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The G-20 Heads of State have recently committed to
phase out and rationalise inefficient fossil fuel subsidies
over the medium term while providing targeted support
for the poorest. This commitment is to be commended
as an important step towards effectively addressing the
threat of climate change and should be implemented.
It also needs to be replicated and extended to other
subsidies with direct and important harmful effects on
ecosystems and biodiversity.
Priority areas for reform, from a global ecosystems and
biodiversity perspective, include the removal of
capacity- or effort-enhancing fisheries subsidies
and the continued and deepened reform of production-inducing
agricultural subsidies, in particular
in most OECD countries. Reasons include the
size of their environmentally harmful effects and/or their
sheer magnitude and the resulting strain on scarce
resources, as well as high opportunity costs.
The WTO negotiations on fisheries subsidies and agricultural
domestic support have significant potential, if
successfully concluded, to support the accelerated
removal of environmentally harmful subsidies. Governments
should redouble their efforts to successfully
conclude the negotiations on the Doha
programme of work.
REFORMING SUBSIDIES
Depending on national circumstances, most OECD
countries need to complement these global priorities
with additional and prioritised reform efforts in other
sectors. In addition to energy subsidies, especially on
fossil fuels, these should address the following subsidies
that harm biodiversity and ecosystem services:
• transport subsidies e.g. habitat fragmentation
linked to subsidies for road building;
• water subsidies that result in unsustainable water
consumption.
For non-OECD countries, the sectors mentioned are
also interesting candidates for subsidy removal or
reform but concrete priorities will obviously depend on
national circumstances. Relevant factors include the
importance of specific sectors, the existing subsidy
landscape including the design of individual programmes,
and how existing programmes interact with the
broader policy and institutional framework.
The stimulus programmes that are now in place
in many countries will require stringent budgetary
consolidation in the future. Subsidy reform needs
to be an important element of this process.
Box 6.18: Minimum criteria for subsidy programme design
• Targeted: Subsidies should go only to those who they are meant for and who deserve to receive them;
• Efficient: Subsidies should not undermine incentives for suppliers or consumers to provide or use
a service efficiently;
• Soundly based: Subsidies should be justified by a thorough analysis of the associated costs and
benefits;
• Practical: The amount of subsidy should be affordable and it must be possible to administer the
subsidy in a low-cost way;
• Transparent: The public should be able to see how much a subsidy programme costs and who
benefits from it;
• Limited in time: Subsidy programmes should have limited duration, preferably set at the outset,
so that consumers and producers do not get ‘hooked’ on the subsidies and the cost of the
programme does not spiral out of control.
Source: UNEP 2008a
TEEB FOR NATIONAL AND INTERNATIONAL POLICY MAKERS - CHAPTER 6: PAGE 34