Land-use change related to agriculture accounts for over 70% of tropical deforestation and roughly 25% of all GHG emissions. Land degradation affects 3.2 billion people and results in economic losses equivalent to 10% of annual global GDP. A major driver of these impacts is the widespread failure on the part of governments to implement green fiscal policies, e.g. reform of harmful subsidies, worth an average of USD 705 billion annually between 2016 and 2018 in the sector (OECD 2019).

Unsustainable agricultural practices and associated land-use change are contributing to deforestation, biodiversity loss, water insecurity, climate change and soil and water pollution and threatening the achievement of several SDGs, including SDG 2 (zero hunger), SDG 3 (health and well-being), SDG 8 (decent work and economic growth), SDG 12 (responsible consumption and production), SDG 13 (climate), SDG 14 (life on land) and SDG 15 (life below water).

Green fiscal policies such as reform of harmful subsidies, green taxes, fees and charges, and green subsidies and conditional transfers can support farmers in their efforts to reduce pollution and implement sustainable, resource-efficient and climate-resilient practices. As the largest global employer, green fiscal policies in the agricultural sector can have economy-wide implications and create powerful fiscal levers to drive the shift towards more sustainable agriculture and reduce agriculture-induced environmental stresses on land, biodiversity, and public health. Savings resulting from subsidy reform and revenues raised from green taxes can support direct payments for ecosystem restoration projects and agroecological farming, organic fertilizers, and efficient food production strategies (UNEP 2019).