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Aldo Ravazzi Douvan Chief Economist, Italian Ministry of Environment - TA Sogesid

Sustainability in Europe How can Europe move towards sustainability and a circular, low-carbon economy? What is the role of the future EU budget in supporting the transition? Promoting climate and sustainability in EU policy-making. Aldo Ravazzi Douvan

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Aldo Ravazzi Douvan Chief Economist, Italian Ministry of Environment - TA Sogesid

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  1. Sustainability in EuropeHow can Europe move towards sustainability and a circular, low-carbon economy? What is the role of the future EU budget in supporting the transition?Promoting climate and sustainability in EU policy-making Aldo Ravazzi Douvan Chief Economist, Italian Ministry of Environment - TA Sogesid former Chair of OECD Committee on Environmental Taxation Chair OECD Committee on Environmental Performance Country Reviews

  2. Analysis and knowledge, new from Italy: • Italian Catalogue of EHSs and EFSs 2017 (Environmentally Harmful Subsidies and Environmentally Friendly Susbsides) like FR and DE • Italian Natural Capital Committee and State of Natural Capital Reports (like UK) 2017 and 2018 • Positioning paper on Circular Economy and Resource Efficiency 2017 • Financing the future: 1st Italian Report on Green Finance 2017 • all in the frame of the new National Strategy on Sustainable Development 2017

  3. G7 Environment 2017: • EFR and EHS, incentives and FFS • Green/Sustainable Finance • Role of MDBs in supporting Paris Agreement & SDGs • Green Jobs • G20 Peer Review on Fossil Fuel Subsidies • 2016 Usa and China • 2017 Germany and Mexico • 2018 Italy and Indonesia • Inefficient Fossil Fuel Subsidies that encourage wasteful consumption . All Fossil Fuel Subsidies are inefficient…

  4. DECOUPLING (IRP-UNEP FOR G7) • PRODUCTIVITY/INTENSITY/EFFICIENCY • RESOURCE PRODUCTIVITY (GDP / DMC) • RESOURCE INTENSITY (DMC or RMC / GDP) • TECHNICAL EFFICIENCY (OUTPUT t / INPUT t) • ECONOMIC EFFICIENCY (OUTPUT € / INPUT €)

  5. 9 Planet Boundaries to be kept under control: • Climate Change • Biosphere integrity • (Biodiversity) • Stratospheric ozone • Atmospheric aerosol • Ocean acidification • Biogeochemical flows (P, N) • Land-system change • Freshwater use • Novel entities ... Source: Rockstroem et al. (2009) and Steffen et al. PlanetaryBoundaries: Guiding human development on a changingplanet, Science, 16.1.2015; http://www-ramanathan.ucsd.edu/files/pr210.pdf

  6. CIRCULAR ECONOMY: PRACTICE OECD (2015), Material Resources, Productivity and the Environment

  7. ENABLING FACTORS (EEA, CE The Knowledge Base,2016) • ECONOMIC INCENTIVES AND FINANCE • Shifting taxes from labour to natural resources and pollution • Phasing out environmentally harmful subsidies • Internalisation of environmental costs • Deposit systems • Extended producer responsibility • Finance mechanisms supporting circular economy approaches

  8. OECD POLICY GUIDANCE(for the G7) • INSTRUMENTS • REGULATORY (COMMAND & CONTROL, PERFORMANCE and TECHNOLOGY STANDARDS) • VOLUNTARY (LABELLING, MANAGEMENT SYSTEM) • MARKET-BASED (TAXES, ALLOWANCES, SUBSIDIES) • EVALUATION CRITERIA for POLICY ACTION • ENVIRONMENTAL EFFECTIVENESS • (LIFE-CYCLE COHERENCE) • ECONOMIC EFFICIENCY • LEVERAGE for INNOVATION • ADMINISTRATIVE COSTS • DISTRIBUTIONAL IMPACTS • COMPETITIVENESS IMPACT

  9. ROLE FOR GOVERNMENTS (NATIONAL AND EU) • FINANCIAL INCENTIVES (Support to technical and organizationalinnovation, infrastructure for waste management, well-functioningsecondaryrawmaterialsmarkets, industrial symbiosis, eco-design and EPR, «good» labelling, best practicessharing, education, re-skilling) • FISCAL MEASURES (differentiated VAT, EHS removal, internalization of externalcoststhrough material taxation, Environmental Fiscal Reform and shift of taxation from labour to resource and pollution) • PURCHASE POLICY (Green Public Procurement and (compliance with basic and adequate incentive to «awarding») Environmental Minimum Criteria) • (…) STARTED WORKING WITH OECD TO PROVIDE ANSWERS (e.g. first moveradvantage in the internationalcontext; GPP contribution; eco-design; new jobs; effectiveness of fiscal measures; environmentalburdenleakage; etc.)

  10. Economic Instruments for Waste Management • Tariffs - Charges - Fees (Pay As You Throw) • Taxes (beyond Tariffs) • Deposit Refund Systems • EHS removal for • EFS for innovative waste management practices, • EFS for the use of secondary raw materials • Landfill tax • …

  11. The Policy Issue: Firms maximise Resource Efficiency every day, they practice Circular economy whenever it is convenient: they reduce costs, they maximize profits Why the cumulative behaviour at economy level is insufficient, why do we need public intervention

  12. Economic Instruments for Materials (ResEff & CircEco) • Rights on Land Use and Transformation • Fees on Extraction from Caves and Riverbeds (Marble, Gravel, Sand, ...) • Fees/Tariffs/Taxes on the Extraction of Metals (issue of Rare Metals) • Fees/Tariffs/Taxes on Water consumption and treatment • Fuels (coal, natural gas, oil, uranium, …) • …

  13. Green Fiscal Reform (GFR) • Green/Environmental/Ecological Tax/Fiscal Reform • Four policy areas of public intervention: • Restructuring existing rates in an environmentally friendly way • - New environmental taxes if needed • Creating markets where they do not exist (ETS but not only) • - Remove Environmentally Harmful Subsidies: e.g. Fossil Fuel Subsidies • Use of revenues: • Radically decrease other distortionary taxes • e.g. income taxes (citizens and firms) • [economic, environmental and political acceptance issue] • Finance eco-innovation, low- and 0-carbon technologies, RE&CE • Abate public debt

  14. END Fiscal neutrality - compensation - transition but possible also in a dynamic dimension (tax increase or tax abatement policy) GFR: Shifting the tax burden from Labour and Firms to Resources and Pollution Jacques Delors, EU White Paper on Growth, Competitiveness and Employment, 1994 From people to energy and resources Giulio Tremonti, Italian White Paper on Fiscal Reform, 1995 At National or European level? Common Budget Policy, no Common Fiscal Policy Unanimity rule on taxation – Brexit – Visegrad Enhanced Cooperation – Coalition of the Willing – Like-Minded Countries Serving the Paris Agreement and the UN 2030 Agenda on Sustainable Development Global Carbon Price does probably not make sense (oil? aviation?) Not achievable without serious and significant carbon pricing, ambitious ETS markets and effective carbon taxes. Need to reform international agreements on kerosene exemption. Pricing of fuels that discourage their use and encourage technological innovation Removal of EHSs and FFSs which distort prices and do not internalize environmental costs

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