This document discusses promoting sustainability and a circular economy in Europe. It describes Italy's work analyzing environmentally harmful and friendly subsidies. It advocates shifting taxes from labor to natural resources and pollution to incentivize resource efficiency and a circular economy. Government policies like green fiscal reform and removing fossil fuel subsidies can help finance innovation for sustainability goals. Economic instruments including taxes, fees, and markets can internalize environmental costs.

1. The event is realised with the financial assistance of the European Union.
The donors are not responsible for any expressed views at the event.
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
Chief Economist, Italian Ministry of Environment - TA Sogesid
former Chair of OECD Committee on Environmental Taxation
Chair OECD Committee on Environmental Performance Country Reviews
15/05/2018

2. The event is realised with the financial assistance of the European Union.
The donors are not responsible for any expressed views at the event.
15/05/2018 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. The event is realised with the financial assistance of the European Union.
The donors are not responsible for any expressed views at the event.
15/05/2018 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. The event is realised with the financial assistance of the European Union.
The donors are not responsible for any expressed views at the event.
15/05/2018
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 € /

5. The event is realised with the financial assistance of the European Union.
The donors are not responsible for any expressed views at the event.
Source: Rockstroem et al. (2009) and Steffen et al. Planetary
Boundaries: Guiding human development on a changing planet,
Science, 16.1.2015;
9 Planet Boundaries to be
kept under control:
1. Climate Change
2. Biosphere integrity
(Biodiversity)
3. Stratospheric ozone
4. Atmospheric aerosol
5. Ocean acidification
6. Biogeochemical
flows (P, N)
7. Land-system change
8. Freshwater use
9. Novel entities ...
5

6. The event is realised with the financial assistance of the European Union.
The donors are not responsible for any expressed views at the event.
15/05/2018 6
CIRCULAR ECONOMY: PRACTICE
OECD (2015), Material Resources, Productivity and the
Environment

7. The event is realised with the financial assistance of the European Union.
The donors are not responsible for any expressed views at the event.
15/05/2018 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. The event is realised with the financial assistance of the European Union.
The donors are not responsible for any expressed views at the event.
15/05/2018 8
• 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
OECD POLICY GUIDANCE(for the G7)

9. The event is realised with the financial assistance of the European Union.
The donors are not responsible for any expressed views at the event.
15/05/2018 9
ROLE FOR GOVERNMENTS (NATIONAL AND EU)
 FINANCIAL INCENTIVES (Support to technical and organizational
innovation, infrastructure for waste management, well-functioning secondary
raw materials markets, industrial symbiosis, eco-design and EPR, «good»
labelling, best practices sharing, education, re-skilling)
 FISCAL MEASURES (differentiated VAT, EHS removal, internalization of
external costs through 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 mover advantage in the international context; GPP contribution; eco-
design; new jobs; effectiveness of fiscal measures; environmental burden
leakage; etc.)

10. The event is realised with the financial assistance of the European Union.
The donors are not responsible for any expressed views at the event.
15/05/2018 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 event is realised with the financial assistance of the European Union.
The donors are not responsible for any expressed views at the event.
15/05/2018 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. The event is realised with the financial assistance of the European Union.
The donors are not responsible for any expressed views at the event.
15/05/2018 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. The event is realised with the financial assistance of the European Union.
The donors are not responsible for any expressed views at the event.
15/05/2018 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,

14. The event is realised with the financial assistance of the European Union.
The donors are not responsible for any expressed views at the event.
15/05/2018 END 14
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