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The Triple Win. Fossil Fuel Subsidy Reform and Fuel Taxation: Opportunities for governments to save money, fund sustainable development, and reduce GHG emissions

The combined impact of fossil fuel subsidy reform (FFSR) and an increase in gasoline and diesel fuel taxation could do three things: save and raise money for governments, reduce emissions, and provide upfront and ongoing domestic resources to fund sustainable development and energy.

Currently, global consumer and producer fossil fuel subsidies stand at around USD 425 billion annually, and although consumer subsidies have decreased nominally due to a combination of lower oil prices and active reforms, it is also estimated that the overall effective gasoline taxation has actually fallen by 13.3 per cent from 2003 to 2015. However, with a combination of FFSR and sensible increases in fuel taxation, carbon dioxide emissions could be reduced by 23 per cent globally and raise much-needed revenue to governments (2.6 per cent of GDP). For example, India and Indonesia both saved around USD 15 billion each in 2015 from FFSR. Almost 70 countries included either FFSR or fuel taxation in their Nationally Determined Contributions. This paper makes the link between the fiscal instruments of fossil fuel subsidy reform and fossil fuel taxation with the implementation of the Paris Agreement and SDGs (Goal 7: sustainable energy; Goal 12: sustainable production and consumption where FFSR is included as a means of implementation [MoI]; and Goal 17: MoI and financing).

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