Harmful subsidies: why is the world still funding the destruction of nature? | environment

By the middle of the century, our planet will need to feed almost 10 billion people, according to the UN. To do this sustainably and limit global heating to 1.5C, the world must also reforest on a huge scale, say scientists, while increasing food production without converting more rainforest and wetland into farmland.

It is an intractable challenge. With vast areas of forest, grasslands and savannah already lost to expanding agricultural frontiers and resource extraction in the last century, the competition for space, dubbed “the land squeeze” by the World Resources Institute (WRI), will put unprecedented pressure on Earth’s planetary boundaries.

Government incentives will play an important role in reconciling the competing demands on our planet’s resources. But new research reveals at least $1.8tn (£1.3tn) of environmentally harmful subsidies is heading in the wrong direction every year, financing the annihilation of wildlife and global heating through support for cattle ranching, pesticide use, the overproduction of crops and fossil fuel extraction.

“In a situation where, as a civilization, we are dying from climate change and biodiversity loss, we should not be spending money on making the situation worse,” says Ariel Brunner, head of policy for BirdLife Europe and Central Asia. “The biggest threats to our ability to feed ourselves are climate change and environmental collapse. We have enough food. The only scenarios in which we wouldn’t have enough are linked to running out of water, soil erosion and the collapse of ecosystems.”

The report, produced by leading subsidy experts for the B Team and Business for Nature, estimated that, each year, there is at least $640bn of environmentally damaging financial support for the fossil fuel industry, $520bn for agriculture and $350bn for the unsustainable use of freshwater. Examples range from subsidies for soy production in the Amazon and palm oil plantations in south-east Asia to artificially low energy prices for groundwater pumping in Iran and poor water management in California.

Despite a target on redirecting subsidies in the draft UN biodiversity agreement, repurposing them will not be easy. The B Team argues that the UN target should be strengthened to eradicate all environmentally harmful subsidies – not just the $500bn drafted at the moment – ​​and businesses must reveal the support and subsidies they receive through environmental disclosures.

But there is also political jeopardy. Governments have never met a UN target on halting the destruction of nature, with failure to act on subsidies highlighted as a key failure of last decade’s targets. Recent protests in France, Kazakhstan and Nigeria over the threatened loss of subsidies are warnings to leaders on how subsididy reform can go wrong.

The Palo Verde national park in Costa Rica, where a new program has helped reverse deforestation. Photographer: Jeffrey Arguedas/EPA

Costa Rica is a high-profile example of how government support can strike the balance between nature and agriculture. The country’s payments for ecosystem services programme, which won the inaugural Earthshot prize last year, helped halt and reverse what had been one of the highest rates of deforestation in the world in the 1970s and 1980s, while maintaining the production of bananas, pineapple, coffee and other crops. Chile, Ghana, Colombia, Guatemala, Mexico and Peru have similar schemes where landowners are paid for environmental services, albeit on a smaller scale, helping to combat rural poverty and the climate crisis.

“We have to restore ecosystems to be able to feed more people, not just for biodiversity,” says Helen Ding, an environmental economist with the WRI, who led research on repurposing farm subsidies in August last year. The research argued that redirecting subsidies to support agroforestry and low-carbon agriculture, especially among small farmers, who produce a large proportion of the world’s food supply, could improve soil quality and the ecological health of land without affecting bottom lines.

“Farmers do need to receive subsidies, especially after the Covid pandemic. Rural communities have to recover from the economic shock. But we do know there are subsidies that are inefficient and are driving deforestation,” says Ding.

While the postwar expansion of fertilisers and pesticides use alongside technological support lifted millions out of poverty, some well-intentioned schemes are not achieving their aims, according to the WRI report. In Malawi, the government spent about 60% of its annual agricultural budget on farming input subsidies like fertilisers after food instability in the early 2000s. Over time, the initial increase in maize yields fell while the soil was also damaged. Ding’s report argues that such schemes could be changed to benefit both farmers and the environment.

Either way, the $1.8tn calculated in the new research is likely to be a gross underestimate of the true scale of environmentally harmful subsidies, say the report’s authors, Doug Koplow and Ronald Steenblik. A year after the review by Cambridge economist Prof Sir Partha Dasgupta of the failure of economics to take into account the rapid depletion of the natural world ahead of Cop26, there is little sign so-called “natural capital” has gone mainstream. The human-driven sixth mass extinction of life on Earth continues to be subsidized with public money.

“We found at least $1.8tn a year in subsidies. What was equally striking to me is how much we couldn’t find out. There were no estimates of water for direct withdrawals by industry and agriculture, even though that’s just a massive use of freshwater around the world,” says Koplow, founder of the Earth Track organization, which monitors environmentally harmful subsidies. “My hope is that this report restarts a critical conversation.”

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