Distributional impacts on firms and households

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Political economy of land-use policies

Some of the salient issues that arise in the political economy of land-use policy are similar to those characterising environmental or biodiversity policy reforms: (1) competitiveness issues, (2) distributional implications on households, (3) vested interests, and (4) political acceptability (OECD, 2017[73]). Empirical research has shown that the distribution of real or perceived costs and benefits influences policy choice and design in general and the ambition and pace of reforms in particular (OECD, 2017[73]; Zachmann, Fredriksson and Claeys, 2018[111]). In this context, analysing distributional impacts of reforms and possible mitigation or compensatory measures could speed-up the introduction of new policies or policy reforms (OECD, 2015[112]; Zachmann, Fredriksson and Claeys, 2018[111]; OECD, 2014[113]). This chapter details key distributional impacts of biodiversity reforms and of green urban policies, and solutions to adjust or avoid them. It then delves into land governance issues towards more sustainable land use.

Distributional impacts on firms and households

Distributional impacts of biodiversity reforms

The risk that reforms can have a negative impact on firm competitiveness is a common concern in

environmental policy reforms. A country or region applying more stringent policies may affect the competitiveness of domestic firms and create an incentive to relocate in other countries or regions with less stringent regulations (the so called “pollution haven” hypothesis ) (OECD, 2017[73]). Such ‘competitiveness concerns’ may also generate a “race to the bottom”, where policy makers ease regulations in order to retain or attract firms (OECD, 2017[73]).

The literature on the impact of biodiversity policy reforms on firm competitiveness is particularly

limited. Most of studies on the competitiveness impact of environmental policy reforms focused on the impact of carbon pricing and find limited evidence of negative impact of more stringent emission policies on firms (OECD, 2020[30]). The OECD (2017[73]) reviewed examples of studies on competitiveness impacts of environmental policy reforms in sectors or areas related to biodiversity and found limited evidence of negative impacts. ECOTEC (2001[114]) focused on the introduction of a pesticide tax reforms in Sweden and Denmark and found no evidence of negative impacts on firms (OECD, 2017[73]). No negative competitiveness impacts were found in a study on the introduction of an Environmental User Fee System (EUFS) to address oxygen pollution in the Philippines (ECOTEC, 2001[114]; Catelo and al., 2007[115]; CBD, 2011[116]; DELTARES, n.d.[117]; GWP, n.d.[118]); as in (OECD, 2017[73])].

Similarly, studies on the impact of PES and the creation of protected areas on income have mixed

results. Hegde and Bull (2011[119]) found some evidence of regressive impacts since male-headed and high-income households were being favoured as project benefit recipients of a small scale agroforestry based carbon sequestration PES project in rural Mozambique (Hegde and Bull, 2011[119]). The Mexico’s Payments for Hydrological Services Program has been found to generate small but positive poverty alleviation effects (Alix-Garcia, Sims and Yañez-Pagans, 2015[120]; Sims and Alix-Garcia, 2017[121]). Alix-

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Garcia, Sims and Yañez-Pagans (2015[120]) found that targeting forests at greater risk could increase additionality in terms of forest protection but would decrease the potential for poverty alleviation by reducing participation of poor households (because they usually live close to forests at lower risk). The creation of national parks in Costa Rica has led to increase in the wages but only in areas with tourism (Robalino and Villalobos, 2015[122]) while Sims and Alix-Garcia (2017[121]) find that protected areas in Mexico had overall neutral impacts on livelihoods. Policies to green the agricultural sector may also have indirect consequences on households’ budget through variation in food prices. For instance, policies to decrease global GHG emissions in food production may affect crop prices. In principle, such changes could have regressive implications as lower income households are likely to spend a higher share of their income on food. However, food consumption preferences vary remarkably across a number of socio-economic dimensions (e.g. geography, religion, income) and it is challenging to make broad conclusions (Zachmann, Fredriksson and Claeys, 2018[111]).

Distributional impacts of green urban policies

Policies to promote infill development can have important distributional implications as they can

affect house values directly. Urban containment policies may strongly affect the value of land as they can change its commercial value. Investment in public transportation, often used to support densification of inner suburbs, often increases the values of areas served by the newly built infrastructure. Reform to building height, which may be used to increase densification, can also affect the prices of existing dwelling stock (Ihlanfeldt, 2007[123]). In this context, it should be noted that poorer households are less likely to be directly affected by such policies since they are less likely to own housing. However, they may suffer from second round consequences as rent prices may vary due to increase in the property values due to policy intervention (OECD, 2018[49]). Urban containment policies were found to have regressive impacts in Germany (Jehlinga, Hecht and Herold, 2018[124]). The topic of infill development needs to be further researched (Jehlinga, Hecht and Herold, 2018[124]). Reforms to urban parking policies may have progressive impacts. Incorporation of parking costs in local taxes is likely to be regressive as low-income households are less likely to own cars. In this context, reforms to increase the prices of parking permits prices may lead to progressive outcomes (Russo, van Ommeren and Dimitropoulos, 2019[125]). In addition, large amounts of land is allocated to car parking, which encourages car ownership and use, thus further promoting urban expansion. At the same time, the saturation of on-street parking in busy downtown areas suggests that parking prices are too low. However, local communities are likely to oppose increase in tariffs for curb-side parking. Earmarking some of the revenues from parking revenues for local project can help to increase support for policy reforms. For example, 30% of on-street parking fees in central Mexico city are earmarked for local projects that are selected through a public consultation process (Russo, van Ommeren and Dimitropoulos, 2019[125]) (see Box 4.1).