5

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International
developments and
initiatives supporting
green fiscal reform
international developments and
initiatives supporting
green fiscal reform

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on behalf of PAGE.

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Course authors:
Giuliano Montanari, Maya Valcheva, Amrei Horstbrink (UNITAR); Philip Gass (IISD)

Contributors:
Jason Dion (IISD); Sirini Withana (UN Environment); Sarwat Chowdhury, Massimiliano Riva
(UNDP).

Creative Concept:
Arturo Rago (UNITAR)

Graphic Design:
Pilar Lagos (UNITAR)

Photo credits
Unless stated otherwise, the photos used in the journal are under a Creative Commons license.
TABLE OF CONTENTS
Introduction 5

1 international developments and the new agenda 2030 6

OVERVIEW 6
MAJOR INTERNATIONAL FRAMEWORKS RELEVANT TO FISCAL AND ENVIRONMENTAL POLICY 6
A NEW AGENGA FOR ALL THE COUNTRIES 8
FINANCING THE DEVELOPMENT AGENDA 9
MOVING TO A LOW-CARBON ECONOMY UNDER CLIMATE CHANGE 10

2 how green fiscal reform can support the 12

agenda 2030
OVERVIEW 12
ACHIEVING SDGS THROUGH FISCAL INSTRUMENTS 12
CUTTING ACROSS THE AGENDA 15

3 existing initiatives in support of green Fiscal Reform 18

OVERVIEW 18
COLLABORATION FOR GREENING FISCAL REFORM 18
HOW COLLABORATION CAN ASSIST GREEN FISCAL REFORM 26

4 Key learning points 28

5 references 30

ABBREVIATIONS 31
4
 5
Introduction
Fiscal policy is primarily a national issue,
but it interlinks with developments at
the international level as well. Trade,
development assistance or regional
cooperation –think of the EU, ASEAN,
development banks for example– all affect
the management of public finances.
In recent years, the international community
has been active in establishing new and
ambitious agendas related to both sustainable
development and the climate. These agendas
will depend to a significant degree on sound
fiscal policy to reflect changing priorities in
the way governments use public resources.
Recognizing the important role of fiscal policy
to achieve national and global goals, initiatives
and networks are forming to assist countries in
making the best use of revenue collection and
expenditure.
Module 5 identifies international
developments and efforts to advance green
1
fiscal reform. Lesson 1 places green fiscal
policy within current global frameworks, such
as the Agenda 2030 and the Sustainable
Development Goals. Lesson 2 presents in
more detail existing initiatives and networks
that support researchers and policymakers
around the globe in the design and
implementation of green fiscal policies.
After completing the module, participants will
be able to:
• Explain how green fiscal reform can
advance the new 2030 development
agenda.
• Discuss selected Sustainable
Development Goals and targets that can
be advanced through green fiscal reform.
• Identify initiatives and networks pertinent
to the area of green fiscal reform.
• Describe how collaboration on
international or regional level can
support national policy reform.
 6

international developments
and the new agenda 2030
The global framework for political action on commonly shared challenges
evolves steadily.The international community remains committed to
sustainable development by adopting the 2030 development agenda.

OVERVIEW
A number of high-level conferences on
sustainable development discussed various
challenges at the interface of socioeconomic
development and the environment in recent
decades.
Many of the outcomes also inform national
efforts to put green fiscal instruments to
work.
This lesson outlines central outcomes of major
international conferences that relate to fiscal
and environmental policy solutions

MAJOR INTERNATIONAL FRAMEWORKS RELEVANT TO

FISCAL AND ENVIRONMENTAL POLICY
In response to an observed deterioration of
ecosystems, the 1992 Rio Summit –also
known as Earth Summit– urged governments
to not leave responsibility for environmental
issues alone to environmental departments.
It promoted enhanced use of economic
instruments within environmental policy,
thereby complementing traditional regulatory
instruments1. Furthermore, three binding
agreements were adopted: The Convention
on Biological Diversity (CBD), the
Framework Convention on Climate Change
(UNFCCC) and the Convention to Combat
Desertification (UNCCD). The CBD and
UNFCCC incorporate new approaches to
environmental protection (see Boxes 1 and 2).

1 The main outcome document, Agenda 21, promotes “making effective use of economic instruments
and market and other incentives” (UNCED 1992, Ch. 8). See also Principle 16 of the Rio
Declaration on Environment and Development.
 7
BOX 1:
CONVENTION ON BIOLOGICAL DIVERSITY
The convention represents a key document
for guiding environmental policy. It has
three main objectives:
1. The conservation of biological diversity
2. The sustainable use of the components
of biological diversity
3. The fair and equitable sharing of the
benefits arising out of the utilization of
genetic resources
Article 11 of the convention specifically
addresses incentive measures.
The 2002 Johannesburg World Summit for
Sustainable Development emphasized the
interlinked relation between the environment
and poverty reduction. One of the outcome
documents, the “Johannesburg Plan of
Implementation”, explicitly advocates for
internalization of environmental costs via economic
instruments. It furthermore reaffirmed the polluter
pays principle (WSSD 2002, 9)
Rio+20 – the 2012 follow-up conference to the
1992 summit – featured a high-level summit
that renewed global political commitment for
sustainable development. It examined, inter alia,
how a green economy could provide contemporary
BOX 2:
UNITED NATIONS FRAMEWORK CONVENTION ON CLIMATE CHANGE (UNFCCC)
The objective of the UNFCCC is to
stabilize greenhouse gas concentrations
in the atmosphere at a level that would
prevent dangerous anthropogenic
interference with the climate system.
The basic measure is the concentration
of carbon dioxide in the atmosphere
(parts per million or ppm). It has risen
from 280 ppm before the industrial
revolution to over 400 ppm in 2016
The management of ecosystems with
economic means was developed further
at the Fifth Conference of the Parties
(COP5). Specifically, decision V/6
suggests cost internalization, reduction of
market distortion and aligned incentives
as protection measures (UN 1992).
Similarly, the Aichi Biodiversity Targets,
adopted 2010 in Japan, foresee elimination
or phasing-out of incentives, including
subsidies, harmful to biodiversity (Target 3)
(CBD 2016).
policy solutions. In the outcome document
“The Future We Want“, states recognize “that
fundamental changes in the way societies consume
and produce” are necessary, pointing to the
potential of appropriate economic incentives and
sustainable public procurement.
In addition, the problematic role of harmful
fisheries and fossil fuel subsidies is reaffirmed.
For example, states are invited to “consider
rationalizing inefficient fossil fuel subsidies
by removing market distortions, including
restructuring taxation and phasing out harmful
subsidies (…)” (UNGA 2012, 43)
due to the combustion of fossil fuels and
land use change. Actions to curb climate
change are negotiated and adopted at
the Conference of the Parties (COPs)
which take place every year. Over time,
several market-based instruments were
developed to protect the climate, such as
Joint Implementation (JI) and the Clean
Development Mechanism (CDM) (click on
UNFCCC for more info).
 8

A NEW AGENDA FOR ALL COUNTRIES

The 2015 UN Sustainable Development The SDGs succeed the Millenium

Summit in New York focused on uniting
world leaders to adopt the new and universal
2030 development agenda including the 17
Sustainable Development Goals (SDGs).
Development Goals’ (MDGs) 2000-
2015 period, and are designed to guide the
development efforts of all governments
irrespective of countries’ level of prosperity
(see Figure 1).

Fig. 1: The 17 SDGs of 2030 Sustainable Development Agenda

The SDGs come with a specified set
of 169 targets. At the moment, global
indicators are being formulated by the
Inter-agency and Expert Group on
SDG Indicators (IAEG-SDGs) with
support from member states. A total of
230 indicators have been proposed and
preliminarily agreed on. The indicators
establish a common framework for
measuring progress and are expected to
be adopted by the UN General Assembly
in 20172.

2 For the latest on the process, please consult the UN Sustainable Development Platform. The
website provides main documents as well as extensive information on a range of topics related to
the new development agenda.

FINANCING THE DEVELOPMENT AGENDA
The financial architecture for achieving the
SDGs was in large part prepared by the third
UN International Conference on Financing
for Development held in July 2015 in Addis
Ababa, Ethiopia.
Countries agreed to provide a financial
foundation for implementing the new global
sustainable development agenda.
The agreement –the Addis Ababa Action
Agenda (AAAA)– addresses various sources
of finance including mobilizing domestic
revenue, and covers cooperation on a range
of issues including technology, science,
9
innovation, trade and capacity building.
It explicitly emphasizes the need for adequate
fiscal space, modernized, progressive tax
systems, improved tax policy, reducing tax
evasion and broadening the tax base (UNGA
2015a).
Together with the Agenda 2030 and the
Paris Agreement, the AAAA represents a key
global milestone that will help redirect public
and private finance to work for pro-poor, low-
carbon solutions.
Importantly, policymakers can refer to these
international documents to build legitimacy
for green fiscal reform at the national level.
 10

MOVING TO A LOW-CARBON ECONOMY UNDER CLIMATE CHANGE

The 2015 Conference of the Parties under the
UNFCCC (COP21) marks a milestone on the
path to a climate-friendly global society. Its
major outcome, the Paris Agreement, calls for
a far-reaching transformation of economies
towards low-carbon, resource-efficient and
climate-resilient development (Box 3).
Moreover, it sends a key message to
policymakers and citizens alike: The end of the
fossil fuel age has begun.
In light of the scale of the policy challenges
that such a transformation entails, a mix of
policy tools, including fiscal policy, is most
likely to succeed in driving behavior change.
Considerable amounts of finance, both
public and private, will have to be raised on a
consistent basis for several decades to come4.
National emission reduction targets as well
as specific measures to achieve them are
voluntary and country-determined.
The agreement, however, recognizes the
need for economic incentives, such as carbon
pricing market-based mechanisms, to reduce
emissions.
In addition, the creation of large,
encompassing markets for carbon credits
can play a major role in reshaping incentives
towards the avoidance of carbon dioxide
emissions.
Responding to the risks of climate change is
also part of the Agenda 2030 (SDG 13).

Photo: UN/ Mark Garten

4 Article 2, Paragraph 1 (c) and 9, Paragraph 3 of the Paris Agreement (UNFCCC 2015) explicitly
acknowledge the important role of consistent financial flows, and public funds in particular, to
mobilize action on climate change. The Global Landscape of Climate Finance reports by the
Climate Policy Initiative provide a concise overview of financial flows worldwide (CPI 2015).
 11
BOX 3:
KEY PROVISIONS OF THE PARIS AGREEMENT
The outcome document, adopted by 196
countries, formulated the following central
objectives:
• To keep global temperature rise “well
below” 2 degrees C above pre-
industrial levels and to pursue efforts
to remain below 1.5 degrees C
• To achieve climate neutrality, i.e. a net
zero balance between emissions and
natural sinks, in the second half of the
century
• To mobilize 100 billion USD per
year by 2020 and enhance capacity
Similarly, the Group of 20 (G20) committed
to rationalize and phase out inefficient fossil
fuel subsidies over the medium term.
All member countries are encouraged to
participate in a voluntary review of their fossil
fuel subsidies. China and the US, however,
vowed to publish their mutually peer-reviewed
fossil fuel subsidies in an attempt to single out
and cut the most inefficient subsidies.
Although only bilateral so far, the approach
could create further momentum within the
Group due to the countries’ large subsidies.
5 See the official Communiqué at http://europa.eu/rapid/press-release_STATEMENT-16-2967_en.htm.
building to support the most
vulnerable countries in mitigating and
adapting to climate change
• To review (and eventually) strengthen
country commitments every five years
in line with latest scientific findings
and technological advances
• To establish a common transparency
framework for reporting and tracking
progress
(UNFCCC 2015)
The G20 also established two groups with a
mandate to identify challenges to mobilize
private and public funds for green and climate
finance, i.e. the Green Finance Study Group
(GFSG) and the Climate Finance Study
Group (CFSG).
The groups’ reports seek to develop specific
policy options for countries to choose from5.
 12

How green fiscal reform can

support the Agenda 2030
Many development issues we face today are pricing issues at the bottom
line.This puts fiscal instruments in a good position to address multiple
development goals in a cross-cutting way.

Overview
The linkage of the Sustainable Development
Goals and green fiscal reform is very
obvious in the case of, for example,
regulating natural resources or supporting
green infrastructure.
issues like decent jobs creation (SDG 8)
or strengthening means of implementation
(SDG17; also a core element of the AAAA)
can be supported as well through shifting
public financial flows accordingly.

By correcting distorted prices, GFR can
promote sustainable water (SDG 6), energy
(SDG 7) or ecosystems services (SDG 15),
among others. However, non-environmental
This lesson discusses how selected SDGs
can be advanced through fiscal instruments
(2.2) and illustrates ways in which direct
and indirect impacts result in further
development benefits (2.3).

ACHIEVING SDGS THROUGH FISCAL INSTRUMENTS

Given its emphasis on pricing, focusing on It is this versatility that makes fiscal
goods and services traded in the market instruments so useful in the pursuit of the
place, GFR affects almost all SDGs. SDGs.

Building resilient infrastructure (SDG 9),
taking action on climate change (SDG 13)
or conserving marine resources (SDG 14)
can all be advanced by fiscal policy, i.e. by
appropriate economic incentives.
Against this background, the new
development agenda recognizes the
important role of governments in regulating
economic incentives that contribute to the
achievement of the goals (see Table 1)6.

6 For instance, the specified target 4 of SDG 10 (Reduce inequality within and among countries) explicitly
refers to fiscal policies as a tool to achieve greater equality.

SDG
3 – Ensure healthy lives
households.
6 – Clean water and
sanitation
7 – Access to
sustainable energy
10 – Reduce inequality
11 – Make cities and
human settlements
inclusive, safe, resilient
and sustainable
12 – Ensure sustainable
consumption and
production patterns
17 – Strengthen means
of implementation
table 1: How GFR can advance the achievement of selected SDGs7
7 For discussion on how fiscal policy promotes other SDGs as well, see UNEP (2016).
13
WHAT GFR CAN DO
Improve air quality;
manage health risks
(e.g. from nutrition)
Improve water quality;
increase water-use
efficiency
Encourage clean
and decentralized
electricity generation
Raise share of total
national income of low-
income population
Promote low-carbon
urban mobility; reduce
individual car traffic
Encourage use of latest
technology; phase out
inefficient products
Mobilize domestic
resources; leverage
private investment;
enhance fiscal space
SPECIFIC
INSTRUMENT(S)
Pricing on particular
emissions (NOx, SOx);
incentivize healthy diet
Regulatory levies;
progressive water-use
taxes
Feed-in-tariffs for
renewable energy
systems; targeted
subsidies
Progressive taxation;
cash transfer; financial
transaction tax
Congestion charges,
parking fees, finance
urban infrastructure
Taxes or tax exemptions
on technologies, fuels,
product categories,
etc.; payments for
ecosystem services;
fossil fuel subsidy
reform
Inflation-adjusted
taxes; tax shifts
 14
REFLECTION POINT
Looking at the goals in Table 1 do you identify SDGs other than the ones discussed here,
that fiscal instruments can advance? If so, how?
SDG 3 – Ensure healthy lives
and promote well-being for
all at all ages
Air quality is affected by various particles,
including nitrogen oxides (NOx) which
contribute to the formation of ground-
level ozone (smog). NOx is known to cause
respiratory and cardiovascular problems in
humans.
In Sweden, the government has taken a
largely successful approach to tackling NOx
emissions by introducing a high tax from large
combustion sources (OECD 2013).
The impact was a 35% reduction in NOx
emissions from facilities covered by the tax
within 20 months after implementation of
the tax. What is more, from 1992 to 2010
NOx emissions per unit of energy fell by
more than 50% as plant operators sought
innovative ways to reduce the tax burden.
Similarly, an unbalanced nutrition can pose
severe health risks, too. Consumption of
sugar-sweetened beverages, for example,
has been associated with higher obesity and
diabetes incidence.
A 10% tax on sugar-sweetened drinks,
introduced 2014 in Mexico, succeeded in
reducing sales. Preliminary results show a 6
percent average decline in purchases of taxed
beverages in the first year compared to pre-
tax trends.
This difference accelerated over 2014
and the reduction compared to pre-tax
trends reached 12% by the end of the year
(Colchero and Ng 2015). As a consequence,
the country’s obesity problem is expected to
diminish in the long term.
SDG 7 – Ensure access
to affordable, reliable,
sustainable and modern
energy for all
For many people, especially in rural areas,
reliable access to electricity is a constant
problem.
Low density of rural settlements and long
distances between them lead to high
connection costs to the national grid (World
Future Council et al. 2013).
Even though Tanzania is no exception in
this regard, it is one of the few countries in
the world with a feed-in tariff strategy that
explicitly supports mini-grids.
In an attempt to improve energy access with
renewable sources, Tanzania’s Small Power
Producer (SPP) FiT features both an on-grid
and off-grid component, i.e. a long-term
fixed payment for electricity generated since
2009.
A total of 17 off-grid projects are being
developed comprising both private sector
developers and communities/cooperatives.
The combined renewable generation capacity
is expected to be 46.2 megawatts – energy
that no longer needs to be provided by diesel
generators.
 15

Cutting across the agenda

As we have seen from the discussion above,
GFR can have direct positive impacts on
some of the SDGs. It is important to note,
however, that there are indirect impacts with
beneficial outcomes, too.
If we take a closer look at the above SDGs,
we will see that promoting sustainable
consumption and production, making cities
safe or reducing inequality through GFR
indirectly contribute to ensuring healthy lives
and well-being for all (SDG 3) (Figure 2).
Let’s consider the following examples.
By phasing out old inefficient cookstoves –a
major source of indoor pollution in developing
countries– and encouraging the use of clean
cookstove technology, e.g. through subsidies,
advancing SDG 12 would also promote SDG 2.
In Uganda, for instance, 97% of the
population use solid fuels like wood or
charcoal for cooking.
Exposure to cookstove smoke is associated
with 13.000 premature deaths every year in
the country.
In response, the Global Alliance for Clean
Cookstoves collaborates with the World Bank
and the national government to introduce
modern cookstove technology at competitive
market rates.

clean cookstoves

SDG 12
Ensuring sustainable
consumption and SDG 3
production Ensuring healthy
lives and well-being

improve
air quality
psychological
phase out old products
benefits
manage
health risks

Fiscal policy SDG 10

Reducing inequality

raise share of total nat.

income of low-income
population

healthier, mobility
choices; safer traffic
promote public transport
SDG 11
Make cities and
human settlements
direct impact inclusive, safe,
resilient, sustainable

indirect impact

Fig. 2: Direct and indirect impacts of fiscal policy on selected SDG

 16
Alternatively, by discouraging the use of
individual motorized transport in city centers
(remember the London congestion charge),
other means of transport, e.g. metro, cycling,
automatically become more attractive.
In combination with public investments in
urban infrastructure such as bicycle lanes,
perhaps partially funded by the congestion
charge, GFR can advance SDG 11.
Again, indirectly, it can also promote SDG
3 as a result of reduced city traffic (less road
accidents, cleaner air) and sustainable mobility
choices (more cycling, walking).
Or take the example of more equal societies
(SDG 10). Measures like increased progressive
taxation, transfer programmes (IMF 2015) or
a financial transaction tax can render income
distribution more balanced, with considerable
positive effects on the health and well-being of
entire communities.
video 1
TEDX SPEAKER RICHARD WILKINSON,
ON HOW ECONOMIC INEQUALITY HARMS
SOCIETIES IN DEVELOPED COUNTRIES
WATCH THE VIDEO
A sense of fairness and equal opportunities
have people lead more fulfilled lives and
trust more in their fellow citizens. Strong
evidence exists across countries (Video 1).
While good health is essential in itself, it
comes with concrete benefits not only to
the healthy individual, but public finances as
well.
Higher levels of public health, resulting
from diminished negative externalities, also
feed back to the national budget in the form
of lower government spending on the health
sector.
Principle 13 of the Agenda document
(UNGA 2015b) acknowledges this
interrelated nature of the challenges and
commitments concerning sustainable
development. In short, achieving the SDGs
requires integrated solutions.
17
 18

Existing initiatives in support

of green fiscal reform
In light of fiscal instruments’ versatility to reach multiple goals, political
interest in fiscal solutions is on the rise. Accordingly, collaboration is
forming to build momentum for fiscal reform and share a growing body of
experience.

Overview
Since the beginning of modern states, fiscal recent years, information and experience-
policy has been considered a core right of sharing on green fiscal policy reform have
national government. become more pronounced though.

Collaboration in fiscal affairs among countries This lesson presents selected global initiatives
was traditionally low as a result. With growing in support of greening fiscal policy (3.2) and
experiences with green fiscal reforms and describes how collaboration can assist green
the agenda attracting increased attention in fiscal reform at the national level (3.3).

Collaboration for greening fiscal policy

Beyond the national domain of finance
ministries, the World Bank and IMF8 as
well as the OECD developed long-standing
global know-how in fiscal policy analysis and
advisory.
In addition, strategic fiscal partnerships and
initiatives have formed in the wake of the
international momentum towards green
economy.

8 These two international organisations are also known as the Bretton Woods Institutions (BWIs).
 19

THE INTERNATIONAL MONETARY FUND

In its primary objective to ensure the stability
of the international monetary system, the
IMF recognizes the various harmful effects of
economic development on the environment.
The Fund actively promotes the use of fiscal
reform to counter environmental problems
through:
• Analytical work on the nexus between
fiscal instruments and green growth/green
economy9;
• Outreach activities including co-
organization of conferences and events;
• Technical Assistance (TA) to member
countries interested in environmental tax
reform.
In particular, TA is delivered in four areas to
respond to varying country needs:
• Public Financial Management – e.g. legal
and regulatory framework review, budget
management;
• Tax policy – e.g. advisory on income or
natural resource taxation, interaction
between tax systems and labour markets,
tax coordination among countries;
• Revenue administration – e.g.
implementation of tax policy changes;
• Expenditure policy – e.g. equity and
social spending analysis, subsidy reform.
The Fiscal Monitor is one of the institution’s
cross-country flagship publications. It
serves to survey and examine the latest
developments in public finance, provide
projections as well as assess fiscal policies10.
In addition, the Fund scaled up its work on
energy subsidies with a view to drive subsidy
reform.
It provides extensive data, an interactive
assessment tool, and thought leadership on
the issue11.

9 For example, IMF analysis (2014) informs reform efforts through estimating the benefits of corrective
taxes on fossil fuels in a wide range of countries
10
The report is prepared by the IMF’s Fiscal Affairs Department twice a year, featuring a special topic in
each edition.
11
For more information on recent developments and key publications, please visit the IMF website on
reforming energy subsidies. The site also lists expert blogs.

Photo: IMF/ Henrik Gschwindt

 20
THE WORLD BANK
The World Bank –the larger of the two
BWIs– affords an extensive number of fiscal
experts stationed in its member countries.
Fiscal policy is considered central to the
institution’s twin goals of eliminating extreme
poverty by 2030 and boosting shared
prosperity among all countries. The Bank
works with governments on the full spectrum
of fiscal issues, from revenue and expenditure
planning to effective implementation and
monitoring. Its focus lies on economic and
social implications of fiscal policy.
In recent years, the Bank emphasized its
advisory activity in three distinct themes of
fiscal reform:
• Public debt-related issues – e.g. by asking
how countries can balance high financing
requirements for development needs
against macroeconomic stability and
sustainability concerns;
• Issues related to aging populations – e.g.
by investigating major obstacles for
reform such as shorter political horizon of
voters and policymakers;
• Issues related to resource-rich countries
– e.g. by examining which policy factors
determine successful implementation of
fiscal rules.
In order to support policymakers in
addressing both design and implementation
gaps in reform, the Bank developed several
methodological and analytical tools.
These include Public Expenditure Reviews
(PERs) that look at the efficiency and
equity of public spending and examine how
governments should allocate its money to
maximize economic growth and poverty
reduction. Policy Notes observe fiscal
challenges at the country level and offer
tailored recommendations.
Fiscal and Debt Sustainability Analyses
apply technical frameworks for assessing the
financial coherence of current and expected
policies.
In the area of energy subsidies, the Bank
supports countries in the design and
implementation of subsidy reforms through
the Energy Subsidy Reform and Delivery
Technical Assistance Facility. The Facility
assists policymakers with analyses of the
poverty, social, fiscal, macroeconomic,
political economy and climate change aspects
of subsidy reform.
The Bank maintains a Carbon Finance Unit
whose mandate focuses on purchasing GHG
emission reductions in developing countries
on behalf of developed country governments
and firms. The emission reductions are bought
–similar to commercial transactions– within
the Clean Development Mechanism (CDM)
and Joint Implementation frameworks of
the Kyoto Protocol. Compared to traditional
lending operations, this mechanism leverages
more private and public investment while
promoting economic viability of emerging
emission reduction projects.
Photo: WB/ Deborah W. Campos
 21
ORGANIZATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT
The OECD has a long tradition in advisory on
fiscal issues –also beyond member countries–
and maintains the Centre for Taxation Policy
and Administration. The Centre covers
topics, such as planning, policy analysis, global
relations and others more.
Work on planning aims to improve
international tax cooperation between
governments to counter international tax
avoidance and evasion.
The Base Erosion and Profit Shifting
(BEPS) project in particular refers to tax
planning strategies that exploit gaps in the
international tax system to artificially shift
profits to places where there is little or no
economic activity or taxation12.
Tax policy analysis is carried out to deliver
high-quality economic analysis and tax
policy advice and to provide internationally
comparable revenue statistics.
Fiscal reformers interested in state-of-the-
art recommendations may benefit from
detailed and regular analyses, such as the
OECD’s Tax Policy Studies and the Tax
Working Papers.
The Centre’s global relations work has the
primary objective of expanding the global
dialogue on relevant issues in order to enable
12 The magnitude of the problem
is significant: Estimates indicate
global annual revenue losses
from corporate income tax of
100-240 billion USD. More than
a dozen developing countries
have participated directly in the
project while an additional 80
non-OECD countries provided
inputs. In 2013, BEPS Action Plan
was adopted which formulates 15
key actions to address gaps and
mismatches in current tax rules.
the global development and implementation
of standards and best practices that work
for all, whether OECD countries, emerging
economies or developing countries. It does so
through various initiatives, among them:
• Task Force on Tax and Development –
e.g. by supporting developing countries
to enhance tax collection in extractive
industries and to curb wasteful tax
incentives;
• Advisory Group for Cooperation with
Non-OECD Economies – e.g. by
establishing fiscal policy dialogue across
countries and serving as a channel to
influence the future direction of the
OECD’s partnership with the developing
world;
• Latin America and the Caribbean (LAC)
Fiscal Initiative – e.g. by organizing
regional fora, capacity building workshops
and joint publications with key fiscal
institutions in the region.
Fiscal reformers may use the Environment
Directorate’s database on instruments for
environmental policy and natural resource
management for comparison. The database
is updated regularly and features easily
accessible information on national rates
related to taxes, charges and fees, tradable
permits, environmental subsidies and more. It
covers member and (selected) non-member
countries.
Photo: OECD/Julien Daniel
 22
PARTNERSHIP FOR ACTION ON
GREEN ECONOMY
PAGE focuses on reframing economic
policymaking of countries or regions to advance
the Agenda 2030. The Partnership brings
together the expertise of five UN agencies –
UN Environment, ILO, UNDP, UNIDO and
UNITAR– and works closely together with
governments, delivering technical assistance and
capacity building.
The specific policy focus varies from country
to country, with fiscal policy typically being
one of the key mechanisms to drive change.
Reforms of both revenue and expenditure are
proposed following rigorous assessment of the
country’s or region’s economy and suitable
green economy indicators. Whenever feasible,
economic modelling is used to project the impact
of intended policy interventions.
The Partnership currently collaborates with 13
countries13 and maintains the so-called PAGE
Exchange in which non-PAGE countries can share
their initiatives, policies and lessons learned with
the community.
Furthermore, its website features a free package
of introductory learning materials on green
economy and related policies, including fiscal
instruments.
13 PAGE seeks to work with 20 countries or regions by 2020.
14 The fiscal policy work stream website offers numerous studies (both on country and
sectoral level), background documents and workshop presentations by experts.
UNITED NATIONS ENVIRONMENT
The 2011 flagship report, Towards a Green Economy
(UNEP 2011) identified fiscal policies as a central
element of the wider policy toolbox for the transition
to an inclusive green economy. The programme’s
Fiscal Policy work stream14 focuses on: research and
analysis of green fiscal policies, knowledge sharing and
dissemination, policy dialogue.
UN Environment undertakes analysis on green fiscal
policies across different sectors and provides advice to
countries on how fiscal instruments can support the
inclusive green economy and delivery of the SDGs.
Country studies identify options to reform fiscal
policies to mobilize domestic resources and create
fiscal space for green investment, while addressing
environmental externalities and social equity issues.
Sector studies examine the role of fiscal reforms in
specific sectors such as water and extractive industries;
the use of natural resource revenues through sovereign
wealth funds to support the SDGs; and cross-sector
impacts of fiscal policies in relevant sectors (e.g.
agriculture, energy).
The programme works with a range of partners
including fiscal authorities such as the IMF,
development agencies such as the German
Development Cooperation (GIZ), academic
institutions, think tanks and green fiscal policy experts
such as the Global Subsidies Initiative (GSI), Green
Budget Europe (GBE) and national research institutes,
to provide policy advice, develop knowledge products
and host technical workshops which facilitate policy
dialogue among experts and policymakers on the role
of fiscal policy in the transition to a green economy.
Photo: BMUB/ThomasTrutschel
 23

UNITED NATIONS DEVELOPMENT GREEN FISCAL POLICY NETWORK

PROGRAMME
The Green Fiscal Policy Network is a
UNDP offers strategic assistance in catalyzing joint partnership between GIZ, IMF and
public investment into green technologies, UN Environment which aims to facilitate
practices and enterprises that pave the way knowledge sharing, learning and dialogue on
to sustainable development. Moreover, green fiscal policies. The Network provides a
UNDP promotes green fiscal reforms and virtual knowledge hub of resources on green
research through global projects and country fiscal reforms for the policy community and
programming. For example: organizes bi-annual technical workshops on
specific topics. Knowledge products available
Through the Governance of Climate on the website16 include:
Change Finance project UNDP helps • Policy insights and guidance on
Asian countries establish climate change implementing green fiscal reforms;
financing frameworks, e.g. the Climate Fiscal • Case studies on green fiscal policies in
Framework in Bangladesh. With the Poverty- different sectors and countries;
Environment Initiative –jointly implemented • Country profiles on green fiscal policies;
with UN Environment– countries receive • News and events on green fiscal policies.
support to introduce green fiscal instruments
and performance-based budgeting.

UNDP also helps countries review and BOX 4:

establish policy and financing frameworks
to more effectively to plan, access, deliver,
EMPOWER
diversify, scale-up and sequence the use
public resources to achieve the transition
towards a green and low carbon economy.
The Biodiversity Finance Initiative assists
30 countries in financing their national
biodiversity action plans: beneficiary countries
complete a thorough assessment process
that leads to the identification of existing and
potential financing solutions.
In addition, the agency aims to link the green
fiscal reform agenda with the mainstreaming
of the SDGs in national development plans
and budget processes. Using a dedicated
online toolkit, policymakers can learn
about Financing Solutions for Sustainable
Development (Box 4)
16 The network website offers useful
tags (such as “fuel tax” or “energy
subsidies”) to facilitate identification
of reports or case studies. In addition,
there is a quarterly newsletter.
FINANCING SOLUTIONS FOR SUSTAINABLE
DEVELOPMENT TOOLKIT
A major task for policy-makers in
delivering on the Agenda 2030 is to
devise financing solutions that can direct
investments to areas where greater co-
benefits and multiplier effects can be
achieved. To respond to the challenge of
linking policies with financing instruments
and solutions, UNDP has launched a
new online toolkit. The platform provides
guidance to review and operationalize
financing solutions –from green bonds
and impact investment to fuel taxes and
ecological fiscal transfers– that enable
the implementation of SDG-oriented
development strategies, including national
development plans, biodiversity strategies
and Nationally Appropriate Mitigation
Actions. It can be used to facilitate
national SDG-related or strategy-specific
workshops and the design or revision of
fiscal financing frameworks, including
green fiscal reform. The BETA version of
the online toolkit is accessible here.
 24

CARBON PRICING LEADERSHIP GLOBAL SUBSIDIES INITIATIVE

The idea of a coalition for carbon pricing first
emerged at the 2014 UN Climate Summit
where many countries and companies
expressed support for carbon pricing. The
coalition was officially launched at the COP21
in Paris. It is a voluntary partnership of national
and sub-national governments, businesses,
and civil society organizations that agree to
advance the carbon pricing agenda by working
towards the long-term objective of a carbon
price applied throughout the global economy.
For this purpose, it seeks to collect evidence
and illustrate plausible outlooks under varying
pricing policies and timelines.
The coalition’s website features thematic
information, including:
• A global overview of where carbon pricing
is applied or planned for;
• Resource section with key documents,
background notes and additional reading;
• News and events on the issue.
The Global Subsidies Initiative (GSI) was
established in 2005 by the International
Institute for Sustainable Development
(IISD). It is a program designed to put the
spotlight on subsidies and the deteriorating
effects they can have on environmental
quality, economic development and
governance.
The GSI aims to encourage individual
governments to undertake unilateral reforms
on subsidy policy where these would deliver
clear economic, environmental and social
benefits. Furthermore, it seeks to generate
a consensus in the World Trade Organization
and in other fora on the need to take
resolute, ongoing and systematic action to
reduce or eliminate subsidies that are both
trade-distorting and undermine sustainable
development. The initiative may thus inform
policymakers and civil society interested
in reforming the expenditure side of fiscal
policy (Video 2).

GREEN GROWTH KNOWLEDGE PLATFORM

video 2
The Green Growth Knowledge Platform is a
global network of international organizations and HOW DIALOGUE BETWEEN STAKEHOLD-
experts. It offers practitioners and policymakers ERS ENHANCES LEARNING ON FOSSIL
policy guidance, good practices, tools, and data FUEL SUBSIDY REFORM
necessary to support the transition to a green
economy.

The GGKP was established in 2012 by the

Global Green Growth Institute, the OECD,
UN Environment and the World Bank. It has
expanded to include a large, diverse group
of knowledge partners, comprising leading
institutions and organizations active in areas
related to green growth and green economy at WATCH THE VIDEO
the local, national, regional, and international
levels.
The network website features a specific theme
on fiscal instruments with abundant resources17.

17 The search function allows for targeted search of

Moreover, a fiscal instruments research
committee has been established to examine learning resources along a wide range of criteria, e.g.
challenges and opportunities associated with sector, region, organization, country etc.
reforming environmentally perverse fiscal
measures. The committee further provides
policy guidance on an effective design and
implementation of fiscal instruments for a green
economy transition.
 25
The website serves to share knowledge
products and latest research structured along
different subsidized items, i.e. fossil fuel,
biofuel, renewable electricity, irrigation, and
trade.
The resources section features information
suitable for both non- experts and experienced
practitioners.
Fig. 3: GSI interactive map tool
FRIENDS OF FOSSIL FUEL SUBSIDY REFORM
FFFSR is an informal group of non-G20
countries working to build political consensus
on the importance of fossil fuel subsidy
reform. It addresses international fora such
as the G20, World Bank, OECD, Asia
Pacific Economic Cooperation (APEC),
UNFCCC and the 2030 Development
Agenda to promote the benefits of reform
among governments.
18 The search function allows for targeted search of learning resources along a wide range of
criteria, e.g. sector, region, organization, country etc.
For example, a Subsidy Watch Blog tracks
news, commentaries and analyses related to
subsidies.
An interactive map tool (Figure 3) allows
for visualizing GSI’s subsidy database along
different categories such as consumption
or production subsidies for various fuels and
countries, per capita and total government
spending etc.
Current members of the group are Costa
Rica, Denmark, Ethiopia, Finland, New
Zealand, Norway, Sweden, Switzerland
and Uruguay. Many more countries,
non-governmental organizations and
major corporations support the group’s
Communiqué, a call on the global
community to increase efforts to phase out
fossil fuel subsidies18.
 26

HOW COLLABORATION CAN ASSIST

GREEN FISCAL REFORM
In the sphere of fiscal policy, uncoordinated
action by sub-national or national
governments may pose problems in terms
of economic, environmental and social
impact. If poorly designed or misaligned,
fiscal policies easily create environmental
leakage, race-to-the-bottom tax dynamics
or excessive free-riding (IMF 2016)19.
Although each country faces unique
political, socioeconomic and environmental
circumstances, common mistakes need
not be repeated. Experience suggests that
there are numerous benefits to gain from
international collaboration, for example:
• Dissemination of good practices and
frequent policy dialogue, as exercised
abundantly by the presented initiatives,
help provide benchmarks and build
capacity among policymakers and
stakeholders concerned with GFR;
• Regional economic integration (EU,
ASEAN) can minimize risks from
unilateral action by virtue of fiscal policy
harmonization and alignment;
• ‘First mover’ concerns can be overcome
on the grounds that other countries
also take action, facilitating thus public
support and greater ambition;
• Creation of international (and ultimately
global) markets for tradable permits
or allowances20 to set a firm price of
environmentally harmful activities.
The environment does not see state
boundaries. Internationally coordinated fiscal
instruments to adequately reflect the global
cost of externalities would thus have the
utmost positive impact.

19 As we have seen, the case of environmental leakage illustrates that green fiscal policies are not immune to
these risks. Even a well-meaning policy that, say, places a high cost on carbon emissions, may result in perverse
incentives that run counter to the desired outcome.
20 The EU Emissions Trading System legislation, for instance, provides for the possibility to link the EU ETS with
other compatible emissions trading systems in the world at national or regional level.
 27

REFLECTION POINT
Internalizing the regional cost of externalities can be a driver for regional/global
collaboration on fiscal issues.

In your own regional context, is there a sector or a pressing issue that might promote
regional fiscal collaboration? Are there any windows of opportunity to support GFR?

Now that we concluded the final module
of this course on green fiscal reform, it is
up to you to make a positive change! As we
have seen throughout the discussions, fiscal
instruments offer versatile tools to develop
and incentivize societies for the better, i.e.
to become more sustainable, equitable,
prosperous and innovative.
How to achieve change? Even though the
task seems enormous, there are concrete
steps that you can take to build momentum
for green fiscal reform.
Forge alliances!
Actively approach the various initiatives and
organizations working on green fiscal reform
to establish dialogue or seek assistance.
The green fiscal reform community is
growing steadily, persuading more and more
citizens, stakeholders and leaders around
the world. You are a part of it now.
Reach out beyond your community!
Try to engage stakeholders that are not
like-minded but potentially powerful
agents for change. Green fiscal reform is
about multiple goals and benefits. It might,
however, still be perceived as expensive,
complicated and detrimental to the national
economy. You now have arguments to
counter such criticism and help design and
implement fiscal reforms that work for your
country.
 28

key
learning points
1
Various international agreements underscore the importance of economic instruments to
achieve sustainable development.

2
Given its emphasis on prices, focusing on goods and services traded in the market place, and
its revenue raising potential, green fiscal reform affects almost all SDGs.

3
Green fiscal reform can have direct and indirect impacts on SDGs with beneficial outcomes.

4
International collaboration can assist green fiscal reform through dissemination of good
practices and policy dialogue, regional economic integration, facilitating greater ambition, and
the creation of international markets for tradable permits or allowances.
 30

REFERENCES

CBD (2016) Aichi Biodiversity Targets. https://www.cbd.int/sp/targets/.

Colchero, M.A., and S. Ng (2015) Changes in Prices After an Excise Tax to Sweetened Sugar
Beverages Was Implemented in Mexico: Evidence from Urban Areas.

CPI (2015) Global Landscape of Climate Finance 2015. San Francisco.

IMF (2014) Getting Energy Prices Right. From Principle to Practice. Washington, DC.
— (2015) Harnessing the Power of Fiscal Policy to Mitigate Inequality. Washington, DC.
— (2016) After Paris: Fiscal, Macroeconomic, and Financial Implications of Climate Change,
IMF Staff Discussion Note. Washington, DC.

OECD (2013) The Swedish Tax on Nitrogen Dioxide Emissions, Lessons in Environmental Policy
Reform, Environment Policy Paper No. 2. Paris.

UN (1992) Convention on Biological Diversity. Rio de Janeiro.

UNCED (1992) Agenda 21. Rio de Janeiro.

UNEP (2011) Towards a Green Economy. Pathways to Sustainable Development and Poverty
Eradication. Nairobi.
— (2016) Fiscal Policies and the SDGs. Policy Brief. Geneva.

UNFCCC (2015) Paris Agreement. Paris.

UNGA (2012) Resolution 66/288, The Future We Want. New York.

— (2015a) A/RES/69/313. Addis Ababa Action Agenda of the Third International Conference
on Financing for Development. New York.

— (2015b) A/RES/70/1 Transforming Our World: The 2030 Agenda for Sustainable
Development. World Future Council et al. 2013. Powering Africa through Feed-in Tariffs.
Advancing renewable energy to meet the continent’s. Nairobi.

WSSD (2002) Johannesburg Plan of Implementation. Johannesburg.

 31

Abbreviations

AAAA Addis Ababa Action Agenda

APEC Asia Pacific Economic Cooperation
ASEAN Association of South East Asian Nations
BEPS Base Erosion and Profit Shifting
BWI Bretton Woods Institution
CBD Convention on Biological Diversity
CDM Clean Development Mechanism
COP Conference of the Parties
EU ETS European Union Emissions Trading System
EU European Union
FiT Feed-in Tariff
GBE Green Budget Europe
GFR Green Fiscal Reform
GGKP Green Growth Knowledge Platform
GIZ German Development Cooperation
GSI Global Subsidies Initiative
IAEG-SDGs Inter-agency and Expert Group on SDG Indicators
IISD International Institute for Sustainable Development
IMF International Monetary Fund
JI Joint Implementation
LAC Latin America and the Caribbean
MDG Millenium Development Goal
NOx Nitrogen oxides
OECD Organisation for Economic Co-operation and Development
PER Public Expenditure Review
ppm Parts per million
SDG Sustainable Development Goal
SOx Sulphur oxides
SPP Small Power Producer
TA Technical Assistance
UNCCD United Nations Convention to Combat Desertification
UNCED United Nations Conference on Environment and Development
UNEP United Nations Environment Programme
UNFCCC United Nations Framework Convention on Climate Change
USD United States Dollar
WSSD World Summit for Sustainable Development