Fossil-Fuel Subsidy Reform: Challenges and opportunities

The report details a workshop in Bali, Indonesia, focused on reforming fossil-fuel subsidies in Southeast Asia. It presents a policy framework based on three pillars: getting energy prices right, managing reform impacts, and building public support. The document includes case studies from the Philippines, Vietnam, Indonesia, Malaysia, India, and Iran, highlighting the fiscal burdens of subsidies, the effectiveness of targeted cash transfers and 'lifeline' tariffs, and the political difficulties of price deregulation. It emphasizes that successful reform requires comprehensive communication strategies, impact assessments for vulnerable groups, and a transition toward market-based pricing to support green growth and energy efficiency.

• Fossil-fuel subsidies in several Southeast Asian countries represented a significant share of their GDP in 2011: Indonesia (US$21.3 billion, 2.5%), Malaysia (US$7.2 billion, 2.6%), Philippines (US$1.5 billion, 0.7%), Thailand (US$10.3 billion, 3.0%), and Vietnam (US$4.1 billion, 3.4%).
• The Philippines deregulated its downstream oil sector in 1998, which helped diversify its energy mix by increasing the supply of renewable energies such as geothermal, hydro, wind, and biomass.
• To mitigate the impact of fuel price increases, the Philippines implemented the Public Transport Assistance Program, distributing 1.22 million smart cards with pre-loaded credit to jeepney and tricycle drivers to discount fuel bills.
• Vietnam's Green Growth Strategy identifies fossil-fuel subsidy reform as essential because subsidies are costly, drive greenhouse gas emissions, and are regressive, with few benefits reaching the poor.
• Malaysia used a 'Subsidy Rationalization Lab' in 2010, involving 70 experts and extensive public engagement via SMS polls and forums, which saw public agreement for reducing subsidies increase from 60 per cent to 90 per cent after an Open Day event.
• Iran's 2010 energy subsidy reform is cited as a success due to the use of direct cash transfers, where 80 per cent of the population received payments in bank accounts before the reforms were implemented to improve public acceptance.
• The Philippines' former Oil Price Stabilization Fund (1984–1998) was found to be regressive, with 92.8 per cent of benefits going to high- and middle-income groups and only 7.2 per cent to the lowest quintile.
• Vietnam utilizes an 'Incremental Block Tariff' structure for residential electricity, including a lifeline tariff for the poor (first 50 kWh) that recovers approximately 40 per cent of the economic cost of supply.
• India's fuel subsidies for diesel, LPG, and kerosene have led to significant 'under-recoveries' for national oil companies and the diversion of subsidized fuels to industrial and commercial use.
• The IISD Guidebook for Policy-Makers proposes a three-pillar framework for sustainable reform: getting energy prices right, managing the impacts of reform, and building support for reform.

APA

International Institute for Sustainable Development (2012). Fossil-Fuel Subsidy Reform: Challenges and opportunities. https://www.iisd.org/gsi/sites/default/files/ffs_gsibali_meetingreport.pdf

Chicago

International Institute for Sustainable Development. Fossil-Fuel Subsidy Reform: Challenges and opportunities. 2012. https://www.iisd.org/gsi/sites/default/files/ffs_gsibali_meetingreport.pdf.

Wikipedia

{{cite report |author=International Institute for Sustainable Development |title=Fossil-Fuel Subsidy Reform: Challenges and opportunities |date=November 2012 |url=https://www.iisd.org/gsi/sites/default/files/ffs_gsibali_meetingreport.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{internationalinstituteforsustainabledevelopment2012fossilfuel, author = {{International Institute for Sustainable Development}}, title = {{Fossil-Fuel Subsidy Reform: Challenges and opportunities}}, institution = {International Institute for Sustainable Development}, year = {2012}, month = nov, url = {https://www.iisd.org/gsi/sites/default/files/ffs_gsibali_meetingreport.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }