Competition through indicators of regional sustainability in a federal system

Abstract

"Indicators of regional sustainability can attempt to inform regional actors by pointing out potentials of sustainable development. In this respect, indicators are a heuristic instrument for designing policy instruments. But theoretically sustainability indicators could also be applied in horizontal and vertical fiscal relations to allocate funds among regions. Then they could induce competition either by setting standards or else by evaluating relative efforts towards sustainable development. In a way, this seems to be comparable to ecotaxation: An incentive provides for the lack of altruistic behavior to do what is best for all. And reforming fiscal relations according to sustainability indicators would come close to a revolution. Unfortunately, chances are low of fitting complex indicator systems with rather simple measures of current fiscal relations and their structural conditions. Specifically, we show that sustainable development indicators suffer four fundamental problems if applied to fiscal relations. All four are arising from the fact that highly diverse information must be condensed into one single form of information to give the incentive: money." [author's abstract]