Presentation by Katia Karousakis, Dimitris Diakosavvas, Roger Martini at the BIOFIN webinar, March 2017

1. INSIGHTS ON THE REFORM AND GREENING
OF ENVIRONMENTALLY HARMFUL SUBSIDIES
AND
OECD METHODS FOR MEASURING GOVERNMENT
SUPPORT TO AGRICULTURE AND TO FISHERIES
Katia Karousakis (ENV Biodiversity, katia.karousakis@oecd.org)
Dimitris Diakosavvas (TAD Agriculture, dimitris.diakosavvas@oecd.org)
Roger Martini (TAD Fisheries, roger.martini@oecd.org)
BIOFIN webinar, 29 March 2017

2. • Context
• Country examples
• Relevant OECD databases
• Measuring support to agriculture
• Measuring support to fisheries
Overview

3. • Aichi Biodiversity Target 3 on Incentives
– By 2020, at the latest, incentives, including subsidies, harmful to biodiversity are
eliminated, phased out or reformed in order to minimize or avoid negative impacts,
and positive incentives for the conservation and sustainable use of biodiversity are
developed and applied..
• Many NBSAPs without associated national targets for Aichi Target 3
(CBD COP/13/8/rev1).
• Why it is important
The diverse impacts of subsidies
Context
Domestic Global
Economic Price
Production levels
Budget
Trade
Competitiveness
Development
Environmental Pollution levels
Resource use
Biodiversity loss
Climate change
Social Income distribution
Employment
Equity
Living standards
Source: OECD (2006) Subsidy Reform and Sustainable Development

4. Subsidies to activities with significant
environmental footprints are large, and costly
• Fossil fuel production and consumption: at least USD 400 billion per
year, globally. (Varies significantly, in line with int. energy prices)
• Water use and treatment: around USD 450 billion globally in 2012,
according to the IMF
• Agricultural production: around USD 100 billion in support considered
potentially environmentally harmful provided by OECD countries in 2015
• Fisheries: estimates vary, from almost USD 7 billion a year for the OECD
to USD 35 billion (including fuel subsidies) a year globally
• Others: subsidies that favour the extraction of primary (non-energy)
minerals and metals production, and for activities that indirectly lead to
increased pressure on the environment (e.g., tax policies that encourage the
provision of company cars and fuel credit cards in lieu of cash)
• Finance for biodiversity (i.e. for conservation and sustainable use):
estimated at approx. USD 50 billion a year, globally

5. • Fossil fuel production and consumption:
– Production: land degradation (coal and petroleum), spills (petroleum),
methane emissions (natural gas, deep-mined coal)
– Consumption: CO2 emissions, sulphur and particulate emissions
• Water use and treatment: over-use (depleting aquifers, reducing flows
in some rivers); encourages investment in unsustainable uses
• Agricultural production and aquaculture: habitat destruction, land
degradation, nutrient pollution
• Marine capture fisheries: over-fishing and associated externalities from
fishing; damaging practices that are facilitated by low-cost fuel
• Non-energy minerals and metals production: land degradation,
water pollution; discouragement of re-use and recycling
Potential environmental problems that
are exacerbated by subsidies are many

6. Steps to reforming environmentally harmful subsidies:
• Admitting that certain subsidies might be causing problems
• Having good information on the size and nature of the subsidies
• Understanding the effects of subsidies, and their reform, on economic, social, and
environmental indicators
• Learning from the lessons of past examples of reform
• Developing realistic reform plans that address the needs of the poorest
• Leveraging international collective action to lend legitimacy to domestic action
 But few existing examples to identify EHS at national level
Exceptions include France and Germany
• French report on public support harmful to biodiversity: http://archives.strategie.gouv.fr/cas/en/content/report-public-support-
harmful-biodiversity.html
• German report on environmentally harmful subsidies:
https://www.umweltbundesamt.de/sites/default/files/medien/376/publikationen/environmentally_harmful_subsidies_in_germany_2
014.pdf
The need to identify, track and monitor

7. Iceland – Fisheries subsidy reform (see OECD, forthcoming 2017; Policy Highlights available here)
New Zealand – Fisheries subsidy removal in 1990’s in response to fiscal pressure (see OECD 2007),
and agricultural subsidy reform in 1980’s (see OECD, 2017)
Norway – Fisheries subsidies reduction by 80% from USD 150 million to USD 30 million between
1981 and 1994, relieving pressure on marine ecosystems and reducing burden on government coffers
(see OECD, 2013)
Switzerland – Agriculture policy reform in 2014 including to address biodiversity concerns (see
OECD, forthcoming 2017; Policy Highlights available here)
Mexico – Fiscal reform: excise tax on pesticides in 2014 (see OECD, 2015)
• Increasing rates according with the acute toxicity level of each pesticide
• Expected collection of tax was approx USD 14 millions in 2014, and 30 million from 2015. In the
first quarter of 2014, the collection was approx USD 4 million
Brazil – ICMS-Ecologico. Ecological indicators used to allocate revenue from tax on goods and
services (see OECD, 2013)
India – reform of subsidy on chemical fertiliser (see CBD, 2011)
Indonesia – removal of pesticide subsidy – yet three years later had record levels of rice production
and savings of over USD 100 million (see CBD, 2011)
Examples on reform and greening of
harmful subsidies…

8. Overcoming barriers to effective biodiversity policy reform: insights
and lessons learned
• With case studies on French tax on pesticides; Swiss agricultural
policy reform; EU payments under the Fisheries Partnership
Agreements (FPAs) for marine conservation in Mauritania and
Guinea Bissau; Icelandic ITQ for fisheries
The Political Economy of Biodiversity
Policy Reform
Lessons:
1. Seize opportunities to advance reform: from crisis to public concern
2. Build alliances between economic and environmental interests
3. Devise targeted measures to address potential impacts on
competitiveness and income distribution
4. Build robust evidence base to support reform (e.g. costs and benefits
including for environment and human health)
5. Encourage stakeholder engagement to ensure broad and durable
support
6. Consolidate gains to ensure sustained reforms over time

9. • Support to agriculture
www.oecd.org/agriculture/agricultural-
policies/producerandconsumersupportestimatesdatabase.htm
• Support to fisheries
http://dotstat.oecd.org/Index.aspx?DataSetCode=FISH_FSE
• Fossil fuel subsidies
www.oecd.org/site/tadffss/data/
• Policy instruments on the environment
oe.cd/pine
Relevant OECD databases

10. 10
Policy Instruments for the Environment
database – what is it?
Policy Instruments covered:
• Environmentally-related taxes, fees and
charges
• Tradable permit systems
• Environmentally-motivated subsidies
• Deposit refund schemes
• Voluntary approaches
Environmental domains:
• Biodiversity
• Water pollution
• Air pollution
• Climate change
• Land contamination
• Waste management
• Natural resources
management
• Energy efficiency
• Transport
• Land management
• Noise
Data on more than
2900 instruments
58 countries
Information on
instruments and
revenue supplied by
countries
All countries
welcome to
provide
information
oe.cd/pine

11. Revenue from environmentally related taxes
in % GDP, 2014
USD 6 billion per year = Revenue from biodiversity-relevant taxes in
OECD countries
 only 0.7% of the total revenue from environmentally relevant taxes
oe.cd/pine

12. Measuring agricultural support
• OECD has been calculating support indicators since the mid-1980s
• A unique source of reference
• Provide a comprehensive account of policy transfers to agriculture
• Internationally comparable measurement of support to agriculture
• Consistent approach over time and across countries
• Estimates are updated annually
• Methodology is regularly reviewed to reflect policy evolution
• Covers OECD and major emerging economies - 50 countries – most
of global agricultural value added:
 OECD countries (EU as a whole)
 Brazil, China, Colombia, Indonesia, Kazakhstan, Russia, S. Africa, Ukraine,
Vietnam
12

13. Classification of policies
• It is important for policy evaluation to know “how”
support is provided
• Support delivered in different ways can have different
effects on production, trade, farm income, environment
• PSE classification distinguishes different ways to deliver
support:
decoupling of support from commodity production
inputs, etc.
• Provides data for analysis of policy impacts

14. Farm support ranked by potential
environmental impact
• Most harmful
 Market price support
 Support without
imposing environmental
constraints on farming
practices:
commodity output
variable input use (e.g.
fertiliser subsidies)
• Least harmful
• Support that imposes
environmental constraints
on farming practices:
non-commodity criteria
fixed capital formation
farm services
historical entitlements, etc.
14

15. -15
-5
5
15
25
35
1995-97
2013-15
%
Declining trends and wide variations of
support to farmers across countries …
Total = $585 bill. 2013-15
OECD = $238 bill.

16. Support to producers in OECD countries and
emerging economies is converging
(% PSE)
Source: OECD (2015), "Producer and Consumer Support Estimates", OECD Agriculture statistics
(database), http://dx.doi.org/10.1787/agr-pcse-data-en.
-5
0
5
10
15
20
25
30
35
40
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
%
Grand Total OECD 9 emerging economies

17. Important changes in the structure of support
to producers
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Support based on commodity output
Support based on commodity ouput Payments based on input use
Other payments Payments not requiring commodity production

18. Trends in potentially environmentally
harmful agricultural support
Source: OECD Secretariat calculations based on OECD PSE/CSE database, 2016.
OECD agricultural support to farmers by potential environmental impact
0
50000
100000
150000
200000
250000
300000
USD mn Most harmful Least harmful Other
Potentially most environmentally harmful support

19. Measuring government support to
fisheries
Access to other EEZs
Infrastructure
Marketing and promotion
Community support
Education and training
Research and Development
Management of Resources
Variable costs
Fixed costs
Income
Capacity reduction
Transfers to individuals General transfers
Most distorting form of support

20. Evolution of fisheries support estimate,
% of value of landings
-5
0
5
10
15
20
25
30
2009 2010 2011 2012 2013 2014 2015
Total FSE GENERAL services
Transfers to INDIVIDUAL fishers Cost Recovery CHARGES%

21. Management services are the largest
proportion consistently across countriesTUR
IRL
MEX
SWE
SVN
CAN
DNK
NLD
GRC
PRT
ITA
NOR
EST
ESP
OECD
KOR
LVA
BEL
FRA
USA
GBR
DEU
CZE
JPN
AUS
NZL
ISL
POL
%

22. Some evidence of progress in reducing
and re-instrumenting fisheries support
SVN
GRC
FRA ISL
BEL
ITA
ESP
MEX
OECD
TUR
CAN
USA
EST
PRT
NLD
DNK
-35
-30
-25
-20
-15
-10
-5
0
5
10
-50 -40 -30 -20 -10 0 10 20 30
%GSSE
%TIF
Average annual changes in
the absolute contributions of
TIF and GSSE, 2009-2015

23. • OECD (2017), The Political Economy of Biodiversity Policy Reform
Policy Highlights available here
• OECD (2017), OECD Environmental Performance Review – New Zealand
• OECD (2106), Agricultural Policy Monitoring and Evaluation 2016
• OECD (2105), OECD Economic Surveys - Mexico
• OECD (2013), chapter 3 ‘Environmental Fiscal Reform’ in Scaling Up Finance Mechanisms for Biodiversity
• OECD (2013), Policy Instruments for Green Growth in Agriculture
• OECD (2011), Fisheries Policy Reform – National Experiences
• OECD (2007), Subsidy Reform and Sustainable Development: Political economy aspects
• OECD (2006), Subsidy Reform and Sustainable Development: Economic, environmental and social aspects
• OECD (2005), Environmental Fiscal Reform for Poverty Reduction
• OECD new work starting now: Pathways to Fisheries Policy Reform
For more information visit:
http://www.oecd.org/environment/resources/biodiversity.htm
http://www.oecd.org/environment/resources/mainstream-biodiversity/
Relevant OECD work