Our common imperative for fiscal resilience and a nature-positive economy.
Why It Matters
The global economy is deeply reliant on nature—but the degradation of natural capital is accelerating. Unsustainable practices in agriculture are often incentivized by harmful subsidies and are a major driver of this trend. The financial community are not just witnesses to this degradation—they are financially exposed to its consequences. Ministries of Finance hold the levers to drive a paradigm shift. Repurposing agricultural subsidies offers a fiscally sound, socially equitable, and economically strategic pathway to reshape food systems, strengthen public finances, and safeguard natural assets essential for long-term prosperity.
A growing fiscal threat: nature loss and economic risk
Governments allocate more than USD 800 billion each year to direct support for agricultural producers: this is a figure that continues to rise. However, an estimated 87% of this support may be distorting agricultural markets and contributing to environmental degradation. For instance, input subsidies create a fiscal double burden: near-term budget expenditures for rising input costs, followed by long-term revenue losses from degraded systems and new costs for environmental remediation.
As a result, the majority of public funding in this sector perpetuates inefficient, inequitable, and environmentally damaging practices. Conventional subsidies are often misaligned with national climate and biodiversity objectives, representing a poor use of public resources.
The fiscal and macroeconomic consequences are significant for all actors in the value chain. Firstly, while agricultural subsidies can boost productivity and incomes in the short term, their overuse often leads to land degradation and negative impacts to productivity over time which generates revenue volatility. Secondly, as agricultural practices become less sustainable, governments face mounting costs associated with the response to environmental damage, natural disasters, and the health impacts of degraded ecosystems. Lastly, environmental degradation and climate-related events heighten financial risks, affecting sovereign creditworthiness and the stability of financial systems. This can ultimately reduce agricultural profitability and, consequently, government revenues from the sector.
Repurpose subsidies to align with national objectives
Repurposing agricultural subsidies can generate substantial benefits across multiple sectors. Firstly, reforming incentives is a critical step for Ministries of Finance to ensure that public spending is aligned with long-term macro-objectives. Secondly, by identifying and phasing out harmful agricultural subsidies, governments have the opportunity to redirect support toward more sustainable and profitable food systems. Finally, management of public risk and redirecting public investments also sends positive signals to sustainable private finance investments.
A Finance-Led Action Agenda: How Ministries of Finance Can Lead, and How UNEP Can Help
First, MoFs can recognize the risks and opportunities of repurposing.
The finance community has the opportunity take the lead in identifying and addressing nature-related fiscal and macroeconomic risks, as these pose direct threats to national budgets, public investment strategies, and long-term economic stability. Harmful agricultural subsidies not only undermine climate, biodiversity, and health goals but they also perpetuate inefficiencies and fiscal vulnerabilities. By recognizing these risks and building awareness across government, Ministries can unlock a more strategic and sustainable use of public funds. Capacity-building workshops, technical support, and access to global best practices, shared through platforms such as the Coalition of Finance Ministers for Climate Action and the Partnership for Action on Green Economy (PAGE), equip Ministries with the insights needed to lead this transformation confidently and effectively.
Secondly, repurposing can multiply impact in a very substantial way.
Reforming incentives is a critical step for MoFs to ensure that public spending aligns with long-term economic, environmental, and social goals. By identifying and phasing out harmful agricultural subsidies, governments can redirect support toward more sustainable, productive, and equitable food systems—reducing environmental degradation, improving health outcomes, and increasing the efficiency of public finances. UNEP and its partners like GIZ can provide vital support throughout this process, offering technical expertise for mapping subsidy flows and assessing their environmental impacts. Through cost-benefit analyses and policy support, PAGE can support ministries to internalise the trade-offs and opportunities of reform. Moreover, this international coalition of partners can support constructive dialogue between finance and agriculture ministries, leveraging insights from its experts’ roster to ensure that reforms are practical, coherent, and grounded in evidence.
Thirdly, this allows to reflect on integrating nature into economy-wide decision-making.
Phasing out harmful agricultural subsidies presents an opportunity to improve ecosystem health, thereby reducing the fiscal and financial risks associated with environmental degradation. As degraded natural resources can lead to increased public and private spending on disaster response, health care, social benefits, and infrastructure repair, aligning subsidy reform with environmental objectives helps safeguard both budgets and the natural assets that underpin economic prosperity. Sustainable budgeting approaches (SBA) can play a pivotal role in this process by enabling Ministries of Finance to systematically identify, track, and assess the fiscal impacts of agricultural subsidies. By integrating the monitoring of subsidy flows and their environmental consequences into national budgeting processes, SBA gives the tools to finance ministries with the information needed to design policies that are fiscally responsible and environmentally sustainable.
Required citation:
GFPN. 2025. Repurposing Agricultural Subsidies: Our Common Imperative for Fiscal Resilience and a Nature-Positive Economy. Geneva: Green Fiscal Policy Network.
For further information, please contact the relevant focal point per organization:
UN Environment Programme – joy.kim@un.org
Green Fiscal Policy Network – abhimanyu.dadu@un.org
PAGE – luciana.fontesdemeira@un.org
GIZ – christina.poser@giz.de
Production of this policy brief was supported with financial contribution from GIZ and PAGE. The views expressed herein do not necessarily reflect those of the donors or partner organizations.
