Technical Discussion Series - Detox Development: Repurposing Environmentally Harmful Subsidies

Incentives that are harmful to nature conservation are an important underlying driver of environmental degradation. Eliminating, phasing out, or reforming harmful incentives is key to generating global environmental benefits. In addition, reforms of harmful incentives, including subsidies, and alignment of positive policies are essential for maximizing the impacts of GEF investments and in the reduction of the nature financing gap by enhancing domestic resource flow toward the investment required for nature conservation and the alignment of public and private investments.

This event shared the findings of a recently published World Bank report, Detox Development: Repurposing Environmentally Harmful Subsidies. The repot examines how subsidy reform can help safeguard the world’s foundational natural assets—clean air, land, and oceans. These assets are critical for human health and nutrition and underpin much of the global economy. But subsidies for fossil fuels, agriculture, and fisheries are driving the degradation of these assets and harming people, the planet, and economies. These subsidies exceed $7 trillion per year — or about 8 percent of global gross domestic product. This includes both explicit subsidies — which are direct public expenditures totaling about $1.25 trillion — and implicit subsidies — which measure the societal impacts of externalities and amount to more than $6 trillion.

As debt levels rise, countries must devise smarter, more efficient ways to use their scarce public resources. In this context, the report asks three overarching questions:

1. What is the magnitude of total subsidies in the natural resource space?
2. What are the impacts of these subsidies on equity, efficiency, and the environment, and what are the gains from reforming or eliminating them entirely?
3. How can governments reform, repurpose, or eliminate subsidies in ways that are sustainable and politically feasible?

This report and its findings are particularly relevant to the Global Environment Facility's advancing agenda on policy coherence and Target 18 of the Kunming-Montreal Biodiversity Framework, which aims to reduce harmful incentives by $500 billion per year by 2030.