The EU could be investing tens of billions of euros each year into activities that damage biodiversity, according to a new report from WWF.  

With biodiversity declining at an unprecedented rate around the world, the EU intends to put nature on a “path to recovery” by 2030, in line with global goals. 

Finance is a key part of this and the bloc has pledged to raise at least €20bn in nature funding each year by the end of the decade. 

However, a new report estimates that EU countries could be spending between €34-48bn each year on projects that can end up damaging biodiversity in sectors such as agriculture, forestry and fisheries. 

It is “pretty shocking” to see the potential scale of funding that EU countries are “pouring into harmful practices”, the lead author of the report tells Carbon Brief.  

A policy expert, who was not involved in the report, says the findings may increase pressure on the EU to track its harmful subsidies, but criticised some of what the report counted as ‘“harmful”. 

Tackling harmful subsidies 

There is no standard definition for “biodiversity-harmful subsidies”, but, essentially, they are government incentives that supplement income or lower costs for certain activities that end up damaging biodiversity. 

Agriculture, fishery and energy subsidies are most commonly termed “harmful”, but damage can also be caused by subsidies for other sectors, including forestry, infrastructure, transport, construction and water. 

Subsidies that harm nature and the environment cost the world around $1.8tn each year, according to a 2022 report from two coalition industry groups – equivalent to the entire GDP of Canada.

There are a number of global goals in place to reduce these harmful subsidies. 

The Kunming-Montreal Global Biodiversity Framework, the global deal for nature signed at the UN COP15 biodiversity summit in 2022, includes a target to cut biodiversity-harming incentives, including subsidies, by at least $500bn per year by 2030. The target also aims to identify such incentives by 2025, although the EU has so far not done so. 

The new analysis finds that the EU is allocating between €34-48bn every year to subsidise activities that harm biodiversity. The table below shows the upper and lower estimates for each sector examined. 

This largest proportion of funding comes from the Common Agricultural Policy (CAP), the EU’s farming-subsidy programme, which accounts for almost one-third of the bloc’s total budget. (See “agricultural impact” below.) 

The subsidies include funds that support “unsustainable” farming, land-use changes, river fragmentation and deforestation, according to the report. It adds that these activities can have knock-on effects on biodiversity, including habitat loss, ecosystem degradation and species extinction. 

Prof Alan Matthews, a European agricultural policy expert at Trinity College Dublin, says the findings start a “good debate” about measuring these subsidies. He tells Carbon Brief: 

“I see the report as contributing to the pressure on the EU…to actually come up with its own identification of what the subsidies are, so that they can begin then in the next few years to actually reduce them.” 

Direct links 

The study, conducted by the Netherlands-based economics consultancy Trinomics for WWF, looks at the biodiversity-harming elements of the EU’s long-term budget, the 2021-27 Multiannual Financial Framework. 

It focuses on direct financing for the agricultural, forestry, fishery, transport and water sectors that may be damaging to biodiversity. This financing includes grants, loans and direct payments. 

It does not look at indirect subsidies, such as tax breaks, or infrastructure investments that disproportionately benefit certain industries, such as tax reductions on fertilisers. 

Tycho Vandermaesen, the policy and strategy director at WWF EU and lead author of the report, says there is an overlap between subsidies that damage biodiversity and those that exacerbate climate change, such as fossil fuel subsidies. But the climate impacts were not examined in the report. He says: 

“We have taken a very conscious choice here to only look at biodiversity-harmful subsidies because this is one of the most under-highlighted environmentally harmful subsidies – in contrast to climate or fossil-fuel subsidies, which have by now been well researched.” 

Matthews notes that the overall findings of the report are in line with previous research, but he criticises some parts of the methodology, such as including a very wide range of direct payments for farmers, as potentially harmful.

In response, Vandermaesen says the assumption on the harmful nature of direct payments for farmers is based on findings in existing studies. 

On Monday, the EU Council approved a targeted review of the CAP to assess, among other things, plans to give farmers “greater flexibility” to comply with environmental terms for their direct payments. 

The report is clear that there are uncertainties and a lack of up-to-date information on EU spending in some sectors. It says the findings are estimates and that more comprehensive analysis would be required to fully measure these subsidies. 

Agricultural impact 

Agriculture and forestry receive the most funding for biodiversity-damaging activities out of any sector examined in the report, as shown in the chart below. 

The report notes that several EU funds “allocate money in a way that encourages large-scale unsustainable farming or forestry practices”.

These include direct farmer payments based on farm size, which can incentivise boosting industrial livestock numbers and expanding conventional crop production – “both of which harm the environment”, according to the report.

It estimates that around 60% of CAP funding – meaning more than €30bn each year – can be considered harmful to biodiversity. 

The current CAP plan, which took effect in 2023 and will remain until 2027, included more environmental measures than previous iterations of the policy. But critics told Carbon Brief in 2021 that the plan was riddled with “loopholes” and unlikely to bring significant change to the sector.

Agriculture accounts for more than 10% of the EU’s greenhouse gas emissions. Globally, the sector is also a key driver of forest loss, causing 80% of deforestation as forest lands are cleared to make space for livestock, palm oil and soya beans.

Looking at other sectors, the report outlines that 5-12% of the European Maritime, Fisheries and Aquaculture Fund – a fishery funding programme – is put towards biodiversity-harmful subsidies. 

This is up to 2.5 times higher than the money from this fund aiming to protect and restore biodiversity, the report says. 

The report says it is “challenging” to accurately estimate the impact that building transport infrastructure can have on biodiversity, noting that it can fragment habitats and ecosystems. It estimates that the EU spends anywhere between €1.7bn and €14bn each year on roads, railways and other transport infrastructure that could be harmful to biodiversity.  

Funds used for certain water infrastructure, such as flood control dams, could also harm biodiversity, the research notes. 

Making changes

The report contains a number of recommendations to put an end to these subsidies, including implementing a legally binding framework to phase out biodiversity-harmful subsidies on both EU and national levels. It adds: 

“Inclusiveness and social awareness need to be included in the phase-out of biodiversity-harmful subsidies to avoid regions or industries being left behind or struggling with the transition.” 

Vandermaesen says that consulting with the impacted sectors and giving a clear pathway to diverting these subsidies is a “really important” step. He adds: 

“We do not want to see a situation where, from one day to the next, these subsidies are basically stopped without the involvement of these communities.” 

The report recommends diverting the funding instead for public investments to protect and restore ecosystems and to put in place “ambitious” national biodiversity plans ahead of the COP16 biodiversity summit, which is scheduled to be hosted by Colombia later this year.

WWF recently asked European political parties whether they would commit to redirecting fossil fuel and other environmentally harmful subsidies towards the “green transition”. All parties that responded expressed a readiness to redirect these subsidies, but the NGO says that “only a few have committed to enshrining this redirection into law”. 

The subsidies report includes a number of case studies of nature-harming subsidies across Europe. 

A forest recovery plan in France, financed partly by the EU, has had “adverse effects” on forests, the report outlines. Almost nine out of 10 projects financed by the plan in 2021 and 2022 involved clearcutting of trees, which can weaken ecosystems. 

The report details another example in Bulgaria, where farmers were permitted to let animals graze in areas of the country’s national parks to help preserve open areas. 

This led to “vegetation being trampled, water being polluted and wildlife being disturbed”, the report says. To mitigate these effects, park administrations requested €760,000 from the country’s EU-funded environment programme. 

These examples “illustrate how complex it can be actually on the ground to deliver these positive results”, Matthews says, adding: 

“In quite a number of the case studies, actually the subsidies were intended to be positive for biodiversity. But it seems that the way they were implemented…They had these sort of perverse outcomes.” 

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EU spending up to €48bn on nature-harming activities each year, report says