Press release

IISD's GSI tackles reform of inefficient fossil fuel subsidies ahead of G20 meeting of finance ministers

April 20, 2010
Urges G20 to ensure climate change, energy security and poverty alleviation objectives are met

GENEVA—April 21, 2010—The International Institute for Sustainable Development's Geneva-based Global Subsidies Initiative (GSI) has issued a five-part series of reports into how nations might remove fossil-fuel subsidies, on the eve of a meeting of G20 finance ministers in Washington this week.

GSI's Untold Billions: Fossil-fuel subsidies, their impacts and the path to reform provides necessary research and analysis to support the commitment by the G20 and the Asia-Pacific Economic Cooperation (APEC) forum to phase out inefficient fossil-fuel subsidies.

"This will be easier said than done. Subsidies are notoriously difficult to remove." said David Runnalls, president of IISD. "The issue of fossil-fuel subsidies drives right to the heart of climate change and sustainable development and must be addressed urgently. The G20 should be commended for their early leadership but they can't afford to let that leadership lag."

In recent decades, many countries have attempted to remove government support for the production or consumption of fossil fuels, with varying degrees of success.

Jose Maria Figueres, chairman of the Carbon War Room and former President of Costa Rica, has seen some success after his government introduced a carbon tax and law to remove fossil fuels in 1995.

"That tax funded farmers to protect and develop forests on private land, raising their income levels," Figueres said in a foreword to GSI's summary of key findings. "Removing fossil-fuel subsidies will enhance the market for new energy solutions by making them more competitive, spurring innovation and development."

UN Under-Secretary General and United National Environmental Program executive director Achim Steiner also contributed to the report as part of an ongoing collaboration with GSI. In the foreword he said: "Reforming fossil-fuels subsidies—in particular, those that are the most inefficient and environmentally damaging—offers one way of realizing a more sustainable, green economic future that includes quick wins on climate change, a small but not insignificant boost to global and national GDP, and reduced dependence on a finite resource."

GSI estimates subsidies to fossil fuels account for roughly US$500 billion per year. This figure includes subsidies to lower the prices of petroleum products, kerosene or liquefied petroleum gas (LPG), typically in developing countries, as well as subsidies to the oil, gas or coal industries, provided by many governments in both developing and developed countries. 

Summary report:

For more information, please contact IISD media and communication officer, Nona Pelletier, Phone: +1-(204)-958-7740, Cell: +1-(204)-962-1303 or GSI research officer Kerryn Lang, Phone: +41 (22) 917-8920


Key findings from the GSI's five-part research series, Untold Billions:
  • The effects of fossil-fuel subsidy reform – Eliminating fossil-fuel subsidies will have significant economic advantages in terms of increased GDP, alongside major environmental benefits, namely reduced greenhouse gas emissions. A recent study by the OECD foresees that removing subsidies in 20 developing and emerging countries could reduce carbon dioxide emissions by 13 per cent by 2050.
  • The politics of fossil-fuel subsidies – Subsidy reformers must begin the reform process with an appreciation of the powerful interest groups determined to perpetuate subsidies as well as the political motives that maintain these subsidies in order to design strategies that inoculate policy reforms against such opposition.
  • Strategies for reforming fossil-fuel subsidies – Not all previous attempts to reform fossil-fuel subsidies have been successful. In order to implement lasting change, subsidy reformers need well-designed reform strategies that also include supporting policies to reduce the negative impacts of reform on affected stakeholders.
  • The need for transparency – Collaborative efforts by national governments and international organizations are needed in order to forge comprehensive fossil-fuel subsidy reform plans over several years and provide a sound information base for assessing their impacts, negotiating commitments to implement them, and monitoring progress of their phase-out.
  • Mapping the characteristics of fossil-fuel subsidies – Investigating the scope and magnitude of subsidies provided for the production of fossil fuels will take time and detailed, country-level and fuel-specific analyses. Surveys of available data in the United States, China and Germany help to establish where crucial information deficits exist, and highlight current trends in data availability, along with emerging issues that are likely to become prominent in the future.
About GSI: Mission
Governments worldwide spend trillions of dollars annually on subsidies, one of the most powerful tools at their disposal for achieving specific public policy goals, such as nurturing nascent industries, attracting foreign investment and making goods cheaper for consumers. Too often, however, public funds are allocated not in favour of the public good, but in response to electoral concerns and the lobbying pressure of special interest groups. There is a critical need, therefore, for the monitoring and evaluation of government subsidies by independent bodies. Through a network of experts and cooperating institutions, the Global Subsidies Initiative fulfils this role and orients policy-makers on indispensable subsidy reforms.

About IISD

The International Institute for Sustainable Development (IISD) is an award-winning independent think tank working to accelerate solutions for a stable climate, sustainable resource management, and fair economies. Our work inspires better decisions and sparks meaningful action to help people and the planet thrive. We shine a light on what can be achieved when governments, businesses, non-profits, and communities come together. IISD’s staff of more than 250 experts come from across the globe and from many disciplines. With offices in Winnipeg, Geneva, Ottawa, and Toronto, our work affects lives in nearly 100 countries.