Report No. 70290-ge
Summary and Roadmap of Priority Actions
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Summary and Roadmap of Priority ActionsSummary of the proposed Green Transportation Policy FrameworkThe proposed Green Transportation Policy Framework laid out in Chapter III includes various measures that falls under one of the four types of instruments discussed in Section II.C—(i) institutional and planning, (ii) regulation and enforcement, (iii) fiscal policy and pricing, and (iv) investments—under six policy objectives, and is summarized in Table 8. Table 8: Summary of the Proposed Green Transportation Policy Framework
Assessment of the proposed policy framework through the objectives and constraints of Government This paper argues that the proposed policy framework would increase the likelihood for Georgia to achieve greener transportation without undermining mobility and accessibility. The policy framework would contribute to the various development objectives of Government discussed in Section I.B. From fiscal point of view it would help reduce fuel imports, and hence, the current account deficits. From environmental point of view, it would help reduce emissions of GHG as well as of local pollutants. The quantified benefits of the policy framework are discussed in the following section. At the same time, the fiscal, political, and administrative constraints facing Government need to be recognized for successful implementation of the proposed framework. First, the proposed fiscal and pricing measures would not be inconsistent with the current administrative philosophy that pursues small government. The proposed taxes and subsidies do not automatically lead to bigger government or increased tax burden on households and firms. Taxes on low quality fuels, pollutants and high-emission vehicles would bring about net welfare benefits in terms of reduced health and environmental costs. Also, income (households) and cost (firms) effects of such fiscal measures can partly be compensated for by how the revenues are used. Government can choose (i) to allocate the revenues generated from the proposed “green” taxes for investment in green transport modes, (ii) to reduce taxes that have negative effects on economic growth, or (iii) to combine both approaches. For instance, if fuel tax revenues are used to improve public transport modes, increased fuel costs for households can be compensated by enhanced mobility through high-quality public transport services. If Government, now with the revenues from green taxes and to be revenue-neutral, reduces the labor or corporate taxes, that would help reduce the informal sector or increase domestic and foreign investments. More generally, introduction of green taxes could be planned as part of broader changes in the taxation. Second, public acceptance of fiscal and regulatory measures can be won through a public outreach strategy that highlights the “service fee” nature of certain pricing measures and the social costs of environmental externalities, and promote “polluters pay principle”. The proposed fiscal and pricing measures are not blanket taxes, but those that target the sources of pollution and inefficient use of motor fuels (in other words, transport users have options to avoid these taxes, by opting for greener modes of transport). Therefore they can easily be formulated and communicated as “fees” that need to be paid for polluting the environment or for using transport infrastructure and services, instead of “taxes” on vehicles or fuels. This approach has also been advocated in the White Paper of the European Commission not only for the political reason but also for the economic rationale. Most congestion charging schemes in Western Europe and North America have gained much political support when they were viewed as fees associated with certain services and users were provided with alternative options. Third, implementation of the proposed regulatory measures can be designed in a way that minimizes administrative costs and sustains the achievement of governance reform. To minimize the contact between public officials and the public, which was the principle of the recent governance reform in Georgia, phased implementation of regulatory measures is recommended. Fuel quality inspection poses lowest governance risks as it can be done by checking a limited number of motor fuel importers and distributors. Expanding the current vehicle inspection that is limited to firms that provide international transport services to include other commercial operators including domestic ones would be a sensible next step. Economic and financial feasibility of inspecting privately owned vehicles needs to be assessed, taking into consideration of governance risks and administrative costs.
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