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Tackling perverse subsidies in agriculture, fisheries and energy

Subsidies have always been part of the policy toolbox that governments use to achieve a variety of policy goals. This information note focuses on three sectors of particular relevance from a sustainable development perspective, namely agriculture, fisheries and energy, reviewing the scale and composition of subsidies provided in these sectors and their relative impact.

The paper finds that the critical importance of fisheries for employment, livelihoods, food security, and government revenues in both developed and developing countries makes reforming the sector very sensitive. On the other hand, it demonstrates the following findings about agricultural support:

  • farm support programmes in developing countries could help farmers to boost yields while reducing greenhouse gas emissions and conserving land and water
  • at the same time, farm subsidies for many products or types of farming may unintentionally encourage production and consumption patterns that are unsustainable
  • while only a meaningful global framework for addressing climate change is likely to provide a long-term solution to this problem, farm subsidy reform at the national or even regional level could provide a stepping stone towards future progress

Regarding fossil fuel subsidies, findings contain:

  • fossil fuel subsidies represent one of the biggest obstacles to a shift to a lower carbon growth trajectory by artificially keeping prices low, distorting energy choices and contributing to carbon emissions
  • while taxation and environmental pricing of fossil fuels external impacts are possible alternatives to subsidising clean energy, such a shift is politically difficult to implement
  • in terms of the environment, however, cutting fossil fuel subsidies would have clear benefits
  • in this sense, effective WTO rules on subsidies that support a massive scaling up of renewable energy supply would be a positive trade policy contribution to help mitigating climate change and fostering access to clean energy for all