The world spends at least $1.8billion (£1.3billion) every year on subsidies leading to wildlife annihilation and increased global warming, according to a new study, prompting warnings that the mankind is financing its own extinction.
From tax breaks for beef production in the Amazon to financial support for unsustainable groundwater pumping in the Middle East, billions of pounds of government spending and other subsidies are hurting the environment, according to the first cross-sectoral assessment since more than a decade.
This government support, equivalent to 2% of global GDP, goes directly against the goals of the Paris Agreement and draft goals to reverse biodiversity loss, research on the explicit subsidies found, effectively funding water pollution, land subsidence and deforestation with state money.
The authors, who are leading grant experts, say a significant portion of the $1.8 billion could be reallocated to support nature-friendly policies and a transition to net zero, amid political division on the cost of decarbonizing the global economy.
The report calls on governments to agree on a target to eradicate environmentally harmful subsidies by the end of the decade at the Cop15 biodiversity meeting in China later this year, where it is hoped that a “Paris agreement for nature” will be signed, and for companies to reveal the subsidies they receive as part of environmental reporting.
Christiana Figueres, who headed the UN climate change convention when the Paris agreement was signed, welcomed the research. She said the grants created huge risks for the companies that received them.
“Nature is declining at an alarming rate and we have never lived on a planet with so little biodiversity,” she said. “Harmful subsidies must be redirected to climate and nature protection, rather than funding our own extinction.”
The fossil fuel industry ($620 billion), agriculture ($520 billion), water ($320 billion) and forestry ($155 billion) account for the majority of the $1.8 billion dollars, according to the report. No estimate for mining, believed to cause billions of dollars in damage to ecosystems each year, could be derived.
The lack of transparency between governments and recipients means the real figure is likely much higher, as is the implicit cost of harmful subsidies. Last year, a report by the International Monetary Fund found that the fossil fuel industry benefited from subsidies worth $5.9 billion in 2020, but the vast majority of that figure comes from the hidden costs of not making polluters pay for the deaths they cause and global warming.
“Subsidy reform allows us to improve price signals so that we are not protecting the revenues of the most polluting industries,” said Doug Koplow, founder of the organization Earth Track, which monitors subsidies harmful to the environment. Environment, and co-author of the report, along with Ronald Steenblik, former Special Advisor to the Organization for Economic Co-operation and Development on Fossil Fuel Subsidy Reform. “It creates space for alternative, cleaner forms of energy to enter the market.”
A draft target in the UN’s biodiversity deal for this decade calls for the reform of $500 billion a year in subsidies, but Team B and Business for Nature, who backed the research, said that should be reinforced. The world has never met a target to halt biodiversity loss, and failure to act on subsidies has been highlighted as a major problem in targets over the past decade.
Eva Zabey, executive director of Business for Nature, said companies are often unaware of the extent of the explicit and implicit subsidies they receive, but can use their influence to call for change.
“Many companies benefit from these environmentally harmful subsidies. It cannot be a taboo subject. We need to speak using facts and understand where the financial flows are going,” she said. “Generally, the grants have been established with good intentions in mind. We need to level the playing field because right now some are getting a leg up when it should be the other way around. It’s a tricky problem.
Last year, a UN report revealed that almost 90% of the subsidies given to farmers each year are harmful, damaging people’s health, fueling the climate crisis, destroying nature and fueling inequalities by excluding small farmers.
Elizabeth Mrema, UN biodiversity chief, said the report was critically important.
“The report highlights how re-directing, re-allocating or eliminating subsidies could make a significant contribution to unlocking the $711 billion needed each year to halt and reverse nature loss by 2030, as well as the cost to achieve net zero emissions,” she said.