What is an Agricultural Subsidies Indicator?

What are Agricultural Subsidies? Agricultural Subsidies are a proxy measure to assess the environmental impacts of policies that tend to encourage the inefficient use of resources that can lead to pollution. How do we know? Nominal Rate of Assistance The Nominal Rate of Assistance, or NRA, is defined as the price of an agricultural product in the domestic market (plus any direct output subsidy) less its global price expressed as a percentage of the global price (adjusting for transport costs and quality differences). Global Price (price at border) NRA Domestic Price (price with assistance) HOW TO SCORE WHEN DATA ARE MISSING? The World Bank only provides NRA data for around 82 countries. For all others, we use a set of rules to determine how to estimate a score for countries. Countries that have a negative NRA (i.e., taxation) receive the top score of 100. Countries with low to middle income (GNI per capita < $4,085). also receive a score of 100, as poor countries are less likely to subsidize their agriculture sectors (see figure below). For high income countries (GNI per capita > $12,616) with agriculture GDP > 5% of the total GDP, a point value is based on a regional GDP model. negligible agriculture sectors (agriculture GDP < 5%) do not receive a score at all. buntries that have Est. 100 100 No Score Score Score score High Income (GNI per capita >$12,616) Low - Middle Income (GNI per capita <$4,085) Negative Subsidies / Agriculture GDP < 5% Tax Income Subsidy Gap Due to monetary limitations, low-income countries have traditionally not provided agriculture subsidies. It is primarily high-income countries that can afford to subsidize agricultural production. 50% Assistance Subsidy gap between high-income countries & developing countries No Assistance High-Income Countries World Market 50% Tax Developing Countries 1955 2000 Why does it matter? Increased Environmental Pollution Agricultural subsidies have been found to lead to more intensive agriculture, inefficient use of resources such as water and agricultural inputs, and can lead to increased environmental pollution through the greater use of pesticides, insecticides, and fertilizers. Increased Use of Water 2-3 times more water 70% than needed of global freshwater use is for agriculture. Water used Water needed to grow plant Increased Use of Pesticides 62 million metric tons CROP SURPLUS 99.9% of sprayed insecticides migrate to nearby streams, rivers, and lakes through rainfall runoff Free water and electricity in India led to massive surpluses of 62 million metric tons. This was 60% of the nation's harvest in 2012 and the third largest grain harvest in the world. Over-Production 1.2 billion pounds of The over-production of government-favored crops distorts global commodity markets. Not only does this affect the global economy, but also food security and poverty. pesticides annually The United States uses 1.2 billion pounds of pesticides a year, of which only 0.01% reaches the intended target. The other 99.99% of pesticides sprayed contaminates the food, air, and water. government $$$ Environmental References Performance Index • "Agriculture and Rural Development", The World Bank: http://web.worldbank.org • "Communities in Peril: Global Report on Health Impacts of Pesticide Use in Agriculture."Pesticide Action Network International: http://www.pan-international.org/panint/files/PAN-Global-Report.pdf • G.T. Miller. "Chapter 9." Sustaining the Earth. 6th ed. Pacific Grove, California: Thompson Learning, Inc. (2004): 211-216 • "World Development Report 2008", The World Bank: http://go.worldbank.org/2DNNMCBGIO %24