The objective of this report is to inform about the general linkages between subsidies and their potential adverse effects, particularly on the environment but also on the economy. Subsidies that are harmful to the environment and the economy at the same time are also called perverse subsidies. The linkages between subsidies and their potential adverse effects are described mainly qualitatively, since very little data exists on quantitative effects, particularly effects on the environment,
from the usage of harmful subsidies. The first part of the report gives general definitions and outlines the theory on subsidies and the linkages to harmful consequences for the environment and the economy. The second part of the report provides empirical examples of the linkages between distorting subsidies, the environment, and the economy within six different sectors: agriculture, fishery, energy production, transport, water, and forestry. These examples mostly contain qualitative assessments, but to give an impression of the magnitude of the problem, estimates of total subsidies granted worldwide are included. The report is based on existing literature in the area and no new calculations are conducted.
