Natural Resource Subsidies, Trade and Environment: The Cases of Forests and Fisheries

The paper argues that natural resource subsidies—direct, indirect, and implicit—lead to overcapitalization, technological inefficiency, and overconsumption, resulting in severe environmental damage. Using forests and fisheries as case studies, it demonstrates how low rent capture and fleet modernization subsidies drive deforestation and stock depletion. The author suggests that international bodies, particularly APEC's Economic Committee, should adopt 'full-cost pricing' and the 'User-Pays Principle' to internalize environmental externalities and ensure sustainable resource management.

• Natural resource subsidies degrade the environment through five intermediary processes: overcapitalization (drawing excessive investment), the technology effect (incentivizing pollution-intensive or high-impact gear), resource inefficiency (removing incentives for efficient use), overconsumption (lowering prices to increase demand), and public resource deprivation (stripping the state of funds for enforcement).
• In the forestry sector, the failure of governments to capture full economic rents on logging concessions acts as a major subsidy. For example, in 1993, Indonesia captured only 20 to 33 percent of economic rents, and Malaysia captured 35 to 53 percent in 1991.
• Log export restrictions intended to stimulate domestic processing often lead to industrial overcapacity and increased pressure on forests. In Indonesia, such restrictions created a milling capacity of 54.9 million cubic meters per year by 1990, far exceeding the estimated maximum sustainable yield of 22 million cubic meters.
• The marine fisheries sector suffers from a 'tragedy of the commons' exacerbated by explicit subsidies for fleet modernization. Between 1950 and 1969, Canada provided loans for new vessels where only slightly more than $3 million of $41 million were repaid.
• Fuel subsidies for fishing fleets encourage the use of fuel-intensive engines that allow vessels to reach distant, previously unexploited stocks. The value of such subsidies for the former Soviet Union was estimated at $5-6 billion annually.
• The global fishing industry operates at a massive deficit, with annual costs estimated at $124 billion against a catch value of $70 billion. The resulting $54 billion annual loss is largely underwritten by governments, particularly Japan, the former Soviet Union, and the EU.
• Implicit subsidies occur when market prices fail to internalize environmental externalities and user costs. The FAO estimates that proper management of depleted fish stocks could increase annual revenues by $15 billion.
• The World Trade Organization's (WTO) subsidies code is limited because its definition of 'financial contribution' excludes the failure to capture rents from logging or the waiving of fisheries access fees.
• The author proposes that APEC's Economic Committee adopt an 'economic instruments' approach based on the OECD's 'User-Pays Principle' to ensure that the price of a resource covers extraction costs, environmental externalities, and depletion costs.

APA

Porter, G. (n.d.). Natural Resource Subsidies, Trade and Environment: The Cases of Forests and Fisheries. Center for International Environmental Law. https://www.ciel.org/wp-content/uploads/2015/02/NaturalResourceSubsidies.pdf

Chicago

Porter, Gareth. Natural Resource Subsidies, Trade and Environment: The Cases of Forests and Fisheries. Center for International Environmental Law, n.d. https://www.ciel.org/wp-content/uploads/2015/02/NaturalResourceSubsidies.pdf.

Wikipedia

{{cite report |last1=Porter |first1=Gareth |title=Natural Resource Subsidies, Trade and Environment: The Cases of Forests and Fisheries |publisher=Center for International Environmental Law |url=https://www.ciel.org/wp-content/uploads/2015/02/NaturalResourceSubsidies.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{porterndnatural, author = {Porter, Gareth}, title = {{Natural Resource Subsidies, Trade and Environment: The Cases of Forests and Fisheries}}, institution = {Center for International Environmental Law}, url = {https://www.ciel.org/wp-content/uploads/2015/02/NaturalResourceSubsidies.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }