Article Series: Fossil Fuel Subsidies

Regional Overviews

Fossil-fuel subsidies are present in many countries around the world. The comparison of country experiences at a regional level can help identify problems and solutions that may be relevant across a given region. These GSI publications examine fossil-fuel subsidies from this regional perspective.

Fossil-Fuel Subsidies: A Barrier to Renewable Energy in five Middle East and North African Countries

This paper explores the current status of fossil-fuel subsidies and renewable energy in five Middle East and North African (MENA) countries. A general introduction sets out the issues across the region. The body of the paper looks at the five individual study countries. For each, it describes the structure of the energy sector, renewable energy status, and the status of fossil-fuel subsidies before making some observations on the impact of fossil-fuel subsidies, particularly in relation to renewable energy. The final section of the paper reviews the countries as a whole and draws some conclusions as to the status of renewable energy, and how it is affected by the existence of fossil-fuel subsidies.

Fossil-Fuel Subsidies in the GCC Region and Their Impact on Renewable Energy Development

This discussion paper looks at fossil-fuel pricing and subsidies in the political, social and economic context of Gulf Cooperation Council countries: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. It provides an overview of IEA and IMF estimates of fossil-fuel subsidies in GCC countries, as well as additional GSI price-gap calculations on subsidies for gasoline and diesel used as transport fuels and electricity generation. The paper then analyzes the impact that fossil-fuel subsidies have on renewable energy development in the region. It finds that at least partial reform of fossil-fuel subsidies would assist GCC countries in meeting their economic, fiscal, social and environmental objectives, but that political opposition to increased energy prices is a key barrier to change.

Fossil-Fuel Subsidy Reform in APEC Economies

Asia-Pacific Economic Cooperation (APEC) economies are estimated to have spent at least US$ 105 billion subsidizing fossil-fuel consumption in 2010. This estimate excludes subsidies for fossil-fuel production, which the GSI estimates could be worth more than US$100 billion per year worldwide. Some APEC economies are spending up to 2.8 per cent of national gross domestic product (GDP) or as much as US$ 840 per capita, despite evidence that fossil-fuel subsidies tend to be regressive, with only around 8 per cent of the benefits reaching the poorest 20 per cent of the population. These subsidies incentivize fossil-fuel production and consumption, increasing energy demand and exacerbating harmful emissions, undermining APEC’s sustainable green growth agenda.

In November 2009 APEC Leaders agreed to “rationalise and phase out over the medium term fossil-fuel subsidies that encourage wasteful consumption, while recognising the importance of providing those in need with essential energy services.” The APEC Secretariat commissioned the GSI to prepare this report as part of the Energy Working Group’s (EWG) program to implement the APEC Leaders’ commitment over the medium term.

The report is divided into three parts:

  1. It draws on existing literature to provide an overview of the types and magnitude of fossil-fuel subsidies in APEC economies; their economic, environmental and social impacts; and issues raised by the private sector and political economy challenges (Sections 1–7).
  2. It provides new case examples of reform efforts in seven APEC economies that illustrate key elements of a subsidy reform strategy and draw lessons that can be shared with other policy-makers (Section 9).
  3. It outlines a framework for planning and implementing subsidy reform, along with policy options and suggestions for capacity building (Sections 8 and 10).