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How Government Subsidies Drive Deforestation and Inequality

Andrew Burger headshotWords by Andrew Burger
New Activism
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Government subsidies remain a fundamental factor driving deforestation around the world, particularly in countries where export-driven natural resource extraction plays a big role in the economy. Unfortunately these habitats often include environmentally-critical tropical forests.

These subsidies represent a perverse economic incentive that poses a major obstacle in the international drive to reduce greenhouse gas emissions, combat climate change and forge pathways toward sustainable development.

Governments subsidized resource extraction and consumption (including water, energy and food) to the tune of up to $1.1 trillion per year in 2011, according to a McKinsey Global Institute study. “By reducing the price of a natural resource below the marginal cost to society, subsidies can have far-reaching impacts (positive or negative) on both investment and consumption,” U.K. think tank ODI (Overseas Development Institute) highlighted in a recently released research report.

In eating up a nation's natural capital, destructive forestry and natural resource extraction policies are also linked to land grabs, as well as ongoing marginalization and disenfranchisement of indigenous people and forest communities. Such practices greatly diminish efforts to forge more open, inclusive democratic governments and market economies.

Government subsidies driving deforestation

Timber and agricultural commodity production for global markets is a large contributor to global trade and national GDP. Deforestation accounted for 61 percent and 28 percent of Indonesia's and Brazil's respective greenhouse gas emissions, according to the ODI report. Subsidies that incentivize soy and beef production play leading roles in nations, such as Brazil, Congo and Indonesia, where large areas of intact tropical forest remain. These subsidies, moreover, pose substantial obstacles to instituting international, as well as national, agreements on climate change and sustainable development.

Estimates from a 2011 study from the Global Canopy Program pegged annual producer values for beef and soy globally at $14 billion and $47 billion, respectively. Those for palm oil totaled $31 billion, and the global export value of timber, pulp and paper was estimated to be $233 billion, WRI (World Resources Institute) reported in November 2014.

On the other hand, agricultural development as currently practiced is linked to 80 percent of forest loss globally, ODI pointed out in its report.

“Subsidies can accelerate environmental degradation through resource inefficiency, overcapitalization, overconsumption and by depriving the state of resources to support sustainable management,” ODI stated.

In addition to agricultural development, commercial timber extraction is another key driver of deforestation, “accounting for over 70 percent of forest degradation in Latin America and Asia,” ODI highlighted. ODI continued by citing the role mining, infrastructure development, urban expansion, uncontrolled fire, fuel wood collection and charcoal production play in tropical and subtropical deforestation. “In addition, it is estimated that between 2001 and 2012, $61 billion per year of the trade in commodities from Brazil and Indonesia (including beef, leather, soy, palm oil and timber products) was based on illegal conversion of tropical forests,” ODI said.

The OECD estimated that agricultural subsidies across 47 countries were worth $486 billion in 2012. As the World Resources Institute points out, these aren't evenly distributed. Between 2010 and 2012, researchers found that agricultural subsidies were highest in China ($160 billion), the U.S. ($145 billion), Europe ($121 billion) and Japan ($69 billion). Adjusted for GDP, subsidies were highest in Indonesia at more than 3 percent.

Forestry and agriculture experts from around the world continue to contribute to the United Nations' efforts to promote REDD+ (Reducing Emissions from Deforestation and Forest Degradation) as means of financing organizations that seek to carry out projects to reduce and minimize deforestation, if not eliminate it completely.

Deforestation, development and human rights


Government policies and subsidies that encourage natural resource extraction at the expense of ecological and socioeconomic considerations do not only run contrary to any notion of sustainable development. They also contradict and diminish the concepts of universal human rights and governments' obligation to develop “human capital” on an inclusive and equitable basis.
According to a detailed assessment of nine country cases produced by more than 60 indigenous forest communities from Africa, Asia and Latin America: “The global forest crisis is worsening and infringements of the rights of indigenous peoples and forest-dependent communities are rising.”

Convening in Kalimantan, Indonesia, a center point of deforestation and international efforts to reduce it, representatives from these indigenous forest communities spoke out regarding “the direct and indirect drivers of forest loss and shared their own assessments of the grave human rights violations and atrocities facing their communities and lands today,” Forest Peoples Program recounts.

By the end of the conference, they had completed work on and issued the Palangka Raya Declaration on the Rights of Indigenous Peoples. As Forest Peoples explained, the declaration makes the following demands for governments, international agencies and the international community:


  • Halt the production, trade and consumption of commodities derived from deforestation;

  • Stop the invasion of forest peoples' lands and forests by logging and other timber extraction, agribusiness, extractive industries, energy and conservation projects that deny fundamental human rights; and

  • Take immediate and concrete actions to uphold forest peoples' rights at all levels (including the right to land, territories and the right to self-determined development).

An area three times the size of Germany – over 104 million hectares (~257 million acres) of the world's remaining intact forest landscapes -- were degraded from 2000 to 2013, according to a new analysis of maps released by the World Resources Institute, which worked with the Greenpeace GIS Laboratory, University of Maryland, Transparent World and WWF-Russia to produce them.
“Governments must take urgent action to stop IFL degradation by creating more protected areas, strengthening the rights of forest communities and other measures that protect intact forests for their economic, social and conservation values,” Dr. Christoph Thies, senior forest campaigner for Greenpeace International, was quoted as saying.

“The UN, donor countries and development banks also need to support developing countries to protect their IFLs. Finally, voluntary private sector initiatives such as the Forest Stewardship Council (FSC) and various roundtables on palm oil, soy and beef, can ensure that their standards for timber and agricultural commodities avoid IFL degradation.”

*Image credits: 1), 3) ODI; 2) Global Canopy Program

Andrew Burger headshotAndrew Burger

An experienced, independent journalist, editor and researcher, Andrew has crisscrossed the globe while reporting on sustainability, corporate social responsibility, social and environmental entrepreneurship, renewable energy, energy efficiency and clean technology. He studied geology at CU, Boulder, has an MBA in finance from Pace University, and completed a certificate program in international governance for biodiversity at UN University in Japan.

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