Financial Mechanism and Resources

T18 (Incentives): How to Use GEF Funding

This page aims to provide information regarding the identifying and eliminating, phasing out or reforming incentives, including subsidies, harmful for biodiversity, while substantially and progressively reducing them, and scaling up positive incentives, for recipient Parties and relevant stakeholders, including how to access funding of the Global Environment Facility in this regard. It is a work in progress and will be updated as necessary.

Little progress has been made over the past decade in eliminating, phasing out or reforming subsidies and other incentives potentially harmful to biodiversity, and in developing positive incentives for biodiversity conservation and sustainable use. Relatively few countries have taken steps even to identify incentives that harm biodiversity, and harmful subsidies far outweigh positive incentives in areas such as fisheries and the control of deforestation. Reported efforts were: Revise licensing processes, including for hunting, fishing and felling; Phasing out subsidies for pesticides and fossil fuels; Efforts to identify potentially harmful subsidies; Actions related to the removal of harmful subsidies; Action to deny government support to certain types of behavior or activities harmful to biodiversity; Reducing taxes on renewable energy; Promoting payment for ecosystem services and offset schemes; Establishing certification and compensation schemes to incentivize activities such as sustainable ecotourism, landscape conservation, and the adoption of more efficient technologies; Efforts to encourage local land management; Provision of compensation for the reduction of harmful activities; Actions to recognize indigenous and local land use rights; Introducing biodiversity-relevant taxes, fees and charges, and tradeable permits, including those that are applied on pesticides, fertilizers, forest products and timber harvests to reflect the negative environmental externalities. Reported challenges were: Limited capacity; Funding and legislative action; Vested interests in maintaining current incentive schemes; Difficulties in upscaling pilot projects.

Financial support of the Global Environment Facility

GEF-financed projected related to incentives

• Food Systems
• Amazon, Congo, and Critical Forest Biomes
• Ecosystem Restoration
• Clean and Healthy Oceans
• Greening Transportation Infrastructure Development
• Circular Solutions to Plastic Pollution
• Net Zero Nature Positive Accelerator
• Eliminating Hazardous Chemicals from Supply Chains
• BDFA: Objective Three
• IWFA: Objective One and Three

Guidance to the financial mechanism

The Conference of the Parties has invited the Global Environment Facility to support: Development and implementation of innovative measures, including in the field of economic incentives and those which assist developing countries to address situations where opportunity costs are incurred by local communities and to identify ways and means by which these can be compensated. (Decision X/24, annex, para. 4.8; XIII/21, annex II, para. 20}

Guidance to Parties

Planning

• Develop policy plans that identify those harmful incentives that are candidates for removal, phase‑out, or reform, provide for a prioritized list of measures leading to their eventual removal, phase-out, or reform and a prioritized list of measures leading to the introduction, or strengthening, of positive incentives for the conservation and sustainable use of biodiversity, and include associated timelines and milestones for implementation; (XII/3, annex I, para. 1(b) and 4; XI/30, para. 6; X/44, para. 3; 14/22D, para. 10; XIII/20, para. 22)
• Review existing legislation and economic policies to identify and promote incentive for the conservation and sustainable use of components of biological diversity, stressing the importance of taking appropriate action on incentives that threaten biological diversity, and develop supportive legal and policy frameworks for the design and implementation of incentive measures; (IV/10, para. 1(d); III/18, para. 3)
• Carry out participatory consultative processes at the relevant level to define the clear and target-oriented incentive measures to address the identified underlying causes of biodiversity reduction or loss and unsustainable use; (IV/10, para. 1(e))
• Incorporate biological diversity considerations into impact assessments, consistent with Article 14 of the Convention, as a step in the design and implementation of incentive measures, and promote the design and implementation of appropriate incentive measures, taking fully into account the ecosystem approach and the various conditions of the Parties and employing the precautionary approach of Principle 15 of the Rio Declaration on Environment and Development, in order to facilitate achieving the implementation of the objectives of the Convention and integrate biological diversity concerns in sectoral policies, instruments and projects; (III/18, para. 6; IV/10, para. 1(a))

Valuation and Studies

• Take into account economic, social, cultural and ethical valuation in the development of relevant incentive measures; (XI/30, para. 2; IV/10, para. 1(c))
• Undertake national analytical studies that identify candidates for elimination, phase-out or reform of incentives, including subsidies, harmful for biodiversity, and identify opportunities to enhance the effectiveness of existing financial instruments for biodiversity and to promote the design and implementation of positive incentive measures; (XII/3, annex I, para. 1(a) and 3; XI/30, para. 3 and 4(b)))

Positive Incentives

• Promote the design and implementation, in all key economic sectors, of positive incentive measures for the conservation and sustainable use of biodiversity that are effective, transparent, targeted, appropriately monitored, cost-efficient as well as consistent and in harmony with the Convention and other relevant international obligations, and that do not generate perverse incentives, noting the essential role of regulation and the complementary role of market-based instruments; (X/44, para. 10; IX/6, para. 2; VIII/26, para. 7; VII/18, para. 8, 10; 14/1, para. 14(b))

Perverse Incentives

• Actively identify, eliminate, phase out, or reform, existing harmful incentives for sectors that can potentially affect biodiversity, acknowledging the need to conduct careful analyses of available data and enhanced transparency, through ongoing and transparent communication mechanisms on the amounts and the distribution of perverse incentives provided, as well as of the consequences of doing so, including for the livelihoods of indigenous and local communities, recognizing that perverse incentives harmful for biodiversity are frequently not cost-efficient and/or not effective in meeting social objectives while in some cases use scarce public funds; (14/1, para. 14(b); XII/3, annex IV, para. 32, 1(c), 2; XI/30, para. 4(a), 4(c); X/44, para. 9; VII/18, para. 2 and 6; IV/10, para. 1(f))