Identifying environmentally harmful subsidies and assessing their impacts does not mean abandoning them immediately, the agency said.

But there needs to be a clear understanding of the cost of socio-economic changes they bring, the availability of better alternatives and the possible compensation mechanisms.

The National Audit Office said the need to identify and abandon environmentally harmful subsidies, especially fossil fuels subsidies, has been highlighted for decades already by several international organizations, such as the UN, OECD, the International Energy Agency and the European Union. Methodologies have also been developed to identify these subsidies and assess their impacts.

The overview shows in Estonia there are support schemes, tax exemptions and reductions or incentives in place that have a negative environmental impact.

As the state provides financial support towards achieving environmental objectives, such economic measures counteract the reduction of pollution and habitat loss and contribute to the use of non-renewable natural resources.

For example, state funds are used partly to close the disposal site at the Vaivara hazardous waste treatment centre because companies that dispose of hazardous waste are not charged enough to cover all the necessary costs.

However, this is contrary to the principle that the polluter must pay for the costs of its activities as well as for the damage caused to the environment.

In the responses sent to the National Audit Office, the ministries cited socio-economic or competition-related objectives as reasons for the subsidies related to their field, but at the same time, agreed to the need to independently and centrally identify environmentally harmful subsidies.

The agency found that identifying and assessing the environmentally harmful subsidies could be one of the activities in the green deal action plan prepared by the Government Office.

The highest number of environmentally harmful subsidies in the world has been provided in the energy, transport and agriculture sectors, analysis shows.

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