Environmental Consumer Subsidies and Potential Reductions of CO2 Emissions

In the environmental debate, global problems clearly gained importance. Successful international conventions could reduce the threats posed by acid rain, ozone depletion and hazardous wastes. Next to end-of-pipe solutions (like placing scrubbers), cleaner inputs (like low-sulphur coal), cleaner products or retrofit processes (replacing CFCs by HCFCs and HFCs) were available in due course. Acid rain and ozone depletion are problems caused by specific industrial activities, processes or products, whereas global warming and the resulting climate change are the consequence of a multitude of factors, most of them related to energy use. This limits the possibility of solving the problem with just one set of substituting technologies. It will be necessary to work out a concerted strategy that exploits all potential efficiency gains in all layers of society. We will need to modify whole structures, institutions and behaviours. Therefore we can use economic instruments like taxes, subsidies and tradable permits. We will try to estimate the potential of environmental subsidies in terms of reductions of energy use and CO2 emissions. In the next sections, we will comment on the Kyoto Protocol and the projected CO2 emissions in the European Union. Starting from data on sectoral energy efficiency, we will indicate policy priorities and will present a short overview of instruments. In the final sections, we work out three types of consumer subsidies and estimate their potential of reducing CO2 emissions.