The Nature of Subsidies: Improving their impacts on biodiversity

By Herve Barois, Senior Technical Advisor, BIOFIN

Environmentally harmful subsidies across sectors such as fossil fuels, hard rock mining, agriculture, and forestry, are estimated to cost US$ 1.8 trillion annually, or 2% of global GDP.  Many well-intended subsidies and government support often have unintended negative, costly effects on the environment and biodiversity, which negatively affect societies and economies at the local and national levels. That is why UNDP-BIOFIN is set to publish a step-by-step guideline to assess to which extent subsidies and government support are having harmful impacts on biodiversity and create action plans to rethink and redesign them.

There is a big opportunity in the area of repurposing harmful subsidies. Without significant action, these increased ‘negative’ expenditures may ultimately outdo our efforts to raise finance for nature positive investments. Without a substantial change, there is no chance of achieving the Global Biodiversity Framework currently under discussion, which most likely will include a target on reducing harmful spending.

One key question is: where to begin?

If countries want to make more progress than in the last decade, they need to start by documenting the extent of negative impacts on nature from their subsidies. And this is where the new UNDP-BIOFIN guideline The Nature of Subsidies: How to improve their impact on biodiversity, society and fiscal systems, is a step-by-step guideline for developing countries to assess to which extent subsidies and government support are having harmful impacts on biodiversity and create action plans to rethink and redesign them.

It will be launched in early 2023 to support the implementation of the new Global Biodiversity Framework and will provide guidance and support countries to:

• Identify and asses which subsidies/government support is likely harming nature, and where possible, quantify their value and cost.
• Define multiple redesign options through a multidimensional analysis that adequately weighs social, gender equality, environmental, economic, and political economy concerns throughout the re-design and transition process, including within the COVID-19 context.
• Develop action plans to redesign prioritised subsidies, outlining multiple scenarios.
• Implement the action plans to redesign subsidies to reduce their negative impacts on nature while likewise reducing other negative impacts and enhancing positive attributes for all SDGs
• Identify institutional gaps that have caused subsidies to become adopted without sufficient consideration for nature and define actions to fill existing gaps.