Many subsidies harm biodiversity

Working with expert committees, the researchers analysed 102 subsidies, tax incentives and other financial instruments and assessed their effects on biodiversity. They looked not only at protected nature areas, but also at wider pressure factors such as changes in land and sea use, climate change, pollution and the use of natural resources. The overall picture is nuanced but clear. Subsidies that are explicitly aimed at nature management and restoration have positive effects, while many other subsidies and tax reductions have mixed or even negative impacts on biodiversity.

“What strikes us is that biodiversity often receives too little attention in subsidy policy”, says Monica van Alphen, researcher at Wageningen University & Research. “Subsidies are usually designed with economic or social objectives in mind. Their effects on nature and biodiversity are rarely taken into account.”

Nature and agriculture

At the Ministry of Agriculture, Fisheries, Food Security and Nature, subsidies for forest and nature management in particular show positive effects. Examples include tax incentives under the Nature Conservation Act and programmes for nature restoration and national parks. These schemes are directly aimed at conserving and restoring ecosystems and contribute to connected landscapes, habitats for plants and animals, and carbon storage in forests. At the same time, their budgets are relatively small.

In contrast, large agricultural subsidies tend to have mixed or predominantly negative impacts on biodiversity. A key example is the basic payment under the Common Agricultural Policy. This income support helps farmers financially, but is only weakly linked to ecological performance and therefore maintains existing pressures from land use. Fiscal incentives such as the reduced energy tax rate for greenhouse horticulture also stimulate energy use and increase pressure on biodiversity.

Water quality and infrastructure

Mixed assessments also dominate at other ministries. At the Ministry of Infrastructure and Water Management, subsidies for water quality and soil remediation are beneficial for biodiversity because they tackle pollution and help ecosystems recover. By contrast, the exemption from tap water tax for large-scale users has a negative effect, as it encourages water consumption and contributes to the desiccation of natural habitats. In mobility and infrastructure, subsidies for electric transport and emission reduction benefit the climate and air quality, while fossil fuel advantages and road expansion place additional pressure on biodiversity. The absence of excise duty and VAT on aviation is also harmful to biodiversity.

Subsidies aimed at the built environment, such as insulation and sustainability schemes for housing and public buildings, are often assessed as mixed but predominantly positive. They reduce fossil energy use, but can also cause local damage, for example through the loss of nesting and roosting sites for birds and bats or through increased use of raw materials. Subsidies for new construction more often score negatively, as building almost always involves additional land take, material use and emissions.

Fossil fuels and biodiversity

Exemptions and reductions in energy and coal taxes for industry lower the cost of fossil fuels and therefore encourage their use. These fossil fuel subsidies often harm the climate and, through climate change as a pressure factor, lead to biodiversity loss. “At the same time, without international coordination, phasing out these subsidies can also lead to leakage effects, where production shifts abroad and environmental pressure is simply relocated”, says Van Alphen.

Need for an integrated assessment

According to Van Alphen, the study shows that trade-offs are inevitable. “Subsidies serve social and economic interests. A measure can also be beneficial for the climate while being harmful to nature. That is why it is so important to assess subsidies in an integrated way and consciously weigh their effects against each other.”

The researchers conclude that biodiversity should receive greater attention from the very start when new national financial and fiscal instruments are developed. “If ministries take global, European and national commitments to a healthy natural environment seriously, financial schemes must be aligned with them. This means encouraging positive effects, phasing out harmful subsidies and reducing unintended negative impacts.”

“Subsidies shape behaviour”, says Van Alphen. “The key question is whether we want to continue using this policy instrument in ways that put pressure on biodiversity, or whether we want to deploy it to make biodiversity and the economy reinforce each other.”

More information

• Report (in Dutch): Beoordeling van de effecten van financiële en fiscale rijksmiddelen op biodiversiteit.

Text and images: Wageningen Social & Economic Research