ABSTRACT
Subsidies for environmental improvement are a common environmental policy instrument. They are often combined with direct regulation and sometimes with environmental charges with the aim of reducing compliance costs to water users. Subsidies are preferred by water users and often by politicians, who are under pressure from interest groups particularly hard hit by regulation or charges. However, subsidies do have a number of drawbacks, which make themselves felt mainly in the long term: they impose a fiscal burden on the national budget, and it is difficult to withdraw them. Nor do they encourage resource users to abandon activities in resource-intensive sectors. There is considerable tension between the granting of subsidies and the polluter- or user-pays principle, which is widely accepted, though seldom rigidly enforced under environmental policies (Agenda 21 1992, point 8.28, quoted in BMU 1994; OECD 1989, 27–30; Cansier 1993, 130–133).
