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

This research paper examines the potential for fossil-fuel subsidy reform in Emerging and Developing Asia—specifically Southeast Asia, India, and China—to provide fiscal space and revenue for financing the Sustainable Development Goals (SDGs). It argues that current subsidies are regressive, inefficient, and detrimental to environmental and health goals, and advocates for their phase-out in favor of targeted social welfare systems and corrective taxation.

• Consumer fossil-fuel subsidies in Emerging and Developing Asia totaled US$104 billion in 2011, a sum nearly equivalent to the total OECD aid budget of US$134 billion.
• Fossil-fuel subsidies are often regressive, primarily benefiting wealthier populations rather than the poor. Research across 20 countries indicates that over 80% of petrol subsidies accrue to the top two income quintiles, while for diesel and LPG, the figures are 65% and 70% respectively.
• In India, spending on fossil-fuel subsidies is significantly higher than public expenditure on health. In the 2012–2013 fiscal year, 13.7% of India's budget expenditure went to these subsidies, while public health expenditure was 1.3% of GDP.
• The presence of fossil-fuel subsidies undermines the SDGs by depressing market prices, which discourages investment in renewable energy and eco-efficiency, and fails to account for the social costs of air pollution, congestion, and climate change.
• The Philippines provides a model for successful reform, having removed all consumer energy subsidies between 1996 and 2001. The government transitioned from the Oil Price Stabilization Fund to a system of targeted cash transfers and a 12% VAT on gasoline to fund infrastructure, health, and education.
• Indonesia has utilized a combination of temporary unconditional cash transfers and permanent social welfare programs to mitigate the impact of fuel price increases in 2005, 2008, and 2013. These include Raskin (subsidized rice), Jamkesmas (public health insurance), BSM (assistance for poor students), and PKH (conditional cash transfers).
• Phasing out consumption fossil-fuel subsidies could significantly reduce global emissions. The IEA suggests such a move could contribute to a 12% reduction in energy sector emissions by 2020, equivalent to 360 million tonnes of CO2.
• The author argues that the final outcome document of the Open Working Group (OWG) weakened the commitment to subsidy reform by moving it to a "Means of Implementation" and removing specific phase-out targets and end dates.

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} }