UNEP study on the effects of taxes and subsidies on pesticides and fertilizers

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With the world population expected to reach almost 9.7 billion by 2050, a key question is how to sustainably improve agricultural productivity to meet increasing demand for food. Historically, pesticides and fertilizers have been perceived as key agricultural inputs, capable of generating and maintaining high yields from available agricultural land and increasing agricultural productivity. However, pesticides and fertilizers contain toxic content which can adversely affect the environment and human health. In particular, the over- or misuse of pesticides and fertilizers can lead to run-off, leaching and consequent nutrient surpluses in soil and water. This has negative impacts on human health including through the consumption of contaminated drinking water and death by self-poisoning from pesticides, particularly in low- and middle-income countries, with corresponding economic costs.

The use of agricultural inputs is stimulated through various policies, including different types of fiscal policy instruments. Certain fiscal policies can support agricultural development, for example through public investments in innovation, infrastructure and services. Such support can create enabling conditions for the agricultural sector more broadly and/or strengthen capacities to address environmental challenges, for instance providing incentives for resource-efficient or climate-smart practices. However, the ineffective/inefficient design and implementation of certain fiscal policies can also create perverse incentives that exacerbate the adverse environmental and health impacts associated with the over- or misuse of pesticides and fertilizers. 

The study was undertaken in the context of a UNEP-led project on Environment, Health and Pollution which seeks to provide the needed understanding, capacities and tools to help countries and stakeholders take effective action to address pollution. As part of this project, a series of studies have been carried out which explore the effective use of fiscal policies for pollution reduction. These fiscal studies contribute to the Implementation Plan ‘Towards a pollution-free planet’ adopted at the Third UN Environment Assembly (UNEA-3) which identifies stimulating good practices through fiscal policy as an accelerator for implementation.