Tax and Fiscal Incentive Policies to Promote Sustainable Wood in Construction

Introduction

This brief explores which tax and fiscal incentive policies are useful for incentivising the private sector to adopt and scale up the use of sustainable wood in construction.

Tax and fiscal incentives can have profound effects on the economy, on how private-sector decisions are made, and on how the public sector intervenes in markets. They have fueled energy production and consumption patterns, agricultural intensification and commodity growth, but also provide many examples of unsustainable practices that lead to the overuse of natural resources and even corruption.

There are examples of fiscal incentives promoting green building, though this is more evident in developed countries than in developing ones. Government support for green technological innovation is especially effective in the initial stages, but beyond a certain point, government intervention exhibits a crowding-out effect, inhibiting innovation dynamics.

In the scan of policies promoting forest-positive buildings in FCLP countries, it was found that activity in this policy basket was lower. Yet, fiscal incentives have high potential to impact private-sector uptake of more sustainable technologies and materials if designed well.

This brief provides an overview of insights and options for further consideration by countries as they determine how tax and fiscal policy tools can be used alongside the broader suite of policy tools governments can use to increase uptake of more sustainable building materials.

This brief employed a comprehensive literature review and expert input:

The brief starts with a definition of terms, explores the differences in usage among ‘subsidy,’ ‘tax incentive,’ and ‘fiscal incentive.’

then elaborates on a typology developed by the Global Subsidies Initiative (GSI) of the different types of incentives.

The third section maps the different tax and fiscal incentives identified in the policy scan for FCLP countries to the GSI typology.

The fourth section builds on the second and third sections’ definitions and typology to reflect on considerations that guide FCLP member-country review and the redesign of their tax and fiscal incentives to promote lower-carbon building materials.

• Category: Publications, Resources
• Tag: wood construction