As the world’s largest employer, the agriculture and food production sector plays an important role in efforts to reduce poverty and improve people’s livelihoods. However, unsustainable agricultural practices and associated land-use change have contributed to biodiversity loss, water insecurity, pesticide related deaths, climate change, soil and water pollution and the related economic and health impacts, which is threatening delivery of several SDGs. These externalities often do not have a market price. In some cases, prices are further distorted by policy interventions such as subsidies, which have fiscal implications, accounting for a large share of public resources and reducing public funds. Such subsidies can distort global commodity markets, drive down global crop prices, and undermine small farmers and poverty reduction efforts in many developing countries.
Reforming agriculture-related fiscal policies in line with sustainability objectives could support the transition to a more sustainable agriculture sector. Such reforms can help to shift producer and consumer behaviour through prices that reflect costs of production and externalities, mobilise financing for sustainable land-use, help to reduce pollution and environmental degradation, improve health, encourage resource efficiency, and address other global challenges. Fiscal policies will thus be a core part of the policy mix, complementing other approaches including regulatory instruments, market-based mechanisms, information tools and voluntary measures to support the just transition to sustainable agriculture.
UN Environment is supporting countries in this process through targeted policy analysis, advice, dialogue and capacity building on how reforming agriculture-related fiscal policies by repurposing current subsidies and aligning fiscal incentives with sustainability objectives could support the just transition to sustainable agriculture and food production.
