Policy Analysis

Phase out fossil-fuel subsidies

By Mark Halle on October 28, 2010

In an article in The Broker, IISD's Mark Halle discusses the benefits of fossil-fuel reform. He notes fossil-fuel subsidies cost the global economy an estimated US$500 billion annually.

But these heavy subsidies serve to discourage energy efficiency and defer investment in clean-energy systems.

If international governments were to stop subsidizing fossil fuels, global greenhouse gas (GHG) emissions could be cut by as much as 10 per cent by 2050.World leaders have already taken the first tentative steps in this direction. At present, there is a unique set of circumstances that can facilitate subsidy reform. The current economic crisis, high and volatile energy prices, increasing concern over energy security and continuing pressure to reduce GHG emissions all combine to make subsidy reform a relatively easy sell.The U.S. decided to include fossil-fuel subsidy reform on the agenda when it hosted the Group of Twenty (G-20) summit in Pittsburgh in September 2009. The result was a commitment from leaders to "rationalize and phase out over the medium term inefficient fossil-fuel subsidies that encourage wasteful consumption."

Policy Analysis details