Trade policy measures to enhance agricultural sustainability and environmental clauses in trade agreements are on the rise, reflecting governments’ efforts to enhance the sector’s long-term resilience.

But a new OECD report warns that reducing agriculture’s environmental footprint while improving food security will require reforming support and redirecting public spending toward research, innovation, and sustainable farming.

OECD Agricultural Policy Monitoring and Evaluation 2025, the global reference on government support policies for agriculture across 54 countries representing 75% of global agriculture value added, shows that total support to agriculture averaged $842 billion per year during 2022-2024.

This was 20% higher than the pre-pandemic period (2015-2019).

The subsidies with the strongest potential to distort markets, such as price support for producers, payments based on output, and subsidies for inputs such as fertilisers or fossil fuels, declined in relative terms from 15% of the sector’s production value on average between 2000 and 2002, to 9% in 2022 to 2024.

However, they still represent about half of the total support provided today.

Governments are increasingly using trade agreements as a tool to promote sustainable agriculture.

Between 1997 and 2024, OECD members applied or approved 130 measures, mostly through regional trade agreements, with 60% of them being approved over the past seven years.

The report recommends greater harmonisation of sustainability clauses across trade agreements to facilitate their implementation and monitoring, reduce compliance costs for businesses, and help ensure a level playing field for sustainable practices.

OECD secretary-general, Mathias Cormann said: “To complement trade agreements that encourage sustainable agriculture, governments can replace market-distorting subsidies with better targeted support for research, innovation and sustainable farming practices.

"This would boost productivity, improve food affordability and security, strengthen the environmental sustainability and resilience of agriculture, and sustain the livelihoods of millions of people who depend on the agriculture sector worldwide.”

The value of agro-food exports has grown to $1.4 trillion, nearly five times higher than three decades ago and outpacing production growth.

However, agricultural products continue to face higher tariffs and quantitative restrictions compared to other sectors, as well as more non-tariff measures that may restrict trade.

In 2021–2023, the Americas exported 40% of global agri-food value, while Asia imported 47%, driven by population growth, rising incomes and consumption and expanding urbanisation.

Government investments in agricultural innovation and other services – critical for meeting the sector’s productivity and sustainability objectives – remain low.

In particular, public investments in agricultural knowledge and innovation systems have fallen to 0.54% of the sector’s production value in 2022-2024, down from 0.92% in 2000-2002, despite their role in strengthening the resilience of global agro-food value chains.

OECD recommendations

In the report, the OECD recommends a policy agenda to feed a growing global population in an efficient, resilient, and environmentally sustainable way.

This includes:

Reforming, reorienting, and phasing out where possible the most distorting forms of support;
Reducing income support measures with low transfer efficiencies and prioritising targeted and tailored mechanisms for the direct benefits to farmers;
Investing more in targeted innovation and sustainable productivity growth;
Promoting broad approaches to resilience that ensure preparedness and risk management systems that respond to OECD frameworks;
Promoting environmental protection and mitigation of negative environmental impacts, balanced with open and transparent trade and efforts to address the triple challenge facing agriculture.

The report includes detailed analyses for selected countries and the EU, reviewing major policy developments in 2024 and early 2025 with the latest data on agricultural support including the composition of support and its changes over time.

Working with over 100 countries, the OECD is a global policy forum that promotes policies to preserve individual liberty and improve the economic and social well-being of people around the world.

European Union

The OECD report outlined that the European Union has introduced a range of trade-related measures linked to the environmental sustainability of agriculture, reflecting its commitment to aligning trade policy with environmental objectives.

Recent EU trade agreements include dedicated chapters on sustainable food systems to drive improvements of the sector’s performance.

Evaluating the outcomes of these provisions is essential, according to the OECD, to ensure they deliver on their potential and to guide any needed adjustments.

Ambitious climate mitigation policies were also introduced, including regulations that apply to both domestic production and imports.

While these initiatives are promising, continued efforts to assess their effectiveness in achieving climate objectives and to understand their potential trade impacts would help ensure that they remain responsive to emerging challenges and address any unintended trade effects in a timely and balanced manner, the report concluded.

The Nature Restoration Law includes regulatory elements such as quantified targets, obligations on member states, and an integrated connection with other EU environmental policies.

Strong enforcement mechanisms are necessary to ensure that the outcome-oriented approach adopted to design this regulation will be also the guiding principle for its delivery, the OECD stated.

The CAP 2023-2027 emphasises performance, simplicity and a modernised approach, introducing a new delivery model.

While this approach has offered increased flexibility for member states, the OECD said that it has also introduced new requirements and adds complexity.

Further improvements are recommended as necessary to simplify the CAP while maintaining adequate compliance.

The OECD advises that future reform should focus on enhanced enforcement of a reduced number of interventions to reduce the administrative burden for both administrations and beneficiaries.

On average, member states plan to direct approximately a quarter of CAP direct payments to eco-schemes, which are the main tool to achieve environmental and climate goals.

Similarly, environment and climate-related interventions are expected to receive the largest share (32%) of Pillar 2 funding.

Nevertheless, available evidence shows a low level of climate and environmental ambition of member states’ CAP Strategic Plans (CSPs), which mostly favour economic rather than environmental outcomes, the report stated.

The OECD recommended that additional efforts should be made to favour the adoption of innovative policy approaches such as collective agri-environmental schemes and result-based payments for a more effective delivery of environmental public goods and services.

Amendments to the CAP came into force in May 2024, aiming to reduce the burden on farmers and to provide more flexibility for member states regarding some conditionality standards.

The OECD report now states: "While these changes may have eased the implementation of some rules, they have also diminished the policy’s environmental ambitions and could further undermine its effectiveness in promoting public goods or reducing environmental harm.

"Flexibility could be reduced in critical areas to increase policy performance."