Article Series: Fossil Fuel Subsidies

Untold Billions: Fossil-Fuel Subsidies, Their Impacts and the Path to Reform

Untold Billions is a series of five papers examining important themes related to fossil-fuel subsidies.

Research Type: 

A Summary of Key Findings

This paper summarizes the key messages from the five research papers in the Untold Billions series.

Mapping the Characteristics of Producer Subsidies: A Review of Pilot Country Studies

This paper helps increase the body of knowledge about the data sources that hold information on subsidies to fossil-fuel producers, by reviewing available data in a diverse group of countries in terms of data transparency, governance systems, energy markets and stages of economic development - China, Germany, Indonesia and the United States. It finds that fossil-fuel producers are supported by a multitude of policies, ranging from direct payments to preferential access to government-owned lands. While direct payments proved relatively easy to identify in government budget reporting, data was not always provided at a sufficient level of disaggregation to allow proper attribution to beneficiaries.

The Economic, Environmental and Social Effects of Subsidy Reform

This paper reviews the impacts of fossil-fuel subsidy reform, drawing on six major modelling studies conducted since the early 1990s. Each of these studies assessed the economic and environmental impacts of reform at a global level, and in a few cases estimated the social impacts as well. All studies conclude that reform would result in aggregate increases in gross domestic product (GDP) in both OECD and non-OECD countries; and that reform would reduce CO2 emissions. Work conducted by the World Bank suggests that negative social impacts could be associated with reform, but that they could potentially be offset by re-targeting some of the saved subsidy expenditure at social programs.

The Political Economy of Subsidy Reform

This paper argues that failures to reform subsidies are mainly due to failures to appreciate the political economy of subsidy policies. It suggests four lessons for reformers: first, that reform efforts must look at the political drivers that allowed the subsidy to be created and maintained. This may require a strategy to inoculate reforms against powerful interests. Second, transparency about subsidy costs usually promotes reform. Third, where political obstacles are insurmountable, better policy design can help reduce unwanted impacts and ease future reform attempts. And fourth, that an improvement of government administration systems can help open up more policy choices than to subsidize.

Strategies for Reforming Fossil-Fuel Subsidies: Practical Lessons From Ghana, France and Senegal

This paper draws on case studies the GSI has commissioned on fossil-fuel subsidy reform in Brazil, France, Ghana, India, Indonesia, Poland and Senegal. It identifies six stages that improve the chance that a reform process will lead to lasting change: research of subsidy costs, benefits and reform impacts; establishment of clear reform objectives and parameters; construction of a coherent reform policy, including a timeframe, complementary policies to offset unwanted secondary impacts and a communications strategy; effective implementation; monitoring evaluation and adjustment; and finally institutional measures to prevent back-sliding.

Gaining Traction: The Importance of Transparency in Accelerating Reform

Drawing on existing literature on transparency in public policy, this paper describes how improved information could most usefully support reform and how this can be achieved given available time and resources. An analysis of previous efforts to improve transparency about subsidies – in energy and other sectors – is used to suggest options for a feasible international system for evaluating and reporting on fossil-fuel subsidies. The paper concludes that improving transparency requires a two-track approach: better reporting within countries and a new international regime to gather and manage data. Support for this paper was provided by the United Nations Environment Programme (UNEP).