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

The research paper reviews INDCs submitted to the UNFCCC as of November 20, 2015, to identify the prevalence of fiscal policies such as fossil fuel subsidy reform, clean energy subsidies, and carbon pricing. It finds that 39 INDCs reference these instruments, with a strong trend toward unconditional commitments. The paper highlights the significant potential for greenhouse gas reductions through fossil fuel subsidy reform (FFSR), supported by the GSI-IF model, and recommends that more countries integrate these tools to help meet the two-degree climate threshold.

• Fiscal instruments are a common component of INDCs, with 39 submissions referencing them. The most frequent tools identified are clean energy subsidies (25 references), fossil fuel subsidy reform (FFSR) (13 references), and carbon pricing (13 references). Eight countries referenced both clean energy subsidies and FFSR, while 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 nations, subsidy reforms (both FFSR and clean energy) are more evenly distributed across both groups.
• A majority of countries—nearly three quarters—are committing to fiscal measures unconditionally. This is attributed to the fact that these are domestic-led actions that do not require massive international finance or technical support, and they offer co-benefits such as increased financial space and reduced local air pollution.
• Fossil fuel subsidy reform (FFSR) can lead to significant greenhouse gas (GHG) reductions. According to the GSI-IF model, the phase-out of consumer fossil fuel subsidies across 20 countries resulted in average national emissions reductions of 10.92% compared to the business-as-usual (BAU) baseline, increasing to 18.15% if 30% of savings were redirected to renewables and energy efficiency.
• FFSR provides economic benefits to governments in addition to climate mitigation; for every tonne of carbon dioxide equivalent removed through FFSR, governments save an average of USD 92.83.
• Most countries have not quantified the GHG implications of their fiscal reforms within their INDCs. The review found only a few references to quantified GHG reduction implications, suggesting a need for countries to use forecasting tools like the GSI-IF model to estimate impacts.

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} }