A Step-by-Step Guide for Governments to Prepare Fossil Fuel Subsidy Inventories
The Coalition on Phasing Out Fossil Fuel Incentives Including Subsidies (COFFIS) was launched at the 28th United Nations Climate Change Conference (COP 28) in 2023, with 17 countries committing to work on fossil fuel subsidy reforms. Creating transparent and comprehensive inventories of fossil fuel subsidies is an important step toward reform. This guidance paper is intended to assist COFFIS members and other governments in producing such an inventory by providing actionable inputs into the process.
Recommendations
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Fossil fuel subsidy inventories should be led by agencies that can initiate legislative or regulatory proposals for reform and involve all government agencies concerned with fossil fuel subsidies, under a whole-of-government approach.
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Inventories should be consistent with the subsidy definition in Article 1.1 of the WTO ASCM and include additional elements as appropriate. It’s preferable to use internationally recognized terminology to categorize subsidy measures, to ensure better communication and knowledge-sharing.
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It is crucial that inventories provide an estimate of the fiscal costs of subsidies to governments, including of government revenue foregone.
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Inventory updates should be conducted on an annual basis to demonstrate progress and further improve the quality of subsidy data.
Every year, governments worldwide spend at least USD 1 trillion dollars on subsidies to fossil fuels. This spending puts a strain on government budgets, contributes to climate change and air pollution, and distorts the markets in favour of fossil fuels and against other, cleaner energy sources.
As early as 2009, G20 leaders agreed to phase out “inefficient” fossil fuel subsidies over the medium term, and at COP 26, parties to the United Nations Framework Convention on Climate Change called for phasing out “inefficient fossil fuel subsidies.” However, these commitments have not translated into tangible progress on subsidy reform.
In response, COFFIS was launched at COP 28 in 2023 and has since seen 17 countries committing to work on fossil fuel subsidy reforms both collectively and through domestic action. In their Ministerial Statement launching the coalition, COFFIS member states committed to providing transparency on their fossil fuel subsidies by publishing an inventory.
Creating transparent and comprehensive inventories of fossil fuel subsidies is an important step toward reform. This guidance paper is intended to assist COFFIS members and other governments—including at the subnational level—in producing such an inventory.
Countries should follow the following steps in compiling their inventory:
- Step 1. Apply a whole-of-government approach
- Step 2. Work under a comprehensive subsidy scope and definition
- Step 3. Choose an appropriate method to measure subsidies
- Step 4. Consider evaluating subsidy measures from an environmental or otherwise broader socio-economic perspective
- Step 5. Plan for transparent and regular publication and update of the inventory
For countries that do not yet have fossil fuel subsidy inventories, compiling one is a low-hanging fruit for improving transparency. Even a simple inventory can trigger important conversations, and an inventory based on the best practices can both unlock pathways for reform action plans and serve as an effective communication tool with different audiences.
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