INF/TE/SSD/W/29  
 
6 September 2023  
(23-5986) Page: 1/8 
  Original: English  
 
TRADE AND ENVIRONMENTAL SUSTAINABILITY STRUCTURED DISCUSSIONS  
INFORMAL WORKING GROUP ON SUBSIDIES  
Compilation of experiences and considerations regarding subsidy design  
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Contents  
1   INTRODUCTION  ................................ ................................ ................................ ..........  1 
2   AGRICULTURAL SUBSID IES ................................ ................................ .........................  1 
3   SUBSIDIES RELATED TO THE TRANSITION TO A LOW -CARBON ECONOMY  ..................  4 
4   TRANSPARENCY  ................................ ................................ ................................ ..........  7 
 
1  INTRODUCTION  
1.1.  In line with the 2021 TESSD Ministerial Statement ( WT/MIN(21)/6/Rev.2 ) and the 2022 TESSD 
Work Plan ( INF/TE/SSD/W/17 ), Members have carried out discussions on the environmental effects 
and trade impacts of relevant subsidies , related transparency issues and the role of  the WTO in the 
Informal Working Group on Subsidies.  
1.2.  Following the TESSD High -level Stocktaking event i n December 2022 and the related 
Statement by the TESSD Co -Convenors ( INF/TE/SSD/W/21 ), Members have also shared experiences 
in subsidy design and consider ed how to enhance transparency and data availability , focusing on 
agricultural subsidies and subsidies  related to the transition to a low -carbon economy.   
1.3.  This document provides  a compilation of Member experiences and considerations with subsidy 
design based on discussions in the meetings of the Informal TESSD Working Group on Subsidies on 
16 March and 1 0 May 2023 . 
2  AGRICULTURAL SUBSIDIES  
2.1.  Agricultural subsidies were discussed in the meeting on 16 March. In discussing environmental 
effects and transparency, Members acknowledged the complexities of agricultural subsidies and their 
effects on the environment and underlined the importance of moving to less distorting and 
environmentally harmful forms of subsidies . 
2.2.  Members also shared their experiences on subsidy design and discussed the following 
questions:  
• How do you consider possible environmental effects and t rade impacts in the design of 
agricultural subsidies?  
• What kind of agricultural subsidies can be beneficial to the environment?  
• How do you  balance environmental and trade considerations?  
 INF/TE/SSD/W/29  
 
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  2.3.  Table 1 provides a compilation of experiences shared by Members in the form of presentations 
or as part of their interventions.  
Table 1. Experiences with the design of agricultural subsidies  
Brazil: Subsidies and Environmental Sustainability of Brazilian Agriculture  
Brazilian Agricultural Policy aims to strengthen sustainability in its three dimensions – economic, 
social and environment, and its goals, inter alia, include i ncrease productivity ; reduction of GHG 
emission s; prevention of losses in agricultural production ; rationa lization of the use of natural 
resources and inputs ; soil recovery and conservation ; improving the quality and health of 
agricultural production ; treatment of manure and agricultural residues and  reforestation . 
Agricultural productivity has been increasing  in Brazil over time also thanks to double cropping.  
Environmental sustainability has guided agricultural policy  for decade s, including the Agriculture 
Climate Risk Zoning policy and the Low Carbon Emission Agricultur e Plan (ABC) . The ABC Plan 
aims to spre ad environmentally friendly technologies, while the ABC program provides access 
for environmentally sustainable financing (among other options). The Brazilian Forest Code 
establishes minimum limits for environmental preservation in rural properties. While the area 
used for farming has been increasing, it only covered around 31% of Brazilian territory in 2021, 
compared to a forest area of close to 60%.  
Credit subsidies are the main input subsidy instrument , representing less than a third of 
resources raised  by farmers and less than 1% of the value of agricultural production. 
Environmental sustainability is an  essential requirement for accessing  resources . Production has 
grown at an accelerated pace, contrasting with the reduction of  subsidies, which demonstr ates 
the economic sustainability of Brazilian agriculture . Instruments such as ecological economic 
zoning and agricultural climate risk  zoning are fundamental for increasing environmental 
sustainability . There is a need to associate financing for sustainab le production with  financing 
for the recovery of ecosystems , i.e. p ayment for environmental services . 
Costa Rica: NAMA Café and Payment for Environmental Services  
The NAMA Café initiative seeks to promote low -emission and sustainable coffee production and 
processing in Costa Rica, through the adoption of low -emission technologies and the efficient 
use of water and energy. An incentive mechanism by the Costa Rican Coffee Institute (ICAFE) 
allows NAMA café beneficiaries to receive a monetary co ntribution for a maximum of three 
investment projects of up to 10% of the investment.  Incentives might be obtained for 
technologies related to wet and dry mill ing, by-product treatment system, or use of renewable 
energy, among others.  
The National Fund for Forest Financing  finance s forest management for the benefit of SMEs. The 
Fund also includes a  Program me for Payment of Environmental Services (PPSA)  drawing its 
funding from a  single fuel tax, of which 3.5% is allocated  to PPSA which guarantees the 
sustainability of the Program . Other f inancial contributions  can be  received from the Government 
and international development financing . The development of these programs entails an 
exhaustive process of consultation at the domestic level with government sec tors and entities, 
including the Ministry of Foreign Trade, which ensures that any state policy adheres to the rules 
of the multilateral trade system and international law.  
European Union – Environmental dimension of the EU's Common Agricultural Policy  (CAP) 
Since 1980, t he EU's CAP gradually shifted from price support, to coupled producer support to 
decoupled support. Around 85% of EU farm supported currently falls into the WTO green box. 
EU agriculture has seen decreasing trends in GHG emissions (19% low er in 2017 vs. 1990), in 
antibiotic sales for animal  production (40% lower in 2020 vs. 2011), and in chemical pesticides . 
Organic farming is increasing accounting for 9% of utilised agricultural land in 2020. Challenges 
remain, in particular regarding biod iversity, water quality, soil erosion, and ammonia emissions. 
By placing requirements on farmers, the CAP provides a baseline protection for the environment 
on more than 80% of EU's agricultural land , while targeted voluntary commitments cover 15% 
of land.  
The CAP aims to achieve the right balance between economic, social and environmental 
objectives. The new CAP (2023 -2027) includes enhanced conditionality regarding climate and 
environmental requirements which are mandatory for farmers. Eco -schemes and 
environmentally friendly rural development interventions provide additional incentives for 
voluntary practices beyond conditionality. The new CAP includes a needs -based, targeted INF/TE/SSD/W/29  
 
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  approach to addressing environmental and climate objectives, includes a no backs liding clause 
in terms of environmental ambitions, and provides for different mechanisms to ensure alignment 
with the EU Green Deal.  
Paraguay: Good Agricultural Practices  
In Paraguay, a bout 65% of farms carry  out some soil management and  conservation pra ctices , 
of which 64% apply crop rotation and 16% direct sowing, which are the most frequent good 
agricultural practices. Organic production is not automatically considered a good agricultural 
practice as it involves trade -offs (e.g. mechanical processes th at harm soil) that may not lead 
to a net -positive impact on the environment. Other good agricultural practices, inter alia , include 
the use of biotechnology which enhances productivity and lowers the use of resources, while 
precision agriculture provides for a more efficient use of equipment and plots, lowering 
environmental impact. In terms of farming practices, t he adjustment of animal load according 
to the intrinsic capacity of available fields will enhance productivity and can bring the greate st 
benefits for climate change mitigation.  
United Kingdom : Reform of agricultural policy  
Agriculture is a devolved policy area under the devolution settlements of Scotland, Wales and 
Northern Ireland. This means that each government has the ability to des ign and implement 
agricultural policies for their own territories. Significant reforms of agricultural policy and 
spending are being undertaken, which will help align the sector with national objectives for 
improving the natural environment and meeting the  national target of net zero greenhouse gas 
emissions by 2050. The reformed approach will aim to encourage farmers and land managers to 
provide environmental goods and services such as habitat restoration, improved water quality, 
natural flood management, and woodland creation.   
 
2.4.  Table 2 provides a compilation of c onsiderations related to the design of  agricultural subsidies  
that were raised as part of Members' discussions. Consolidating the elements included in Table 2 , 
Members take into account the following considerations when designing agricultural subsidies:   
• Account ing for  multiple objectives such as generating income and jobs, raising living 
standards, improving food security and ensuring environmental sustainability;  
• consider in an integrated m anner the impact on production, trade and environment and steer 
agricultural production towards high -efficiency and sustainability;  
• subsidies should not  be granted in areas with a greater degree of environmental damage 
such as heavy metal pollution to avoi d "environmental depressions" in agricultural 
production ; 
• subsidies should be directed towards good agricultural practices as they can limit negative 
effects on the environment while helping developing countries increase productivity;  
• a comprehensive consi deration of different environmental effects, including carbon 
emissions, biodiversity, healthy soils and responsible water management;  
• the environmental effects of agricultural subsidies with due consideration to each country's 
specific situation;  
• consider ation of subsidies that can be beneficial to the environment, including support for 
the provision of public goods or compensation of income loss due to the use of 
environmental ly friendly  methods of production;  
• evaluate the environmental  impacts of agricultural policy using quantitative models;  
• the impact on farmers in developing countries.  
Table 2. Members' c onsiderations in the design of agricultural subsidies  
Multifaceted intersection between agricultural subsid ies, food security, sustainability and 
development – when designing agricultural policies, countries are faced with the challenge of 
defining a set of goals that often involve generating income and jobs, raising living standards, 
improving food and nutriti on security and ensuring environmental sustainability . 
Agriculture plays a multifunctional role in maintaining biodiversity and protecting the environment, 
while also serving as key contributor to food security and other non -trade aspects. Agricultural 
subsidies can support and enhance agriculture while promot ing environmental sustainability.  
Environmental factors have a big impact on agricultural production, and in the context of tightening 
resources and increasingly fragile ecological environment, agricultural subsidy policies should INF/TE/SSD/W/29  
 
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  balance the relationshi p between growth promotion and environmental protection so as to improve 
the resilience and sustainability of agricultural production.  
When formulating agricultural subsidy policies, the impact of production, trade and environment 
should be considered in an integrated manner. Support for governance of agricultural environment, 
water conservation and ecological compensation should be bolstered, the overall protection and 
support for agricultural resources should be strengthened.  
Subsidies should not be gr anted in areas with a greater degree of environmental damage such as 
heavy metal pollution to avoid "environmental depressions" in agricultural production, and steer 
the agricultural production towards the direction of high -efficiency and sustainability.  
With good agricultural practices, agricultural producers can be competitive and at the same time 
protect the environment. For example, s ubsidies directed to the use of fertilizers or plant protection 
products c an greatly limit their negative effect on the  environment  if good agricultural practices  
are applied . This is a n important point for many developing countries that face increasing 
challenges to control pests and diseases or to increase their productivity in the face of challenges 
such as climate chan ge.  
Need to consider diverse impacts of agricultural subsidies, and need to consider environmental 
effects in a holistic way, beyond carbon emissions.  
Members should themselves identify and evaluate environmentally harmful subsidies as well as 
reorient them to environmentally  positive ones given that simple elimination or reduction of 
agricultural subsidies can result in decreasing agricultural productions, increasing prices, or 
reducing farmers ' income.  
In the legislative processes, the Government systemat ically evaluates the environmental impacts 
of agricultural policy measures including by using quantitative models.  
Agricultural subsidies can be beneficial to the environment. The Government grants  subsidies that 
ensure the provision of various public goo ds, such as the preservation of biodiversity, the protection 
of water and air quality or the reduction of greenhouse gas emissions. Furthermore, subsidies can 
also help in compensating farmers for income loss that is due to the use of environmental -friendl y 
methods of production.   
Certain agricultural subsidies or support programs are designed to achieve multiple objectives, 
some of which may be directly or indirectly related to the protection of the environment.  
Environmental effects of agricultural subsidies vary depending on natural conditions or 
environmental requirements of subsidy disbursement. It is therefore indispensable to examine and 
evaluate based on a non -uniform approach with due consideration to each country 's specific 
situations. It is also not appropriate to analyse  environmental effects based on a single indicator 
or benchmark given their high complexity. The content of data to evaluate environmental effects 
vary depending on the purpose of evaluation and the situation of those countries and regions.  
Comprehensive consideration of all environmental effects is important, including carbon emissions, 
biodiversity, healthy soils and responsible water management. (CHE)  
Important to consider the potential environmental effects  in the long term. Furthermore, the effects 
of agricultural support measures may vary based on the differences in agricultural structures.  
High subsidies in rich countries reduce the ability of farmers on developing countries to compete 
and share on the benefits of international trade.   
 
3  SUBSIDIES RELATED TO THE TRANSITION TO A LOW -CARBON ECONOMY  
3.1.  Subsidies related to a low -carbon transition were discussed in the meeting on 10 May. 
According to t he presentation by IISD on the Energy Policy Tracker, at lea st USD 474.43 billion of 
support  went towards clean energy, compared to USD 512 billion for support towards fossil fuel 
energy  during 2020 -21. IISD underscored the need to prioritize clean energy investments and 
reforms in recovery plans, and to balance im mediate crisis responses with longer term sustainability 
objectives.  INF/TE/SSD/W/29  
 
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  3.2.  In the Working Group, Members shared their experiences on subsidy design and discussed the 
following questions:  
• How do you balance environmental and trade considerations when designing subsidies 
related to the low -carbon transition?  
• How do you consider possible trade impacts in the design of subsidies related to the 
low-carbon transition?  
• How can the environmental effects and trade impacts of such subsidies be identified?  
• What are information gaps to better understand these impacts, and how could transparency 
and data availability be enhanced?  
3.3.  Table 3 provides a compilation of experiences shared by Members in the form of presentations 
or as part of their interve ntions.  
Table 3. Experiences with the design of subsidies related to the transition to a 
low-carbon economy  
Brazil: Subsidies in support of green transition in agriculture  
Brazil provides non-distortive agriculture subsidies on a mo dest level to support the green 
transition in agriculture . Its low-carbon agriculture program (ABC plan) has succeeded in mitigating 
more than 170 million tons of carbon emissions by 2018 and is a core part of the strategy 
encapsulated in Brazil's  ambitiou s Nationally Determined Objective.  
Canada: Federal  Budget 2023: Affordable Energy, Good Jobs, and a Growing Clean Economy  
Canada's  Plan for Affordable Energy, Good Jobs, and a Growing Clean Economy propose s 
investments in clean growth of almost USD  21 billion over the next five  years and focuse s on 
securing global investment in the clean economy, with significant funding allocated for clean 
electricity, clean economy growth, resilient infrastructure, and technological innovation.  
To accelerate private investment, t hree tiers of federal financial incentives are employed: target ed 
programming  to support clean energy and decarbonization projects;  strategic financing  to attract  
private capital and accelerate deployment of key  technologies ; and inves tment tax credits  for 
investments in clean energy, clean hydrogen, clean technology manufacturing and deployment, 
and carbon capture use and storage. These financial incentives are underpinned by carbon pollution 
pricing and regulatory  frameworks  providing  a price incentive to reduce emissions and innovate.  
China: Green Subsidy  Policy of China - Competitive allocation of fiscal funds as an example  
China's green subsidy policy aims to contribute to its goals of carbon peaking and carbon neutrality,  
playing an important role for the green transformation of its economy. Examples of policies include 
special funds for the development of clean energy  and air pollution and control, a subsidy fund for 
energy conservation and emission reduction, preferential tax treatments for new energy vehicles 
and enterprises with comprehensive utilization of resources, and conservation and restoration of 
nature.  
The practice of competitive allocation of fiscal funds reformed the previous model of average 
allocation, providing incentives for participants and improving the effectiveness of the use of fiscal 
funds . Procedures of the competitive allocation include the issuing of funding opportunities by the 
Ministry of Finance, submission of proposals by candidate  cities, expert review and competitive 
mechanism , public notification of assessment results, funds allocation and performance evaluation.  
European Union : EU policy support for the transition to a low -carbon economy  
The EU Green Deal Industrial Plan  aims to scale up manufacturing capacity for net -zero 
technologies, and  includ es the four pillars of: predictable regulations; increased investment for 
clean tech production; skills enhancement; and fair and open trade .  
The EU's state aid framework includes a balancing principle, where positive contributions to 
achieving the policy objective are to outweigh any negative effects on trade. The guidelines on 
state aid for climate, environmental protection and energy provide for safeguards (ensure 
effect iveness; not unduly distort competition), coherence with environmental legislation and WTO 
compatibility. The WTO  has a  role in supporting climate neutrality through its disciplines on 
subsidies, promoting green transition in a manner that minimized trade distortions, and as a forum 
for deliberations  on trade aspects of the green transition.  INF/TE/SSD/W/29  
 
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  Japan  – Green transition fund  
Japan established the Green Transition Fund, which will provide  support from R&D to deployment  
over ten years  toward s carbon neutrality in 2050.  Japan is also preparing  a framework to support 
green transformation by utilizing financial resources to be generated by growth -oriented carbon 
pricing, which will be  introduce d in a step -by-step manner.  
Intend to utilize subsidi es as an incentive, in combination with regulatory measures, to promote 
private investments in those sectors that contribute to the global green transformation, such as 
targeted support for high -risk R&D that is expected to create spillover effects. Such s ubsidies aim 
for green growth to create new dynamics of industries and trade rather than squeezing domestic 
markets.  
 
3.4.  Table 4 provides a compilation of c onsiderations related to the design of  subsidies  related to 
the transition to a low -carbon economy tha t were raised as part of Members' discussions.  As part of 
the experience sharing, Members highlighted a number of common elements, including compliance 
with WTO rules. Consolidating the elements included in Table 4, Members take into account the 
following considerations when designing subsidies related to a low -carbon transition:  
• minimize trade -distorting impacts when designing subsidies;  
• provide subsidies on a non -discriminatory basis;  
• avoid local content requirements;  
• consider the balance between the pos itive effects for the transition to a low -carbon 
economy and the distorting effects on trade;  
• consideration of nature of linkage with policy objective such as reducing green greenhouse 
gas emissions ; 
• avoid unilateral measures that may disrupt global trade ; 
• take into account  how market distortions might disproportionately affect developing and 
least developed countries  as well as  different development levels of countries.   
Table 4. Members' c onsiderations in the design of subsidies related to the transition to a 
low-carbon economy  
Importance of promoting innovation and investment without creating trade distortions or a subsidy 
race. It is essential to adhere to WTO rules while developing support measures to balance climate 
objectives and minimize trade impacts.   
Market -pull incenti ves like carbon pricing, feed -in-tariffs, and investment tax credits are generally 
less distortive than subsidies that directly encourage manufacturing capacity.   
Avoiding local content requirements which can distort trade.  
Balancing test : achieve the po licy objective  of a net-zero transition, while minimising trade 
distortion s. This balancing is between the positive effects of the subsidy – it must facilitate the 
development of an economic activity with clear link to the green objectives - against the ne gative 
effects – the subsidy cannot unduly affect trading conditions to an extent contrary to the common 
interest.  
WTO compatibility is a built -in feature  in subsidy design .  
Essential to ensure WTO -consistency and minimizing negative effects on trade es pecially in the 
phase of designing specific subsidies.   
Importance of taking trade effects and WTO conformity into account when designing subsidies.   
Need to align with the rules set by WTO agreements . Importance of avoiding unilateral measures 
that risk and disrupt global trade.   
The current balance as set out in the SCM Agreement allows the granting of subsidies, even of 
specific ones, insofar they do not cause adverse effects to the interest of other Members or result, 
due to  their design, in particular trade -distortions.   
Minimizing the trade -distorting impact when designing green subsidies  is in line with both trade 
and energy policy interests . Trade distortions increase the price of investments necessary for the 
low-carbon transition.   
The current trade rules support taking in to account the possible trade -impacts of subsidies related 
to the low -carbon transition.  INF/TE/SSD/W/29  
 
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  Green subsidies are traditionally provided on a non -discriminatory basis to minimi ze trade 
distorting effect s.  
Important to acknowledge that some green subsidies, even with the best intentions, can negatively 
impact trade.  
In the design of subsidies, it is essential that we not only look towards meeting our shared net zero 
and environmental commitments, but we do so in a way that minimi zes potential trade effects and 
complies with existing WTO obligations.  
It can be difficult to anticipate the trade effects of a subsidy and causation, in the abstract.   
OECD work on  possible elements of subsidy design  suggests that that "good" government support 
needs to be:  (i) proportional with the scale of the problem it is meant to solve (e.g. market failures);  
(ii) time-limited, e.g. by way of a sunset clause;  (iii) targeted toward those that most need it in 
order to minimi ze windfall effects;  (iv) non-discriminatory; and  (v) transparent, through the 
publication of relevant information by the government concerned.   
In the context of the green transition, subsidy design may  incorporate consideration of whether or 
not the program directly links to the reduction of greenhouse gas emissions.   
Find balanced and meaningful solutions to ensure that our collective approach to subsidies 
promotes environmental objectives at the WTO while, at the same time, upholding and 
safeguarding an open and non -discriminatory international trading system.   
Certain subsidies might  create market distortions disproportionately affecting developing and least 
developed countries, and, in the name of reducing carbon emissions in one jurisdiction, hampering 
the capacity of other countries to pursue similar goals.  As fiscal capacity becomes the lever for 
competitiveness, developing countries will struggle to keep pace on this race to the bottom.  A 
redist ribution of global trade and production that further marginalizes developing countries is bound 
to also constrain their ability for climate action and detract from global efforts for decarbonization.  
Must acknowledge the centrality of development and its  different level in all countries , while 
providing all enablers towards sustainably achieving country specific plans and actions.   
 
4  TRANSPARENCY  
4.1.  Table 5 provides a compilation of transparency considerations  related to agricultural subsidies 
that were rais ed in the Working Group.  
Table 5. Transparency considerations  related to agricultural subsidies  
At WTO  
Potential for a technical exercise focused on identifying the types of trade and production distorting 
agricultural subsidies that are also particularly harmful to the environment.   
There is a need to discuss impact indicators  related to agricultural subsidies .  
Other international efforts  
The OECD 's PINE database will be utilized to measure  environmentally positive subsidies under the 
Kunming -Montreal Global Biodiversity Framework.  
 
4.2.  Table 6 provides a compilation of transparency issues related to subsidies related to the 
transition to a low -carbon economy that were raised in the Working Group.  
Table 6. Transparency considerations  related to subsidies related to the transition to a 
low-carbon economy  
At WTO  
There is low compliance with the notification requirements of the WTO  Subsidies Agreement.  
Proposal have been made  to improve transparency at the WTO Subsidies Committee.   
Notification obligations provided under the SCM Agreement are the basic foundation of subsidies 
discipline s. It is necessary to fulfil existing notifi cation obligations on industrial subsidies, including 
low-carbon transition subsidies.  INF/TE/SSD/W/29  
 
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  There is a need to comply with the notification requirements in the Agreement on Subsidies and 
Countervailing Measures.  
Compliance with WTO subsidy notifications is at chronic low levels, with recent figures showing that 
more than half the Membership hav e not submitted their 2021 notifications. Members were urged 
to redouble efforts to submit their notifications and engage constructively in ongoing work to 
improve the shared evidence base.  
There is a need to improve the timeliness and quality of information provided, and better support 
those Members with genuine capacity concerns to engage in this work.  
Other international efforts  
The OECD's expanded MAGIC database, which includes subsidy  data collected at the individual firm 
level, is an essential step forward in increasing transparency , and could be used to assess the trade 
and environmental impacts of subsidies.   
The Energy Policy Tracker  (energypolicytracker.org), an initiative of 29 expert organizations , tracks 
public financial flows from fossil fuels to clean energy , cover ing policies affecting energy production 
and consumption for 38 economies.  
National efforts  
Importance of transparency of energy subsidies – both the fossil fuel subsidies and the clean energy 
subsidies - going beyond the WTO notification requirements including broad policies and measures.   
Regular reports on energy subsidies  are being published .  
To further improve and harmonise data collection , rules provide for  the structure, format, technical 
details and process for national energy and climate progress reports. This includes information on 
progress towards the national objectives to phase out energy subsidies, in particular for fossil fuels. 
The rules als o set out  a reporting template for this purpose.  
The Government e nsure s a high level of transparency in formulating and implementing subsidy 
policies , including their impacts on trade and the environment through the national legislature , 
public comments on the details of specific policies and public offering of specific projects.  
Tracking government financial flows is not a sufficient analysis of the subsidies being provided by 
a country.  
 
 
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