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Positive price instruments

Subsidies, tax exemptions and credits are positive (incentive) price-based instruments that can stimulate circular goods and services by providing direct financial contributions or by providing reductions of particular taxes payable by an individual or business.[1] Subsidies aim to alleviate unfavourable market conditions and failures, such as externalities and split incentives,[2] thereby inciting further action and investment in both businesses (such as Zagreb’s subsidies for installing renewable energy systems). Tax exemptions increase market interest in circular products and services, and stimulate further investment and innovation. Taxes do this while leaving the choice for the most cost-effective way to reduce environmental damage with consumers and businesses.[2] Hereby they support the realisation of particular circular actions, such as increasing building energy efficiency, purchasing particular ‘green’ products, as well as encouraging private investments in green projects.

 

[1] WTO. 2006. World Trade Report 2006: Exploring the links between subsidies, trade, and the WTO'. World Trade Organization. Available online via https://www.wto.org/english/res_e/booksp_e/anrep_e/world_trade_report06_e.pdf

[2] OECD. 2011. Environmental Taxation: A Guide for Policy Makers. Organisation for Economic Co-operation and Development. Available online via: https://www.oecd.org/env/tools-evaluation/48164926.pdf

Relevant case studies and articles