Why repurposing harmful subsidies is our main lever for biodiversity funding

Women carrying manioc leaves in Yangambi, DRC. Photo by Axel Fassio / CIFOR-ICRAF

The world is facing a biodiversity crisis of unprecedented proportions. Over a million plant and animal species are teetering on the brink of extinction and the intricate web of life that supports our planet and our well-being is unravelling at an alarming rate. Extinction rates are estimated to be 100 to 1,000 times higher than natural background levels. Forests, havens for a vast majority of terrestrial biodiversity, are at the epicentre of this crisis. From the Amazon to the Congo Basin to Southeast Asia, vital ecosystems are vanishing due to deforestation and degradation, driven by unsustainable human activities.

In December 2022, the global community adopted the Kunming-Montreal Global Biodiversity Framework—a landmark agreement setting ambitious targets, including the “30×30” goal to conserve 30% of Earth’s land and sea and restore 30% of its degraded ecosystems by 2030. But ambition without resources remains an empty promise. Estimates reveal a staggering—and likely conservative—annual biodiversity funding gap of USD 700 billion. This is the difference between what we currently spend and what’s needed to halt and reverse nature loss.

While discussions often focus on mobilizing new money to fill this chasm, a much larger and more inconvenient truth lies in plain sight: perverse subsidies! Every year, we spend trillions actively harming the environment, including our precious forests. The real challenge, and indeed the greatest opportunity, isn’t just finding more money for nature—it’s stopping the financial nonsense that fuels its destruction.

Environmentally harmful subsidies (EHS) are government incentives—direct payments, tax breaks and price supports—that, often (let us be generous) unintentionally, incentivize unsustainable production or consumption patterns. They deplete natural resources, degrade ecosystems, distort markets, misallocate resources and create an uneven playing field where sustainable practices struggle to compete.

The scale of this misaligned finance is almost incomprehensible. Recent research indicates that in 2024, global EHS amounted to approximately USD 2.6 trillion per year – equivalent to 2.5% of global GDP and an increase of USD 800 billion since 2022. If we widen the scope to include all nature-negative finance flows from both public and private sectors, the figure balloons to nearly USD 7 trillion annually. That’s nearly two orders of magnitude higher than current positive global biodiversity finance, estimated between USD 124-143 billion per year.

The Kunming-Montreal GBF itself acknowledges this problem in Target 18, which calls for identifying harmful incentives by 2025 and eliminating, phasing out, or reforming at least USD 500 billion per year by 2030. While that is a significant sum, this $500 billion represents just a fraction of the total harmful flows, underscoring the depth of the challenge but also the opportunities.

How harmful subsidies impact forests (and other ecosystems)

• Agriculture: This sector receives massive government support, with estimates around USD 500-600 billion annually being potentially harmful to the environment. These subsidies often incentivize the overuse of chemical fertilizers and pesticides, which pollute waterways and degrade soil health critical for forest ecosystems. They can also promote monoculture farming and encourage the expansion of agricultural frontiers into forests and other natural habitats, directly causing deforestation and habitat loss. For example, in Nepal, fertilizer subsidies led to unsustainable farming practices and encroachment on forest areas. Similarly, credit subsidies for coffee in Viet Nam resulted in plantations expanding into forestland.
• Fisheries: While seemingly distant from terrestrial forests, harmful fisheries subsidies, estimated between USD22 billion and USD35 billion annually, contribute to overfishing and marine ecosystem degradation. This has knock-on effects for coastal forests like mangroves, which are vital fish nurseries and protect coastlines. The vast majority of these subsidies support large industrial fleets, often at the expense of sustainable small-scale fishers.
• Fossil fuels: This is arguably the largest and most damaging category. Explicit subsidies (keeping prices below supply costs) for fossil fuels reached USD1.3 trillion in 2022. However, if we include implicit subsidies – the unpriced environmental costs like climate change impacts and air pollution – the total skyrockets to an astounding USD7 trillion in 2022. These subsidies directly fuel climate change, which in turn devastates forests through increased wildfires, droughts, pest outbreaks, and altered growth patterns. They also create powerful disincentives for transitioning to renewable energy, locking us into a high-carbon pathway detrimental to forests and biodiversity.

This colossal misdirection of public funds means we are essentially paying to destroy the very ecosystems our survival depends on. It’s like trying to fill a bathtub with the drain wide open or, more dramatically, like the Danaïd’s bottomless barrel (we will end up crying).

More than “new money”: The power of repurposing

The sheer scale of harmful subsidies means their reform and repurposing isn’t just an option for biodiversity finance; it’s potentially the largest single source available. This fundamentally shifts the narrative from a primary focus on “finding new money” to the more critical task of “redirecting existing, harmful money.”

Prioritizing this “great redirection” offers a crucial “double dividend”:

1. It stops the bleeding: By removing or reforming these subsidies, we directly curtail the public financing of activities that degrade forests, pollute ecosystems and drive species to extinction.
2. It frees up vast resources: The billions, even trillions, saved can then be repurposed towards positive investments. These funds can support biodiversity conservation, sustainable forest management, ecosystem restoration, climate action and a just transition for communities affected by the reforms.

Imagine redirecting even a fraction of the $2.6 trillion in annual EHS towards planting trees, restoring degraded lands, supporting community-led conservation, or investing in sustainable agricultural practices that reduce pressure on forests. The impact would be transformative.

The benefits extend beyond just finance. Reforming distorting subsidies can lead to:

• Improved economic efficiency: Markets can function more effectively, rewarding sustainable businesses rather than those propped up by harmful incentives.
• Environmental recovery: Reduced pollution, healthier soils and waterways, lower greenhouse gas emissions and more resilient forest ecosystems.
• Social equity: While reforms need careful management to avoid negative impacts on vulnerable groups, the fiscal space created can fund targeted social safety nets and support for a just transition. Indonesia’s experience with removing pesticide subsidies in the 1980s, for instance, halved pesticide applications, reduced negative biodiversity impacts, and generated fiscal savings, alongside an Integrated Pest Management program that benefited farmers.

The main challenge isn’t technical or economic; it’s political. Vested interests often resist change, and there are legitimate concerns about adjustment costs. However, strategies like phased implementation, transparent stakeholder engagement, and targeted compensatory measures can overcome these hurdles.

What about other funding tools? A complementary role

While subsidy reform holds the greatest potential, other financing modalities can play a valuable complementary role in funding forest conservation and biodiversity:

• Debt-for-Nature Swaps (DfNS): These involve restructuring a developing country’s debt, with an agreement that a portion of the relief is invested in conservation. While complex and requiring careful due diligence, DfNS can provide long-term funding, especially for nations with high debt and rich biodiversity.
• Biodiversity credits: This is an emerging market where projects delivering verified positive outcomes for nature can generate credits purchased by entities wishing to invest in biodiversity. The market is nascent, with global spending on mandatory offsetting and voluntary credits recently estimated at $11.7 billion, though most comes from compliance schemes. High-integrity principles are crucial to ensure these credits deliver real benefits, avoid greenwashing, and ensure equity for Indigenous Peoples and Local Communities (IPLCs).
• Carbon credits from Nature-based Solutions (NbS): The voluntary carbon market (VCM) is already channelling funds to projects like afforestation, reforestation, and avoided deforestation, which sequester carbon and can offer biodiversity co-benefits. Nature-based projects accounted for 80% of the $18 billion raised in the VCM between 2021 and mid-2023. However, concerns about additionality, permanence and the actual quantification of biodiversity benefits persist. Robust standards and MRV (Monitoring, Reporting, and Verification) are essential.
• The Global Biodiversity Framework Fund (GBFF): Established under the Global Environment Facility (GEF), this fund aims to support GBF implementation, it is abunded by classic public money with a novel mechanism to potentially receive contributions from industries.

These tools can contribute, but they cannot replace the transformative impact of redirecting the trillions currently flowing towards harmful activities. Their success also often depends on the same principles of integrity, transparency, and equity that must underpin subsidy reform.

Securing a nature-positive future, with thriving forests at its heart, demands a pragmatic and politically astute approach.

1. Prioritize and accelerate subsidy reform (Target 18): This must be the cornerstone of our global biodiversity finance strategy. Governments need to urgently identify harmful subsidies by 2025 and develop clear, time-bound plans to reform or eliminate them, starting with the most damaging ones. The $500 billion annual reduction target is a floor, not a ceiling.
2. Ensure a just transition: Subsidy reform must be designed and implemented in a way that is fair and equitable. This means engaging with affected communities, including farmers and forest-dependent people, and providing targeted support, such as social safety nets or assistance for transitioning to sustainable livelihoods. The goal is not to penalize, but to redirect support towards practices that benefit both people and nature.
3. Strengthen international cooperation: Developed countries must meet their commitments to increase financial flows to developing nations, which host a disproportionate share of global biodiversity. Technical assistance for subsidy reform and accessing new finance mechanisms is also crucial. For issues such as fisheries subsidies or agricultural support that distort global markets, coordinated international action is vital.
4. Align private sector finance with nature: The private sector, including financial institutions, must move beyond niche investments and integrate biodiversity considerations across all operations. This includes adopting frameworks considering carbon markets with a biodiversity angle, setting science-based targets for nature, and divesting from activities that drive deforestation and biodiversity loss.
5. Empower Indigenous Peoples and local communities (IPLCs): IPLCs are the frontline stewards of many of the world’s remaining forests and biodiversity hotspots. Their rights, including land tenure and Free, Prior and Informed Consent (FPIC), must be secured. Financial mechanisms, including those resulting from subsidy reform or new credit markets, must ensure equitable benefit-sharing and direct access to finance for IPLC-led conservation initiatives. The GBF’s recognition of a dedicated subsidiary body for IPLCs is a positive step.
6. Robust national planning and monitoring: National Biodiversity Strategy and Action Plans (NBSAPs) are key to implementing the GBF. These must include clear, costed national finance plans detailing how resources will be mobilized, including specific strategies for subsidy reform and the creation of positive incentives for forest conservation and sustainable land use. Enhanced transparency and accountability in tracking all biodiversity-related financial flows are essential.

It is now time to stop financing forest and nature destruction!

The biodiversity crisis, with forests at its core, demands a radical shift in how we value and finance nature. While the USD700 billion annual funding gap seems daunting, the reality is that we are already spending far more in ways that undermine our planet’s health.

The most powerful financial lever at our disposal is not new money, but redirecting the trillions currently fuelling environmental destruction through harmful subsidies. By confronting and reforming these perverse incentives in agriculture, fossil fuels and fisheries, we can unlock vast resources for conservation, sustainable forest management and a just transition.

This “great redirection” will require governments’ political courage, responsible action from the private sector, diligent research and advocacy from organizations like CIFOR-ICRAF and its partners and the empowered participation of Indigenous Peoples and local communities. 

It’s time to flip the script on biodiversity finance – to stop paying for the destruction of our forests and start investing in a future where both people and nature can thrive. The health of our forests, and indeed our planet, depends on it.