Major report calls for rapid action to be taken by government and business to deliver subsidy reform
'Financing our own extinction': $1.8tr in subsidies funding nature destruction every year, global study finds
Forestry, agriculture and fossil fuels are among the biggest recipients of subsidies that harm nature, the study contends | Credit: iStock

The world is spending at least $1.8tr ever year on subsidies that are driving the wholescale destruction of nature, which is in turn jeopardising the future of the global economy.

That is the stark warning of fresh research published this morning, which estimates that governments around the world are ploughing the equivalent of around two per cent of global GDP via subsidies into activities that harm the natural environment.

The study, which was commissioned by non-profit the B Team, estimates fossil fuels, agriculture and water industries receive more 80 per cent of these environmentally harmful subsidies dished out by policymakers.

Christiana Figueres, former executive secretary of the UNFCC and B Team leader, warned that harmful subsidies were creating "huge risks" for the businesses that receive 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 towards protecting the climate and nature, rather than financing our own extinction."

The research has been published in the hope of informing a working meeting of the UN Convention of Biological Diversity early next month, the treaty through which countries come together to hold regular COP meetings aimed at delivering a global treaty to reverse biodiversity loss.

As such, the research urges business and government to work together on reforming subsidies in order to shift these estimated trillions of dollars from harmful activities towards projects that can halt and reverse the loss of nature.

Redirecting, repurposing, or eliminating subsidies could play a "significant contribution" to unlocking the $711bn required to cover the costs of reaching net zero emissions and reversing nature loss by 2030, the report notes.

CBD executive secretary Elizabeth Mrema said the report was "critically important" and would inform the final shape of a global biodiversity agreement expected to be drawn up at the COP15 UN Biodiversity Conference later this year.

"Transformative action on incentives and subsidies harmful for biodiversity will be decisive this decade to bend the curve of biodiversity loss," she said. "I strongly believe this timely report will help generate the requisite political momentum and contribute to the global biodiversity framework."

The analysis stresses there is a strong incentive for businesses to push for subsidy reform. Not only do companies rely on nature at every stage of their value chain, but environmentally harmful subsidies present a series of reputational, operational and supply chain risks to business, it notes.

Such subsides distort market prices, resource allocation and investment decisions, mask operating or accident risks and create competitive barriers to environmental improvements, it warns.

Roberto Marques, executive chairman and CEO of beauty giant Natura & Co, said humanity's dependency on natural ecosystems was not yet reflected in its markets and institutions. "As businesses we have an important role to play in catalysing the system change to deliver an equitable, net zero and nature-positive economy," he said. "Together, we must work to realign perverse incentives to bring proper value to nature."

The B Team and the Business for Nature coalition have together published a briefing alongside the research targeted at both the private sector and governments which urges firms to support the development of international standards, frameworks, and guidance for mandatory ESG disclosures, including subsidies.

It also stresses that any subsidy reform must consider both social and environmental impacts to avoid negatively impacting the poorest households and most vulnerable communities around the world.  

Cross industry standards and action across all sectors that benefit from environmentally harmful subsidies will be needed to reform the current system, according to the report. It points out that governments failed to meet a previous target - established at the 2010 UN COP conference - to phase out subsidies harmful to biodiversity by 2020.

A detailed breakdown of environmentally harmful subsidies across the economy in the report sets out how issuance of public funds to businesses impacts the environment, global inequalities and climate.

The fossil fuel industry is singled out as the biggest recipient of environmentally harmful subsidies, at $630bn, followed by the agriculture industry, which receives $520bn. Water, forestry and construction come next, at $350bn, $155bn and $90bn, respectively.

But the researchers note that the total value of environmentally harmful subsidies is likely to be even higher than the estimates supplied in the report, pointing to a lack of transparency and disclosure of subsidy flows between governments and recipients, as well as a dearth of data related to the hard rock mining sector.

Eva Zabey, executive director of the Business for Nature group, said the upcoming UN Biodiversity Conference was the "single best chance" to turn the tide on nature loss. "

An ambitious outcome at COP15 on environmentally harmful subsidies has the potential to reset the rules of our economic and financial systems and would incentivise companies to chase nature positive outcomes," she said.



The best of Tired Earth delivered to your inbox

Sign up for more inspiring photos, stories, and special offers from Tired Earth