Energy  |  Publications  |  06.09.2012

Fossil Fuel Subsidies reform in 24 OECD Countries

This report commissioned by Yves Cochet, Member of the European Parliament, and Elise Buckle, Manager of SustainEnergy, provides a summary for decision-makers on how much money could be saved from fossil-fuel subsidy reform in 24 OECD countries. It shows that this reform would lead to a significant cut in greenhouse-gas emissions, while freeing up money to be invested in a clean energy, green jobs, as well as other public goods.

The report synthesizes the existing knowledge on fossil-fuel subsidies by presenting brief profiles of these subsidies in selected EU and G20 countries. While there are large gaps in the data provided by governments—highlighting the need for transparency—the report shows that countries like the USA, Germany, Australia, Mexico and the UK could save between 4 and 12 billion Euros a year by phasing out their government support to fossil fuels.

Scale of Fossil Fuel Subsidies

While governments are struggling to fulfill their promise of mobilizing US$100 billion dollars a year by 2020 for climate change mitigation and adaptation, a pledge that was made at the Copenhagen summit in 2009, recent studies estimate that around US$750 billions dollars of public founds are being spent every year to support the consumption and production of fossil fuels.

Benefits of reforming fossil fuel subsidies

Reforming fossil fuels subsidies would lead to a significant cut in greenhouse-gas emissions, while freeing up money to be invested in a clean energy, green jobs, as well as other public goods. According to a review by the Global Subsidies Initiative of IISD (International Institut for Sustainable Development) of six studies, fossil fuel subsidy reform would result in aggregate increases in gross domestic product (GDP) in both OECD and non-PECD countries, up to 0,7 per cent each year until 2050.

Objectives of the report

The aim of this report is to highlight how much money could be saved by governments from fossil fuels subsidy reform, without applying to any subjective judgment to the available data. The report does not go further into prescribing specific policy measures about how the reform should be implemented at a national level, stressing that this decisions need to be taken by policy-makers who understand the national context. However, in the context of the past Rio+20 summit and the G20 summit, the authors offered suggestions for policy language that could be adopted by the international community to create an enabling environment for policy reforms at the national level.

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Yves Cochet and Elise Buckle