Environmentally harmful subsidies currently stand at no less than $2.6 trillion per year, $800 billion higher than 2022 estimates and equivalent to 2.5% of global gross domestic product (GDP), according to a report released this week.
A combination of improved data, such as the inclusion of estimates for non-energy mining and plastics production, inflation, and growing subsidies to the fossil fuel industry, was behind the increase, according to US-based consultancy Earth Track, which drafted the report with campaign group Business for Nature.
“As expected, gap filling remains challenging. In many important resource areas, it is clear we continue to lack even the most basic needed data, and as a result, are still dramatically underestimating subsidy totals,” said the report.
The fossil fuel sector made up the bulk of environmentally harmful subsidies, reaching $1 trillion per year from the previous estimate of $640 bln, mainly due to rising energy prices following the Russian invasion of Ukraine, and the resulting increase in subsidy programmes for consumers.
The agricultural sector stood at $610 bln, followed by water at $390 bln, transport ($180 bln), forestry ($175 bln), construction ($150 bln), and fisheries ($55 bln).
“Overall, subsidies to fisheries, forestry, and water were all roughly flat, reflective of the absence of new data on the sectors,” said the report.
Environmentally harmful subsidies to the non-energy mining and plastic sectors, which were not covered by the 2022 study, were estimated at $40 bln and $30 bln, respectively.
“ACCELERATE THE TRANSITION”
“We’re spending more than ever on subsidies that are unintentionally destroying the planet on which all our livelihoods and economies depend,” said Eva Zabey, CEO of Business for Nature.
“With COP16 fast approaching, it’s time for governments to ditch these harmful subsidies and redirect them to accelerate the transition to a nature-positive economy for all.”
Under Target 18 of the Kunming-Montreal Global Biodiversity Framework (GBF), agreed in 2022 at the COP15 UN biodiversity summit, countries are required to eliminate, phase out, or reform incentives and subsidies harmful to nature.
In January, the UN Development Programme (UNDP) released guidelines to enable governments to redesign environmentally harmful subsidies, warning that the GBF goals will not be achieved unless countries take urgent action.
A separate report published last year by the World Bank estimated that harmful agricultural subsidies alone are responsible for the loss of 2.2 million hectares of forest annually, equivalent to 14% of global deforestation.
Subsidies can also lead to species loss, over-exploitation of natural resources, land degradation, and pollution by under-pricing the use of natural resources, fuelling over-consumption, or incentivising an increase in production, according to the UNDP.
By Sergio Colombo – sergio@carbon-pulse.com
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