of inefficient support programs because they subsidize actions that some consumers would have taken anyway.
On the other hand, said Amin Asadollahi, Climate Change Mitigation Lead – North America with the International Institute for Sustainable Development, there may be a case for government support to quickly build a national rapid-charging station network that would encourage more rapid adaptation of electric vehicles.
Good subsidies, Asadollahi said, set a course for where the government wants to go and where markets aren’t getting there themselves. Research and development subsidies, for example, help companies focus on the long term rather than looking for a short-term payoff.
The panelists agreed that bad subsidies support activities that would happen anyway. They also suggested that bad subsidies sometimes have the downside of making businesses less competitive.