Subsidy Regime Research Articles

Nutrient Fluctuations in Marine Systems: Press Versus Pulse Nutrient Subsidies Affect Producer Competition and Diversity in Estuaries and Coral Reefs

Resource subsidy regimes, which range from presses to pulses, are common structuring forces in communities, yet research contrasting their effects is lacking. Many coastal marine ecosystems, including estuaries and coral reefs, have experienced increased nutrient subsidies while concurrently shifting to macroalgal dominance; however, the role of subsidy regime in transitions remains unknown. We created concentration–frequency distributions of nutrients in Cook’s Bay, Moorea, French Polynesia, and Carpinteria Salt Marsh Reserve, CA, USA. Both showed relatively high pulses interspersed by press concentrations. We grew dominant macroalgae alone and together in microcosms approximating these subsidy regimes to quantify individual performance and competitive outcomes. Subsidy regime changed growth and competitive abilities of macroalgae from both ecosystems but with divergent effects. In nutrient-limited reefs, different species were favoured under each enrichment regime, suggesting a fluctuating nutrient environment enhances diversity. In contrast, in eutrophic estuaries, enrichment of both regimes facilitated a single competitive dominant, suppressing diversity. Functional form groups did not predict responses to subsidy regime, likely because classifications ignore temporal variability in resource supplies. Because climate change will alter rainfall patterns globally, further accelerating nutrient subsidies from land to sea, understanding species’ responses to nutrient subsidy regimes is key to predicting the fate of coastal communities.

Renewable energy policy as an enabler of fossil fuel subsidy reform? Applying a socio-technical perspective to the cases of South Africa and Tunisia

Fossil fuel subsidies are a key barrier for economic development and climate change mitigation. While the plunge in international fuel prices has increased the political will to introduce fossil fuel subsidy reforms, recently introduced reforms may risk backsliding when fuel prices rebound − particularly if they fail to address the underlying mechanisms that create demand for low fossil fuel prices. Extant literature has mostly focused on the consequences of fossil fuel subsidies, including their economic or environmental impact, and the social contract that make their reform difficult. In this paper, we complement the extant literature with a socio-technical perspective of fossil fuel subsidies to explore the systemic mechanisms that often keep subsidies in place and how these mechanisms can be weakened. Specifically, in case studies of the electricity sectors in South Africa and Tunisia, we trace the socio-technical foundations of their fossil fuel subsidy regimes and the potential of renewable energy policy in disrupting this regime We discuss the relevance of our results for national policymakers wishing to implement and international actors wishing to support fossil fuel subsidy reform. In particular, we highlight that the socio-technical perspective of fossil fuel subsidies offers new intervention points for subsidy reform and that policy designs and assistance should strengthen technologies and actors that are most likely to destabilize the fossil fuel subsidy regime.

On green market segmentation under subsidy regulation

PurposeThis study aims to provide a better understanding of the market balance between regular (high-carbon) and green (low-carbon) products. Further, this study analyses the role of government subsidy policy, based on the results of the government’s optimal green subsidy decision and its implication for green market segmentation and social welfare.Design/methodology/approachThis study adopts a Stackelberg game framework to study the interaction between the government’s subsidy regulations and the firms’ marketing regimes. When considering government subsidy decision, we use multi-objective programming theory and turn the problem into weighted single-objective optimisation programming.FindingsThis study explores three marketing regimes and identifies the conditions under which each regime should be adopted by a firm. Further, investigating the optimal subsidy decision problem for the government reveals three subsidy regimes corresponding to the three marketing regimes. The government may be stuck in a regime of useless subsidy and the reason for this phenomenon is analysed as well.Research limitations/implicationsDeveloping the model into a more complex supply chain situation will enhance the applicability of the framework. Incorporating other environmental regulations, such as carbon tax, can be interesting research extensions of this study.Practical implicationsThis study provides a quantitative framework, which can help the regulator gain a deeper understanding of green subsidy policies and assist focal companies in acquiring a better appreciation of green marketing segmentation.Originality/valueThe study is one of the first few works to explore the optimal design of green subsidy regulation for the government and its impact on market segmentations of high- and low-carbon products by using quantitative modelling approaches and deriving vital managerial insights.

The superiority among specific, demand ad valorem and cost ad valorem subsidy regimes

We analyze the superiority of the specific, demand and cost ad valorem subsidies in industrial and export policies. The criterion employed to measure the ranking of the superiority of the subsidy policies in this paper is that, given an identical total output, the smaller the amount of the subsidy, the superior the subsidy policy. We show that the demand ad valorem subsidy is the least efficient policy, regardless of whether it is measured in regard to the industrial or export subsidy policies. The superiority related to the specific and cost ad valorem subsidies hinges upon the production technology. We can thus provide a theoretical explanation to the real world phenomenon as to why governments usually offer a specific or cost ad valorem subsidy policy to agricultural products and exports.

Agriculture after Brexit

The paper considers the impact of the Common Agricultural Policy (CAP) on the UK, and sets out three options for a new British Agricultural Policy after Brexit. These options are: carrying over the subsidy regime with an emphasis on food security and self sufficiency; maintaining the CAP architecture, but shifting more of the CAP subsidies away from payments for land ownership towards more spending on environmental schemes; and providing public money only for public goods. The third option is advocated, after a transitional path allows time for farmers to adapt.

The impact of the targeted subsidies policy on household food security in urban areas in Iran

Ensuring food security is an important consideration in developing countries. It typically requires bringing people out of poverty and structural changes in the agriculture sector. A common policy tool to help reduce food insecurity is to subsidize food, but there have been insufficient analyses of the impacts of different subsidy regimes. In this study, we examined the effect of the implementing Targeted Subsidies Policy (TSP) on various food commodities on the household food security in urban areas of Iran. The changes in the elasticity of the calorie prices and expenditure following the TSP were considered for 13 food groups. The results showed that the TSP effect on food security in the urban households was positive for some food items (such as red meat and fish) and was negative for other items (such as poultry and cereals). The impacts result from substitution and complementary effects among the foodstuffs. Market regulation of the goods in the food basket of the country in urban areas is necessary and strongly recommended.

Additionality Violations in Payment for Ecosystem Service Programs: Experimental Evidence

Payment for ecosystem service (PES) programs incentivize farmers to implement agricultural best management practices (BMPs) with the goal of reducing nutrient and sediment runoff and improving water quality. These programs are widespread at both the federal and state level. Because some farmers adopt BMPs even in the absence of PES programs, it is natural to question the extent to which BMPs adopted by program participants are additional to the counterfactual scenario of no program. I test the assumption of perfect program additionality for a variety of subsidy programs in an experimental setting using a variant of the common public game. I find that a large proportion of enrollments are not additional, as much as 100% for some subsidy programs. Further, I identify two sources through which additionality is violated: the pay-for-nothing (P4N) effect, in which the subsidy pays for a practice that would be done without incentives, and behavioral substitution, in which the subsidy generates substitution from an unincentivized BMP to the incentivized one, and quantify each effect for a series of subsidy regimes. I find that subsidies for good BMPs are largely ineffective, especially when a great BMP option is also available.

Investing in low-carbon transitions: energy finance as an adaptive market

The amount of capital required to transition energy systems to low-carbon futures is very large, yet analysis of energy systems change has been curiously quiet on the role of capital markets in financing energy transitions. This is surprising given the huge role finance and investment must play in facilitating transformative change. We argue this has been due to a lack of suitable theory to supplant neoclassical notions of capital markets and innovation finance. This research draws on the notion from Planetary economics: Energy, climate change and the three domains of sustainable development, by Grubb and colleagues, that planetary economics is defined by three ‘domains’, which describe behavioural, neoclassical, and evolutionary aspects of energy and climate policy analysis. We identify first- and second-domain theories of finance that are well established, but argue that third-domain approaches, relating to evolutionary systems change, have lacked a compatible theory of capital markets. Based on an analysis of electricity market reform and renewable energy finance in the UK, the ‘adaptive market hypothesis' is presented as a suitable framework with which to analyse energy systems finance. Armed with an understanding of financial markets as adaptive, scholars and policy makers can ask new questions about the role of capital markets in energy systems transitions.Policy relevanceThis article explores the role of financial markets in capitalising low-carbon energy systems and long-term change. The authors demonstrate that much energy and climate policy assumes financial markets are efficient, meaning they will reliably capitalise low-carbon transitions if a rational return is created by subsidy regimes or other market mechanisms. The authors show that the market for renewable energy finance does not conform to the efficient markets hypothesis, and is more in line with an ‘adaptive’ markets understanding. Climate and energy policy makers that design policy, strategy, and regulation on the assumption of efficient financial markets will not pay attention to structural and behavioural constraints on investment; they risk falling short of the investment levels needed for long-term systems change. In short, by thinking of financial markets as adaptive, the range of policy responses to enable low-carbon investment can be much broader.

Contesting a Place in the Sun: On Ideologies in Foreign Markets and Liabilities of Origin

This paper explores the role of ideology in attempts to influence public policy and in business representation in the EU–China solar panel anti-dumping dispute. It exposes the dynamics of international activity by emerging-economy multinationals, in this case from China, and their interactions in a developed-country context (the EU). Theoretically, the study also sheds light on the recent notion of ‘liability of origin’, in addition to the traditional concept of ‘liability of foreignness’ explored in international business research, in relation to firms’ market and political strategies and their institutional embeddedness in home and host countries. Through a qualitative analysis of primary and secondary materials and interview data with key protagonists, we provide a detailed evolution of the case, the key actors involved and their positions, arguments and strategies. This illustrates the complexities involved in the interaction between markets and ideologies in the midst of debates regarding different forms of subsidy regimes for renewable energy, free trade versus protectionist tendencies by governments, and the economic and sustainability objectives of firms and societies. The case shows how relative newcomers to the EU market responded to overcome a direct threat to their business and became, with support from their home government, active participants in the public debate through interactions with local commercial partners and non-governmental organisations. Firms adopted relatively sophisticated strategies to reduce their liabilities vis-à-vis host-country institutions and local stakeholders, including collective action, to increase their legitimacy and reputation, and counter ideologically based attacks. We also discuss implications and limitations.

Specific vs Ad Valorem Strategic Export Subsidies with Taxation Distortion

AbstractThis paper employs a model to compare the welfare between optimal specific and ad valorem export subsidies if the subsidy payment is financed by distortional taxation. It is found that the welfare under the specific subsidy regime is higher (lower) than that under the ad valorem subsidy regime if the social cost of taxation distortion is low (high). Moreover, the signs of the two optimal subsidies are also crucially dependent on this social cost. They are positive (negative) if the social cost is low (high).

MOSAICA: A multi-scale bioeconomic model for the design and ex ante assessment of cropping system mosaics

To understand the effects of policy changes on organisations and compositions of cropping systems at regional scale and their contribution to the sustainable development of regions, we built a regional, spatially explicit, multi-scale, bioeconomic model called MOSAICA. This model explicitly incorporates information at field, farm, sub-regional and regional scales to provide cropping system mosaics by way of regional optimisation of the sum of individual farmer's utilities under field, farm and territory biophysical and socio-economic constraints. Its generic structure means it can be used in different regions with geographic information on the location of the field and farm, data on cropping system performance, on location factors and on policy schemes. We used the model in Guadeloupe to test the impact of three scenarios of change on the agricultural subsidy regimes. The model produced three cropping system mosaics which reduced the area under banana and sugarcane, turned specialised banana and sugarcane farming systems into breeding systems while improving the overall contribution of agriculture to sustainable development. The spatially explicit results of changes in ecosystem services, and in farming systems with MOSAICA make it an appropriate decision-aid tool for regional planning.

An illusion of success: The consequences of British rail privatisation

This article accounts for the British experiment with rail privatisation and how it has worked out economically and politically. The focus is not simply on profitability and public subsidy, but on the appearances which accounting arrangements create. The article scrutinises the Network Rail subsidy regime, which enables train operators to achieve fictitious profitability without increased direct state support. This enables supporters of privatisation to claim train operators produce a net gain for the British taxpayer. The claim forms the heart of a trade narrative which is employed by the industry and their political backers to deflect criticism and stymy reform.

The WTO and China's Renewable Energy: An Application of Anti-Subsidy Rules to China's Green Sector Manufacturing Subsidies

China’s renewable energy subsidies have come under immense international scrutiny in recent years for violating international trade rules. In becoming the world’s largest green sector investor in 2012, the PRC government’s aggressive subsidisation and support of the industry has significantly reduced the costs of domestic production of wind turbines and solar panels. Foreign governments worldwide, including the EU and US, have expressed their opposition to China’s government subsidies by filing complaints at the World Trade Organisation, alleging breaches of the Agreement on Subsidies and Countervailing Measures.As such, this study aims to apply the WTO’s anti-subsidy rules as they currently stand to China’s green sector governmental subsidies. The main analysis is therefore split into the following four conditions necessary to establish liability under the Agreement: (1) The ‘Public Body’ Determination, (2) The Benefit Analysis, (3) Specificity, and (4) Adverse Effects. By doing so, the thesis strives to carry out an assessment of the legality of China’s green sector subsidy regime, as well as revealing the various issues and shortcomings of the SCM Agreement’s application. On this basis, tentative proposals and recommendations for reform are suggested.

Higher Education: Subsidizing Tuition versus Subsidizing Student Loans

We use a simple two-period equilibrium framework to explore the effects of two different subsidization regimes for higher education on the formation of human capital and on the distribution of incomes. Individuals finance their investments in higher education through income-contingent education loans as well as subsidies from the government. The subsidy is tax-financed. We compare an egalitarian subsidy scheme, which reduces by a uniform amount the tuition charged to students, with a student loan subsidy which is proportional to the student's debt service obligation. We show that both types of subsidies reduce the economy-wide underinvestment in higher education and lead to a more equal income distribution. Furthermore, according to some social welfare criterion, the student loan subsidy regime dominates the tuition subsidy regime if the subsidy level is predetermined, while the converse is true if the subsidy level constitutes a choice variable of the government.

Transparency is the Most Important Governance Issue in the WTO Subsidy Control

Transparency, one of the basic pillars and fundamental norms of a well-functioning trading system, is increasingly seen as an inevitable tool in the governance of international trade. Without transparency, trade agreements are just words on paper. Transparency allows economic actors and trading partners to see how rules are implanted, reformed and implemented. For subsidy control, one of the most debated and ambivalent areas of international trade, it is more necessary than ever. The World Trade Organization (WTO) Agreement on Subsidies and Countervailing Measures (ASCM) establishes disciplines on its Members’ use of subsidies and provides extensive means for reporting and monitoring. Transparency in subsidization has increased considerably in the last two decades. But the transparency mechanism has been criticized for deficient attention, underperformance and impetus to implementation. Members comply with transparency obligations only half-heartedly. Lack of incentive for notification and sanction for non-compliance, resource constraint, ambiguous notification-template and inherent difficulties of the subsidy regime have been great obstacles for transparency to work. Experiences from the WTO Agreement on Agriculture and the Technical Barriers to Trade show that well-defined provisions, collaborative approach and capacity building for increased domestic reporting are necessary for the system to run smoothly. Civil society and NGO involvement may also contribute positively. For transparency to control subsidy, negotiators must think carefully about the government behaviour they wish to modify using the mechanism. The future of the WTO as a legitimate and effective international organization will depend, in short, on finding a mode of transparency accessible to all its Members.

The Effect of Screen Quotas and Subsidy Regime on Cultural Industry: A Case Study of French and Korean Film Industries

There are voices in France advocating for a Korean-type screen quota system, seen as a key ingredient in the success of the Korean film industry. At the same time, there are calls in Korea for a French-type subsidy regime to be implented as a way to achieve a further take-off. This paper shows that the Korean screen quota has little correlation with Korea’s success. For the French case, its huge subsidies have had no impact on improving the attractiveness of French movies domestically. The paper concludes by suggesting that an in-depth analysis of the policies pursued by the two countries is crucial toward avoiding a too costly trial-and-error process when designing policies related to cultural industries and culture.

The Legislature and Anti-corruption Crusade under Nigeria’s Fourth Republic, 1999-2013

An attempt by the Federal Government of Nigeria to remove subsidy on Premium Motor Spirit (PMS) popularly known as fuel opened a Pandora’s Box which stories are still developing till today. On the insistence and prompting of Nigerians that corruption and fuel had been subsidized all along, the House of Representatives set up an Ad Hoc committee to look into alleged irregularities in the fuel subsidy regime. The committee after its investigation discovered that N1.4 trillion had been unlawfully paid out to the treasury looters. This particular fraud is said to be the most monumental in Nigeria and in Africa considering that it is close to half the annual budget of Nigeria and that of about seven West African countries put together. Few months after the submission of the report of the Panel which included recommendations for appropriate sanctions to culprits, Nigerians were yet treated to another drama when Mr. Femi Otedola whose company Zenon Oil had been fingered as one of the beneficiaries of the loot, came out to say that the chairman of the Ad Hoc Committee Hon. Farouk Lawan had solicited for $3m out of which $620,000 had been paid out to enable Hon Farouk Lawan remove Zenon Oil from any complicity in the scam. To say that corruption, like cankerworm, has totally devoured the very fabric of the Nigerian polity is merely stating the obvious. That the cost of public and private sector corruption to the nation, over the years, is unquantifiable is rather stale news. Likewise the fact that the agencies saddled with the responsibilities of checkmating corruption and prosecuting corrupt individuals has not done enough. Even the judiciary has not helped matters. And the question remains: Is there a way out of the woods? This is where the role of the legislature in the anti-corruption initiative is critical given the centrality of the role of the legislature in the political process of a polity. This paper examines how the legislature has faired in performing its constitutional and oversight duties in this regard. It finds a wide gulf of difference between constitutional prescriptions and political realities in a country where the legislature itself is confronted by daunting corruption challenges. DOI: 10.5901/mjss.2014.v5n15p28

Policy Traps: Consumer Subsidies in Post-Crisis Argentina

Developing countries devote significant resources to lowering consumer prices for basic goods and services such as food and electricity. Theories of the welfare state only partially elucidate why consumer subsidy regimes grow so large and become entrenched. While the welfare state literature stresses how concentrated, organized beneficiary groups push for the expansion and protection of well-known programs such as pensions, the developing world’s consumers are atomized, and subsidies themselves are of low visibility. The size and durability of consumer subsidy regimes stem primarily from political uncertainty and price shocks that provide politicians with strong incentives to avoid blame for repeal. Over time, environmental pressures and fears of political backlash against repeal reinforce one another, increasing the fiscal burden subsidies impose and dramatically raising the political cost of program exit. In this sense, consumer subsidy programs come to form “policy traps”—initially modest policies that quickly grow and become entrenched, thereby greatly reducing politicians’ maneuvering room. We utilize this framework to analyze the meteoric growth and entrenchment of utility subsidies in post-crisis Argentina. In Argentina, subsidies grew despite the private provision of subsidized services—making it difficult for the government to claim credit—even in sectors with weakly organized interests.

Assessment of the sustainability guidelines of EU Renewable Energy Directive: the case of biorefineries

Abstract Sustainability guidelines can help to safeguard the sustainable use of biological materials. When these guidelines are legally prescribed, their influence on the economic viability of bioenergy, biofuel and bioliquid projects is increased substantially, through their impact on national subsidy regimes and international trade. One of the key examples is the European directive 2009/28/EC, or the Renewable Energy Directive (RED), and the related COM/2010/11 that integrate guidelines for calculating greenhouse gas impact for various bioenergy pathways. This paper looks further into the sustainability results when influenced by principal decisions that are legally open for debate. Therefore, a concise review is conducted of the legal state-of-the-art on whether a product is waste or not. The review pinpoints uncertainty, leading to four potential legal scenarios. The sustainability of a complex biorefinery is analysed for each scenario. The results show (i) a high sensitivity to the principal decisions on the nature of waste materials in the scenarios, and (ii) to the definition of boundaries between the processes. More detailed rules for the application of the RED guidelines are needed, and should be complemented with methods specifically targeting all relevant sustainability aspects, thereby enhancing the overall understanding of the sustainability of the process.

An offer they couldn't refuse (but probably should have): the ineffectiveness of Italian state subsidies to movie-making

Public financial support to national movie (film) production is typically conditional on very subjective artistic and socio-cultural criteria and objectives. Yet the question remains as to whether state subsidies actually help films at the box office. This paper shows the public grant regime in Italy did not develop the industry as intended, since in an overwhelming number of cases, production losses exceeded subsidy. The subsidy regime was ineffective and wasteful. Specific institutional and political features characterizing the Italian system are important components in this story. The conclusions will be of interest to all countries making commercial films.