Fossil-Fuel Subsidies and Climate Change

The document argues that removing fossil-fuel subsidies is a critical lever for reducing global greenhouse gas emissions and unlocking low-carbon energy pathways. It highlights that global emissions could decrease by 6% to 13% by 2050 through the phase-out of consumer subsidies, though these figures are likely underestimates as they exclude producer subsidies. The paper outlines how countries can incorporate FFSR into their INDCs, Nationally Appropriate Mitigation Actions (NAMAs), and the 2015 UNFCCC agreement. It emphasizes that to maximize emission reductions, subsidy removal must be coupled with binding emission caps in OECD countries to prevent 'carbon leakage' and simultaneous government investment in low-carbon energy and transport infrastructure to enable fuel switching.

• Global estimates suggest that phasing out consumer fossil-fuel subsidies could reduce global greenhouse gas emissions by between 6 and 13 per cent by 2050.
• Current emission reduction estimates are likely underestimates because they primarily focus on consumer subsidies and typically exclude the impact of removing producer subsidies, which the GSI estimated at approximately US$100 billion globally in 2010.
• The effectiveness of subsidy reform in reducing emissions is enhanced when coupled with a global climate policy agreement and binding emission caps in OECD countries, which prevents 'carbon leakage' where lower oil prices lead to increased consumption in non-reforming countries.
• To maximize the transition to low-carbon energy, governments must reinvest the significant financial savings from subsidy reform into energy efficiency and sustainable transport infrastructure to increase price elasticity and enable consumers to switch to cleaner alternatives.
• Fossil-fuel subsidies act as a form of negative carbon pricing; combining their removal with correct carbon taxation (accounting for social and environmental damages) could reduce global carbon dioxide emissions by 23 per cent based on 2010 data.
• The document proposes several mechanisms for integrating FFSR into the UNFCCC process, including including emission estimates in INDCs, utilizing Technical Experts Meetings (TEMs), and developing FFSR as Nationally Appropriate Mitigation Actions (NAMAs) to attract technical and financial support.

APA

Merrill, L., Harris, M., Casier, L., & Bassi, A. M. (2015). Fossil-Fuel Subsidies and Climate Change. International Institute for Sustainable Development. https://www.iisd.org/gsi/sites/default/files/FFS_Climate.pdf

Chicago

Merrill, Laura, Melissa Harris, Liesbeth Casier, and Andrea M. Bassi. Fossil-Fuel Subsidies and Climate Change. International Institute for Sustainable Development, 2015. https://www.iisd.org/gsi/sites/default/files/FFS_Climate.pdf.

Wikipedia

{{cite report |last1=Merrill |first1=Laura |last2=Harris |first2=Melissa |last3=Casier |first3=Liesbeth |last4=Bassi |first4=Andrea M. |title=Fossil-Fuel Subsidies and Climate Change |publisher=International Institute for Sustainable Development |date=2015 |url=https://www.iisd.org/gsi/sites/default/files/FFS_Climate.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{merrill2015fossilfuel, author = {Merrill, Laura and Harris, Melissa and Casier, Liesbeth and Bassi, Andrea M.}, title = {{Fossil-Fuel Subsidies and Climate Change}}, institution = {International Institute for Sustainable Development}, year = {2015}, url = {https://www.iisd.org/gsi/sites/default/files/FFS_Climate.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }