DIRECTION DE L'ENVIRONNEMENT ENVIRONMENT DIRECTORATE

Le Directeur The Director

ENV/D/2004.141 Paris, 18 October 2004 Ref: your letter SCBD/SEL/ML/GD/43980, 9 June 2004

Dear Mr. Zedan,

Let me thank you for the opportunity to provide information regarding OECD work on environmentally harmful subsidies, particularly those that affect biodiversity.

The OECD has a very long tradition in looking at the impacts of subsidies on the environment, as well as on the economy. Over the years, this has resulted in a number of publications which have helped governments in their deliberations of policy reform. Included in this letter are some examples of OECD work on those subsidies that have repercussions for the environment.

The focus of recent OECD work has been to: 1) take stock of the available data 2) agree on a set of definitions of support measures in different key economic sectors 3) elaborate an analytical framework to assess the potential harmful effects of subsidies on the environment (a "checklist approach" has been developed) and 4) identify the barriers (e.g. economic and social) to subsidy reform.

The outcome of the first phase of this work is included with this letter (Environmentally Harmful Subsidies: Policy Issues and Challenges). A second phase, now completed, focused on testing the relevance and feasibility of the "checklist" on sectors (e.g. energy, transport, fisheries, water). These were discussed at a workshop in November 2003 (OECD Technical Workshop on Environmentally Harmful Subsidies), as well as papers on the political economy of subsidy reform. A synthesis report should be released soon (SG/SD(2004)3/FINAL). In the context of the 2005-2006 OECD programme on sustainable development, further work on environmentally harmful subsidies will be carried out with a particular focus on the policy issues related to subsidy reform. A substantial volume that will give a comprehensive treatment of OECD work on environmentally harmful subsidies during the past three years is also under preparation.

Relating specifically to biodiversity, the OECD Working Group on Economic Aspects of Biodiversity has been considering the role of harmful subsidies in impeding the creation of markets -- in particular, markets that would benefit biodiversity. The results of the Group's work will be published in a Handbook of Market Creation for Biodiversity that will be available in mid-November.

We hope this material provides useful input into SBSTTA’s report and look forward to continued collaboration across a broad range of activities.

Yours sincerely,

Lorents G. Lorentsen

Mr. Hamdallah Zedan Executive Secretary Convention on Biological Diversity

By e-mail to : [email protected]

Mailing address: 2, rue André-Pascal, 75775 Paris Cedex 16, France Street address: 15, boulevard de l’Amiral-Bruix, 75116 Paris, France Direct line : +33 (0) 1 45 24 93 00 Fax : +33 (0) 1 44 30 62 32 E-mail : [email protected] http://www.oecd.org/env -----Original Message----- From: [email protected] To: [email protected] Cc: [email protected] Sent: 19/10/2004 5:41 AM Subject: FW: ENV/OECD re CBD Seventh Meeting, Decision VII/18

To let you know that the following OECD publications are being mailed today to Mr. Zedan :

* Improving The Environment through Reducing Subsidies - Part I, Summary and Policy Conclusions * Improving The Environment through Reducing Subsidies - Part II, Analysis and Overview of Studies * Improving The Environment through Reducing Subsidies - Part III, Case Studies * Environmentally Harmful Subsidies - Policy Issues and Challenges * Reforming Energy and Transport Subsidies - Environmental and Economic Implications * Perverse Incentives in Biodiversity Loss (WPGSP Working Group on Economic Aspects of Biodiversity)

Regards,

Anne.

2