Subsidies and the Environment

Robin, Sarah, Rob Wolcott, and Carlos E. Quintela. "Perverse Subsidies and the Implications of Biodiversity: a Review of Recent Findings and the Status of Policy Reforms." Sept. 2003. 5th World Parks Congress: Sustainable Finance Stream.

<http://www.conservationfinance.org/WPC/WPC_documents/Overview_PanB_Wolcott_v2.pdf>.

                Subsidies are a significant cause of diminishing conservation efforts.  Subsidies are executed in many different nations throughout the world which can cause production and consumption behavior to intensify biodiversity destruction and frankly discourage effective conservation.  According to Steenblik, “Global spending on subsidies is estimated at a combined $500 billion a year for agriculture, fishing, logging, energy production, and water.”  Removing these subsidies has a potential to decrease the rate of biodiversity being lost, promote sustainable resource usage, and create economic activities that promote conservation.  Reallocating a minor fraction of total expenditures on subsidies would cover the funding needs of an effective protected area network.  (James) 

A subsidy is defined, according to Barg in 1996 as, “a government-directed, market distorting intervention which decreases the cost of producing a specific good or service or increases the price which may be charged for it.”  Subsidies are given to meet a variety of expectations and objectives.  Tax subsidies and direct expenditures are used to increase productively and have trade expansion increase economic gains.  These are usually given during times of hardship in the economy.  Governments may also provide subsidies to stabilize production levels over a specific time frame and in turn, have goods and services produced at prices below the average production costs. 

The benefits of subsidies provide short term benefits, however they eventually lead to economic inefficiency and prevent environmental costs from being internalized. (Robin) 

According to de Moor in 1997, “Subsidies create distortions that cause prices to reflect neither the resource scarcity nor the cost of consumption and production.  Subsidies that are targeted at specific economic sectors “..Divert resources from more productive to less productive uses, interfere with price signals, and in so doing reduce efficiency: at best they are a waste of money,” according to Robin and Steenblik.  In addition, the subsidies damage the environment and the costs of the damages are given to society.  According to OECD, “while the impacts on biodiversity arising from subsidies are largely the result of unintended consequences, they nonetheless need to be better accounted for by policy makers.” 

Governments around the world spend significant amounts of money on subsidies, and the money usually comes from the public.  According to Robin, these funds could be used in other areas that would benefit larger segments of society rather than specific interest groups.  Subsidized spending is especially inefficient when the subsidies are not meeting their specified goals, which happens more often than one would think.  Subsidies also create unfair trade with the third world countries.  This in turn causes further disparity between the developed countries and the developing countries. 

The government should end subsidies that they are currently allocating funds to and use the money on more projects that would benefit society more.  They need to focus on the environmental aspects and how to repair the biodiversity damages caused by previous subsidizing.