Stressing that agricultural subsidies rarely achieve their stated purposes, a World Bank Report states that they often wreak havoc on forests, water supplies and public health. Although agricultural subsidies are often intended to increase the efficiency of production, they usually have the opposite effect, making farming less efficient.
This comes up in the WB report Detox Development: Repurposing Environmentally Harmful Subsidies.
Subsidies tend to be poorly targeted to poor farmers and can exacerbate inequalities. Subsidies tend to accrue to wealthier farmers in disproportionately large amounts, even when programs are designed to be targeted to reach the poor.
Agricultural subsidies can also widen the gender and equity gaps in agriculture, disproportionately affecting women and marginalized groups. The role of women in rural agriculture is growing. Yet despite comprising more than 48 percent of the agricultural labour force in low- and middle-income countries, women and some marginalized groups continue to have less access than men to input and output markets as well as to landownership. When a subsidy that is meant to increase agricultural yields or address poverty does not account for such differences, it can magnify inequalities.
In some geographies, the use of subsidized fertilizers is so excessive that it actually harms yields. New research finds that in sub regions of South Asia and East Asia, use of nitrogen fertilizer is well beyond what is considered efficient, exacerbated by subsidies.
Subsidies drive both the deterioration of water quality by inducing the overuse of nitrogen fertilizers and the increase of water scarcity by incentivizing the over extraction of water.
A new analysis in the report estimates that input subsidies have been responsible for 17 percent of all nitrogen pollution in recent years. In the areas of the world where input subsidies are highest, subsidy-induced increases in water pollution have health impacts that decrease labour productivity by up to between 2.7 percent and 3.5 percent. Coupled subsidies also promote the abstraction of groundwater supplies for irrigation. New evidence finds that, at the mean level of subsidy exposure, agricultural areas around the world risk losing up to 13.2 cubic kilometres of water per year.
Agricultural subsidies are responsible for the loss of 2.2 million hectares of forest per year. Deforestation is sensitive to the price of commodities cultivated near the forest frontier. By increasing the profitability of cultivating such crops, subsidies induce farmers to expand cropland into forest frontiers. This expansion is particularly problematic in the major tropical forests of the world. Today, much of the Amazon Forest lies within a perilous 5 kilometres of the agricultural frontier, where encroaching crops are cultivated.