This article is part of a Synergies series on reviving multilateralism curated by TESS titled From Vision to Action on Trade and Sustainability at the WTO. Any views and opinions expressed are those of the author(s) and do not necessarily reflect those of TESS or any of its partner organizations or funders.

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Agriculture is at a critical juncture, where today’s decisions will significantly impact the future of our planet and its inhabitants. As governments and stakeholders work to enhance sustainability in the sector, subsidies are a key focus due to their clear influence on international production, consumption patterns, and environmental impacts.

Of the nearly $540 billion spent annually on global producer support, the FAO, UNDP, and UNEP estimate that 87% are price distorting and harmful to the environment and health. These practices not only perpetuate unsustainable farming methods but also lead to biodiversity loss, soil degradation, water pollution, and greenhouse gas emissions. The consequences of these actions reverberate across ecosystems, endangering the foundation of agriculture and, ultimately, global food security.

On the international stage, the need to tackle the environmental impact of agricultural subsidies has been reaffirmed at the highest political level. Target 18 of the Kunming-Montreal Global Biodiversity Framework, adopted in 2022, which calls on governments to address subsidies harmful to biodiversity and reduce them by at least $500 billion per year by 2030, signals a collective need for decisive action.

At the World Trade Organization (WTO), negotiations on agricultural subsidies have focused on reducing substantially and progressively the most distorting forms of domestic support, including the large entitlement granted to the biggest subsidizers during the Uruguay Round, and encouraging a shift towards less production and trade distorting forms of support as defined in the different coloured boxes of the WTO Agreement on Agriculture.

Comprehensive reform has so far proven elusive in the WTO. While these deliberations will continue, a critical gap relates to the fact that existing trade rules and ongoing negotiations essentially focus on the production and trade distorting effects of subsidies, not on their sustainability impact. This gap could be addressed both under ongoing negotiations in the special session of the Committee on Agriculture and supported by dialogue underway in the work stream on subsidies of the Trade and Environmental Sustainability Structured Discussions (TESSD) cosponsored by over 75 WTO members.

While there is growing recognition of the need to reform global agricultural subsidies to align the sector with the Kunming-Montreal Global Biodiversity Framework and the Sustainable Development Goals, a key conceptual and technical challenge relates to defining what constitute environmentally harmful agricultural subsidies.

Since the actual environmental impact of a particular subsidy scheme is highly context specific, identifying ex ante the environmental effect of particular forms of support remains largely hazardous. A second challenge relates to building political support for such reform among a critical mass of countries. So far, the debate has focused mostly on repurposing existing support measures through domestic reform. Collective approaches, however, would avoid the free-rider problem and are better suited to address global environmental challenges compared to a patchwork of fragmented actions.

Looking ahead, WTO members can play a key role in addressing both challenges by fostering an open dialogue and cooperation on feasible and effective measures to tackle environmentally harmful subsidies and promote sustainable agriculture. As noted above, an approach associating, ex ante, certain environmental effects with different forms of support (e.g. support based on outputs, input use or income, general services, or consumer support) is unlikely to provide the necessary granularity to single out environmentally harmful subsidies.

A possible approach to overcome this challenge is to shift the focus from the type of subsidies to the specific agricultural practices, production methods, or specific situations associated with clearly negative environmental impacts. In other words, instead of starting from the type of subsidies, one would rather identify those harmful agricultural practices that from an environmental perspective should not be incentivized or supported via subsidies regardless of the form that such support takes.

This nuanced perspective would define ex ante a set of circumstances and possibly thresholds where agriculture should not receive support based on environmental sustainability considerations, regardless of subsidy categorization. This could then be used as a basis to design new international disciplines in the form of prohibited subsidies or enhanced transparency obligations. If this is not possible, WTO members could also use this list to design guidelines for the granting of support or to undertake voluntary commitments or pledges not to grant support to these practices.

The approach is not completely new. WTO negotiations on fisheries subsidies have already highlighted the difficulty of establishing a list of harmful subsidies (e.g. for fuel, boat construction, or equipment) that contribute to overcapacity or overfishing and therefore should be prohibited. This is because the impact of subsidies on fish resources depends on a number of other factors including the extent to which effective fisheries management regimes are in place.

The current WTO Agreement on Fisheries Subsidies, adopted in 2022, partially overcomes this difficulty by focusing on certain fishing practices or conditions where fishing and fishing-related activities should not be subsidized regardless of the type of support. It provides, for example, that subsidies to illegal, unreported, and unregulated fishing shall be prohibited. Similarly, any subsidies for fishing and fishing-related activities of stocks that are already overfished or that take place in the unregulated high sea shall be prohibited.

In spite of differences between agriculture and fisheries, moving away from the traditional classification of subsidies—which was designed to reflect the trade and production effect of subsidies, not their environmental effect—makes sense in both cases. The focus should be on the production conditions, practices, or methods that should not be incentivized through subsidies. This not only offers more granularity but also makes more sense from an environmental perspective.

In practical terms, a first step in pursuing such an outcome-based approach would be to define a set of priority environmental concerns to be addressed (e.g. greenhouse gas emissions, biodiversity loss, water scarcity, soil degradation, or chemical contamination).

The next step would be to identify potentially harmful agricultural practices affecting these environmental priorities. This would imply, for example, identifying a range of biodiversity impacts or greenhouse gas emissions driven by or closely associated with certain agriculture practices or production methods.

The analysis could be further refined through additional layers, highlighting the specific circumstances or thresholds making such practices particularly harmful from an environmental perspective or possible trade-offs between different environmental objectives. For example, while mechanical tillage may generally have negative environmental impacts like pesticide and nutrient runoff, soil erosion, or loss of soil organic carbon, such impacts may be exacerbated under certain agro-ecological conditions or depending on the time of the year when this is done.

Finally, should this approach ultimately lead to a negative list to be used as the basis for new disciplines or even voluntary commitments, a third aspect would consist in reflecting the specific concerns and conditions prevailing in developing countries, in particular the least developed or small island developing states. This should not only recognize possible trade-offs between environmental objectives and other critical economic and social policy objectives central to sustainable development, including rural development and food or livelihood security, but also the need to reflect principles of international law relevant to the environment—such as the principles of equity, sustainable development, and common but differentiated responsibilities and respective capabilities—in the light of different national circumstances.

Building on existing experience at the WTO with special and differential treatment provisions for developing countries, this could be addressed in various ways, including through exemptions, flexibilities, or transition periods for countries at different levels of development and faced with different vulnerabilities or for different types of agriculture (e.g. low-income or resource-poor producers). Any eventual disciplines or guidelines would need to include elements related to transparency and also international cooperation, recognizing the challenges some developing countries may face in reducing subsidies, in the form of adjustment support such as technical assistance and capacity building to assist the phase-down or phase-out process.

Overall, by fostering an open dialogue and inclusive cooperation on this critical issue of environmentally harmful agricultural subsidies, the WTO can catalyse momentum towards a more sustainable and equitable global agricultural system.

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Christophe Bellmann is Head of Policy Analysis and Strategy, Forum on Trade, Environment, & the SDGs (TESS).

Clara Brandi is Head of Programme, Transformation of Economic and Social Systems, German Institute of Development and Sustainability (IDOS).

Umberto Celli Junior is Professor of International Law, University of São Paulo.

Carolyn Deere Birkbeck is Executive Director of the Forum on Trade, Environment, & the SDGs (TESS).

Peter Draper is Executive Director, Institute for International Trade, University of Adelaide.

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Synergies by TESS is a blog dedicated to promoting inclusive policy dialogue at the intersection of trade, environment, and sustainable development, drawing on perspectives from a range of experts from around the globe. The editor is Fabrice Lehmann.

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