BIOFIN: The impact of subsidies and incentives on SA Biodiversity at UN Development Programme

In line with Aichi Target 3 of the Convention on Biological Diversity which states, to eliminate, phase out or reform all subsidies harmful to biodiversity (a similar target is under discussion for the 2021-30 Global Biodiversity Framework), the overall objective of the study will be to:

• Conduct an analysis to identify, assess and quantify the value and the cost of each type of subsidies and incentives likely to have a harmful impact on biodiversity;
• Understand the potential of redesigned options and prioritise efforts that take into consideration a full range of social, environmental, economic, and political economy concerns, trade-offs and possible compensation schemes throughout the re-design and transition process, including within the COVID-19 context;
• Develop a document proposing reform proposals for the prioritised subsidies. Develop a framework for incentives on the conservation and sustainable use of all the components of Biodiversity including at the species, ecosystem and genetic levels. Methodology The methodology will be based on existing literature, including the 2018 BIOFIN Workbook and other relevant approaches.

In undertaking the work, it is critical that stakeholders must be engaged including National Treasury, DFFE, Department of Trade and Industry, South African Revenue Authority, relevant Government Departments and other institutions/ organizations which may be identified at the project inception stage. The work must also make reference to key policy documents which support the use of subsidies and incentives which are harmful to biodiversity.

The consultant should propose a detailed methodology in the inception phase, based on but not limited to the following outline:

1. Research stage

a. Rapid mapping of all major subsidies and incentives (both with a positive and negative impact on biodiversity) in the country in key selected sectors (including subsidies, tax breaks, tax credits, grants, compensation schemes, under-pricing, subsidized tariffs, COVID-19 recovery programmes). Green subsidies will be included, as they could also have unintended adverse impacts. Both production and consumption subsidies will be considered.

b. Screening subsidies likely to have a significant impact on biodiversity: Preparation of an initial inventory of subsidies that may be harmful to biodiversity

c. Rapid stakeholder mapping of key role players in the identified sectors

d. Desktop review of these subsidy policies, legal and institutional framework, the objective and results, the total annual government financial costs, financial impacts of these subsidies at the level of the different category of household and category of producers, anticipated unintended effects of subsidy and if possible related economic costs preferably over a period of 5 years.

e. Develop criteria and indicators for prioritisation of sectors and subsidies focusing on financial/economic and biodiversity impacts including political economic consequences

f. Prioritization of at-least 5-6 subsidies/ incentives (with at least 1 with a positive impact on biodiversity) for in-depth assessment, considering financial/economic and biodiversity impacts following the desk review and consultative processes.

g. Draft report with initial inventory and draft reform proposals for identified subsidies and incentive

1. Validation stage

a. Validation meetings with key stakeholders including representatives of relevant civil society groups, business associations, local communities, and local governments, etc.

b. Final national inventory of subsidies of key sectors that are likely to harm biodiversity and ecosystems,

c. Final report with first suggestions of prioritised subsidies to redesign (prioritize at least 5-6 major subsidies).

1. IDENTIFYING AND ASSESSING REDESIGN OPTIONS

3.1 Review the potential for re-design options

a. Develop criteria and indicators for assessment of prioritized subsidies focusing on financial/economic and biodiversity impacts including political economic consequences

b. In-depth review of initially prioritized harmful subsidies, with detailed information on the objectives, size, nature and impact of the subsidies,

c. Define the final/priority list of subsidies to redesign (at least 2 or 3 major subsidies) and make a strong case for change. 3.2 Redesign scenarios

d. Development of redesign options aligned with national priority within the sector with 2-3 major scenarios that will be compared to the business as usual scenario for selected subsidies, including potential for avoided costs, perceived effectiveness, other climate/environmental impact. Redesign options can consist of either eliminating, reducing or greening the selected subsidy or redirecting savings to support nature-based solutions. This could be in the form of a framework that addresses the needs for decision making and potential policy development.

e. An Initial Impact Assessment analysis that identifies which part of the economy and society that will be affected directly and indirectly by different redesign options over time.

f. Political Economy Analysis including gender dimensions and with dedicated attention for vulnerable groups and poverty and health impacts.

g. Design support programs that ease the path of adaptation for companies or ease path of transition away from harmful practices and possible targeted compensation or exemption to low income groups, certain groups of workers, and other households affected by the proposed change.

h. Assess opportunities for action including options for repurposing savings generated to strength resilience and reduce future risks

i. Develop a communication/advocacy strategy for the redesign options

j. Review and endorsement by formal review committee.