The evidence is crystal clear that fossil fuel subsidies are environmentally harmful and undermine efforts to tackle climate change. In the aftermath of COVID-19, governments have an opportunity to use subsidy reform and fuel taxation as tools for a green recovery. (…) Today’s low global oil prices provide a chance for countries to reform their fossil fuel subsidies without burdening consumers. Our research shows that several countries have already embarked on this journey, such as India, Costa Rica, and Tunisia.
Fossil fuel subsidy and taxation reform can increase government revenues and raise much-needed funds to respond to and recover from the COVID-19 pandemic. IISD experts have shown that we could generate USD 1 billion worldwide per day with just a small tax of 12.5 cents per litre of gasoline and diesel. And, because of today’s low oil prices, consumers would still benefit from markedly lower prices at the pump than before the COVID-19 crisis. The IISD experts conclude that a temporary increase in taxes on gasoline and diesel “is one of the fairest, greenest ways to fund post-pandemic economic stimulus packages.”
The process of reforming fossil fuel subsidies or increasing taxation is complex and politically challenging. But many countries manage their reforms in a careful, courageous, and well-communicated way, and even more can learn by example to seize this opportunity and build a better future for all. Countries around the world need to take action now to shift money from harmful subsidies to sustainable recovery projects that minimize impacts on nature, accelerate the low-carbon transition, and improve social cohesion.
This is an excerpt from a blog article written by Lourdes Sanchez , Peter Wooders, Mostafa Mostafa and Ronja Bechauf, published on August 18, 2020 in the IISD library. You can read the entire piece here.