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Green Fiscal Reform Will Help Preserve the Environment and Forge Development with Equality

Alicia Bárcena participated in the Latin American and the Caribbean-European Union Forum taking place in Germany.

10 November 2010|Press Release

(10 November 2010) The urgent need to close equality gaps in Latin America and the Caribbean should be complemented by the imperative of attaining low-carbon sustainable development, stated ECLAC Executive Secretary Alicia Bárcena today in Germany.

The high-ranking United Nations official participated in the Latin American and the Caribbean-European Union Forum (LAC-EU): Fiscal Policy and an Environmentally Sustainable Economy in the Context of Climate Change taking place in Berlin. The event was convened by the Federal Ministry of Economic Cooperation and Development (BMZ) of Germany, the Ministry of Foreign Affairs of Chile and ECLAC.

Public finances in Latin America have a chronic weakness that is reflected in a low tax burden (combined with high levels of tax evasion and avoidance), a regressive tax structure and a heavy dependence on a specific resource for tax collection (copper, oil, agricultural and livestock exports). Diverse demands compete for public resources, producing constant tension among the different options of public spending, says ECLAC.

Some countries in the region have implemented significant social programmes and have been able to diminish inequality slightly during the past decade, but there are still avenues to pursue. The big question at the seminar is if innovation, productive convergence and employment can be compatible with sustainable development ("green" and low-carbon), said Bárcena.

In this context, climate change and the economic and social costs associated to it are becoming increasingly important, and the trend toward the international homogenization of tax rates, the growing use of "green taxes" and the carbon footprint of exports is of concern.

Bárcena stated that for Latin America, green fiscal reform "is a serious challenge but also a new opportunity to combine the establishment of solid fiscal foundations with environmental preservation, as long as this can be adequately combined with greater investment in critical areas (such as infrastructure), which could generate decent jobs with environmental sustainability. This will depend, undoubtedly, on financing, investment and technological innovation".

"A better design of public finances that may expand the margins for environmental security as well as for attaining the imperative of social welfare requires using the opportunities of taxation in sectors such as energy, transportation, urban development and infrastructure in general," she said.

This undertaking faces the challenge of the political economy of taxation, she added, which has to do with interest groups and privileged economic groups in a high-carbon development path. But is also reveals to fiscal policy-makers the consequences of inaction.

During the inaugural session of the LAC-EU Forum, the Federal Minister for Economic Cooperation and Development (BMZ) of Germany, Dirk Niebel, referred to the need to achieve success in the Sixteenth Conference of the Parties to the United Nations Framework Convention on Climate Change (COP 16) to begin on 29 November in Cancún, Mexico.

Niebel underscored the commitment of his government to pay for the consumption of environmental goods through the use of tradable emission permits, by which 630 million euros have already been collected, of which 230 million will be allocated to international cooperation.

Dorothee Fiedler, Subdirector General for Latin America, Policies and Organization of Bilateral Development Cooperation of BMZ spoke of Germany's commitment to promote energy-efficiency policies to reduce energy consumption in residential areas by 14%. She also stressed the need to lower fossil fuel subsidies, which total some 20 billion euros, while subsidies for renewable energies only reach 300 million euros.

The Ambassador of Chile in Germany, Jorge O'Ryan Schütz, highlighted the plans of Chile, which presides the Río Group, to diversify the energy matrix and make it more environmentally-friendly and referred to the enormous challenges for the region in terms of sustainable development and low-carbon economies.

High-ranking public finance officials from Brazil, Chile, Cuba, Ecuador, El Salvador, Guatemala, Honduras and Mexico, ambassadors from the region and officials from German agencies like GTZ and InWent also attended the seminar, as well as representatives from multilateral agencies, like Matthias Petschke, Rosa Quevedo and Stefan Agne from the European Commission.



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