Decreasing Environmental Pollution Through Reducing Environmentally Damaging Subsidies : The Case of Agricultural Input Subsidies

Environmental pollution is the most typical example of negative externality regarded as one of the sources of market failure. Therefore, existence of environmental pollution requires government intervention in the economy in order to realize an efficient resource allocation. However, sometimes environmental pollution stems from some public policies intended to achieve non-environmental goals. This study reveals adverse effects of agricultural input subsidies, one of the public policies, on the environment and implies that reduction or removal of these subsidies is necessary to improve the environment. Given some economic, political and social barriers, the success of such policy entails balancing environmental policy objective with non environmental policy objectives.