Government support and subsidies

The growing use of subsidies across a range of sectors has given rise to concerns about whether competition in the global economy is fair, with implications for public support for open markets. At the same time, the digital and green transformations, COVID-19, and concerns about resilient supply chains for essential goods have all brought additional complexity to the debate about whether and when subsidies may be needed and how any necessary support can best be designed to maximise effectiveness and minimise market distortions.  

Subsidies and government support can come in many shapes, with different forms prevalent in different sectors. While some are relatively well understood (such as tax breaks or government grants), others are much more difficult to identify and measure (such as below-market finance). A common understanding of the nature and scale of subsides across sectors is a critical first step in international cooperation to address concerns about the global level playing field.

The OECD plays a leading role in bringing transparency to government support, with extensive and longstanding experience in measuring and analysing support across sectors. This portal provides access to our work on government support to agriculture, fisheries, fossil fuels and industrial sectors.

 

Latest Update

Joint report urges greater international cooperation on subsidies data, analysis, and reform

Greater international cooperation is needed to improve information and analysis on subsidies and their impact, which would in turn inform efforts to strengthen subsidies disciplines and reduce trade frictions arising from their use.  That is the key conclusion from a new joint report issued on 22 April by staff teams from the International Monetary Fund, the Organisation for Economic Cooperation and Development, the World Bank and the World Trade Organization.

Government support to agriculture

Public support for agriculture has reached record levels as governments enacted measures to shield both consumers and producers from the COVID-19 pandemic and other crises. Only a small share of this support has been directed at longer-term efforts to combat climate change and other food systems challenges.

Agricultural Policy Monitoring and Evaluation 2022 shows that the 54 countries monitored – including all OECD and EU economies, plus 11 key emerging economies – provided on average USD 817 billion of support to agriculture annually over the 2019-21 period, a 13% increase over the USD 720 billion reported for 2018-20. Support has remained substantial among OECD countries, and has increased significantly in the 11 emerging economies.

Although support has increased overall, the share of general services, such as innovation, biosecurity or infrastructure, has declined to 13% of support directed to the sector in 2019-21, down from 16% two decades earlier. These services are key for increasing sustainable productivity growth and therefore reducing greenhouse gas (GHG) emissions from agriculture. The report stresses that agriculture faces a complex climate change challenge due to its vulnerability to its effects, its role as a major source of GHG emissions and its potential to remove carbon from the atmosphere.

 
 

Government support to fisheries

Governments provide support to their fisheries sectors through a wide range of policies, including fisheries stock management, monitoring, control and surveillance, infrastructure, research, fuel tax exemptions and direct contributions to fishers’ incomes. The objectives vary but tend to centre around goals such as maintaining fishery employment, or improving fishers’ welfare and enhancing the sustainability of the sector. Yet much of the support goes to input subsidies (such as for fuel and vessels) that can contribute to over-fishing. Scope exists for reforms to better target fishers’ livelihoods without contributing to unsustainable practices. 

The OECD helps support a dialogue on government support to the fisheries sector using the OECD Fisheries Support Estimate (FSE) database, which measures fisheries support policies in a consistent and transparent way across all OECD member countries and other important fishing economies. The FSE and associated modelling work enable analysis of the impacts of fisheries support policies on resources and ecosystems, as well as on jobs, incomes, and value creation. This helps inform policymakers about necessary reforms to ensure policies can better deliver on their goals and ensure the long-term sustainability of fisheries.

New: OECD report on eliminating government support to illegal, unreported and unregulated (IUU) fishing. Read now.

 
 

Industrial subsidies and the level playing field

Recent OECD work has shone an unprecedented light on the ways in which governments provide support to large industrial producers. Work has looked at support received by firms in the aluminium and semiconductor value chains, and at below-market finance across 13 industrial sectors.

Besides direct government grants and tax concessions, governments provide support indirectly through the financial system. This below-market finance can take the form of banks offering loans at interest rates that are lower than firms would otherwise get on the market. It can also take the form of below-market equity return, whereby the government shareholders of industrial companies tolerate lower returns on their investments for longer than private investors would.

This ongoing OECD analysis helps identify the nature and scale of support in industrial sectors and provides analysis and advice to help guide reforms.

 
 

Support to fossil fuels

The OECD Inventory of Support Measures for Fossil Fuels measures support to fossil fuel production and consumption across 50 advanced and emerging economies. Support has been on a downward trend since its peak in 2013, but remains high at over USD 180 billion in 2020.

In 2020, fossil fuel support fell by 10% to USD 183 billion, largely due to the COVID-19 pandemic. The transport sector alone saw a 15% drop in support due to the slump in fuel use from restrictions on mobility. Among fuels, petroleum experienced the largest drop, with support down 19%. Direct support for the production of fossil fuels rose by 5%, reflecting in part large government bailouts to state oil and electricity companies. Were this support to persist beyond COVID-related emergency funding, it would further exacerbate the challenge of phasing out fossil fuel support.

Given the existential threat of climate change and the need for a green recovery, governments have an opportunity to accelerate investment in sustainable energy infrastructure and the creation of green jobs, and meet the UN Sustainable Development Goal 7 of ensuring access to affordable, reliable, sustainable and modern energy for all.