Fiscal Instruments in INDCs: How countries are looking to fiscal policies to support INDC implementation

This research paper by the International Institute for Sustainable Development (IISD) and the German Agency for International Cooperation (GIZ) analyzes the use of fiscal instruments within Intended Nationally Determined Contributions (INDCs) submitted to the UNFCCC by November 20, 2015. The review identifies trends in how countries employ fossil fuel subsidy reform (FFSR), clean energy subsidies, and carbon pricing to support low-carbon development and GHG mitigation.

• Fiscal instruments are a common component of INDCs, with 39 identified documents referencing them. Among these, clean energy subsidies were the most frequent with 25 references, followed by fossil fuel subsidy reform (FFSR) and carbon pricing, both with 13 references. Eight INDCs referenced both clean energy subsidies and FFSR, and two referenced all three instruments.
• The adoption of fiscal instruments spans different development levels, with 33 developed countries and 34 developing countries referencing them. While carbon-pricing mechanisms are more prevalent in developed countries, subsidy reforms (both FFSR and clean energy) are more evenly distributed across both groups.
• A majority of the fiscal commitments in INDCs are unconditional, with nearly three quarters of the reviewed commitments falling into this category. This is attributed to the fact that these are generally domestic-led actions that do not require massive international finance or technical support and offer co-benefits like increased financial space and reduced local air pollution.
• Fossil fuel subsidy reform (FFSR) can lead to significant GHG reductions. Using the GSI-IF model on 20 countries, the research found average national emissions reductions of 10.92% compared to the business-as-usual (BAU) baseline. This reduction increases to 18.15% if 30% of the savings are redirected toward energy efficiency and renewables. Additionally, governments save an average of USD 92.83 for every tonne of carbon dioxide equivalent removed through FFSR.
• Most countries have not quantified the GHG implications of their fiscal reform measures within their INDCs. The review found only a few references to quantified GHG reduction implications, though the GSI-IF model indicates that for two countries, FFSR alone could reduce emissions by over 14% from their BAU baseline by 2020.

APA

Terton, A., Gass, P., Merrill, L., Wagner, A., & Meyer, E. (2015). Fiscal Instruments in INDCs: How countries are looking to fiscal policies to support INDC implementation. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/fiscal-instruments-indcs.pdf

Chicago

Terton, Anika, Philip Gass, Laura Merrill, Armin Wagner, and Eike Meyer. Fiscal Instruments in INDCs: How countries are looking to fiscal policies to support INDC implementation. International Institute for Sustainable Development, 2015. https://www.iisd.org/system/files/publications/fiscal-instruments-indcs.pdf.

Wikipedia

{{cite report |last1=Terton |first1=Anika |last2=Gass |first2=Philip |last3=Merrill |first3=Laura |last4=Wagner |first4=Armin |last5=Meyer |first5=Eike |title=Fiscal Instruments in INDCs: How countries are looking to fiscal policies to support INDC implementation |publisher=International Institute for Sustainable Development |date=December 2015 |url=https://www.iisd.org/system/files/publications/fiscal-instruments-indcs.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{terton2015fiscal, author = {Terton, Anika and Gass, Philip and Merrill, Laura and Wagner, Armin and Meyer, Eike}, title = {{Fiscal Instruments in INDCs: How countries are looking to fiscal policies to support INDC implementation}}, institution = {International Institute for Sustainable Development}, year = {2015}, month = dec, url = {https://www.iisd.org/system/files/publications/fiscal-instruments-indcs.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }