Reforming Environmentally Harmful Subsidies

Environmentally harmful subsidies (EHS) reform is both an opportunity and a necessity. It demands multi-year commitments, significant resources, and a high appetite for risk. However, the potential returns—exceeding USD 2 trillion annually—far surpass current philanthropic contributions to nature and climate. This makes EHS reform the ultimate climate and biodiversity finance leveraging opportunity. With concerted action and long-term commitment, philanthropic organizations can strategically reshape the current subsidy landscape and catalyze a reallocation of resources toward biodiversity, climate, and social equity goals.

The playbook discusses over 20 opportunities for philanthropic organizations to engage on the EHS reform agenda. These include both established concepts and things that have not been tried before. The publication draws on 2 decades of IISD experience on EHS reform, additional research, interviews with 40+ key actors, and consultations at several international conferences and events in 2024.

Many essential elements are still missing for scalable action on EHS reforms, and opposition to reform is strong and consolidated. The first and immediate need for philanthropic investments is to co-create these essentials, such as better transparency, better awareness, and better coordination on EHS issues among philanthropic organizations, first-mover governments, civil society organizations (CSOs), think tanks, progressive businesses, and other policy influencers. There is a need to consolidate progressive forces that are now dispersed and lack essential ammunition.

Philanthropic organizations, first-mover governments, CSOs, think tanks, progressive businesses and other policy influencers must make a concerted effort to draw attention to the problems posed by EHS, offer suggested solutions, and build political consensus on the need for change. This is most effectively done through a combination of inside-track advice to policy-makers, to show them the path forward, and outside-track public advocacy that generates political momentum for change. Governments will successfully reform EHS once they clearly see this path and there is significant political momentum.