Financing the Sustainable Development Goals through Fossil-fuel Subsidy Reform: Opportunities in Southeast Asia, India and China

The paper argues that fossil-fuel subsidies in Emerging and Developing Asia, totaling US$104 billion in 2011, represent a significant opportunity to finance the Sustainable Development Goals (SDGs). It contends that these subsidies are regressive, primarily benefiting wealthier populations while undermining investments in renewable energy and public health. Using case studies from the Philippines and Indonesia, the document demonstrates how transitioning from universal subsidies to targeted social welfare programs and fuel taxation can improve fiscal health and social equity. The author recommends that the SDGs explicitly include a goal to phase out inefficient fossil-fuel subsidies by 2030 to encourage national reforms.

• Consumer fossil-fuel subsidies in Emerging and Developing Asia were estimated at US$104 billion in 2011, a sum nearly equivalent to the total OECD aid budget of US$134 billion.
• Fossil-fuel subsidies are generally regressive and fail as social welfare tools because the majority of benefits are captured by wealthier citizens. Research across 20 countries showed that over 80% of petrol subsidies accrue to the top two income quintiles.
• In India, spending on fossil-fuel subsidies (US$42.8 billion or 2.3% of GDP) is nearly double the public expenditure on health (1.3%) and is comparable to government spending on education (3.4%).
• The Philippines successfully transitioned from a regime of heavy subsidies to one of fuel taxation and targeted support. It removed all consumer energy subsidies by the early 2000s and implemented a 12% VAT on gasoline to fund infrastructure, health, and education.
• Indonesia has used a combination of temporary unconditional cash transfers and permanent social welfare programs, such as the PKH (conditional cash transfer) and BSM (student assistance), to mitigate the impact of fuel price increases in 2005, 2008, and 2013.
• Fossil-fuel subsidies hinder the energy transition by depressing market prices, which deters investment in renewables and energy efficiency. Globally, consumer subsidies in 2012 (US$544 billion) were five times the level of total financial support for renewable energy (US$101 billion).
• The author argues that the final outcome document of the Open Working Group on the SDGs weakened the commitment to subsidy reform by removing a specific end date and moving the issue from a 'goal' to a 'Means of Implementation'.
• Correcting fossil-fuel pricing could significantly reduce global emissions; the IEA suggests phasing out consumption subsidies alone could reduce energy sector emissions by 12% (360 million tonnes of CO2) by 2020.
• There is a strong negative correlation between the prevalence of fossil-fuel subsidies and the quality of government institutions, including rule of law and freedom from corruption.

APA

Merrill, L., & Chung, V. (2014). Financing the Sustainable Development Goals through Fossil-fuel Subsidy Reform: Opportunities in Southeast Asia, India and China. International Institute for Sustainable Development. https://www.iisd.org/gsi/sites/default/files/financing-sdgs-fossil-fuel-subsidy-reform-southeast-asian-india-china.pdf

Chicago

Merrill, Laura, and Vivian Chung. Financing the Sustainable Development Goals through Fossil-fuel Subsidy Reform: Opportunities in Southeast Asia, India and China. International Institute for Sustainable Development, 2014. https://www.iisd.org/gsi/sites/default/files/financing-sdgs-fossil-fuel-subsidy-reform-southeast-asian-india-china.pdf.

Wikipedia

{{cite report |last1=Merrill |first1=Laura |last2=Chung |first2=Vivian |title=Financing the Sustainable Development Goals through Fossil-fuel Subsidy Reform: Opportunities in Southeast Asia, India and China |publisher=International Institute for Sustainable Development |date=2014 |url=https://www.iisd.org/gsi/sites/default/files/financing-sdgs-fossil-fuel-subsidy-reform-southeast-asian-india-china.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{merrill2014financing, author = {Merrill, Laura and Chung, Vivian}, title = {{Financing the Sustainable Development Goals through Fossil-fuel Subsidy Reform: Opportunities in Southeast Asia, India and China}}, institution = {International Institute for Sustainable Development}, year = {2014}, url = {https://www.iisd.org/gsi/sites/default/files/financing-sdgs-fossil-fuel-subsidy-reform-southeast-asian-india-china.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }