Fossil Fuel to Clean Energy Subsidy Swaps

The report advocates for "subsidy swaps," where governments redirect financial support from fossil fuels to clean energy (renewables and energy efficiency). It argues that while removing fossil fuel subsidies alone can reduce emissions, swapping those funds into clean energy magnifies long-term climate benefits and supports a "just transition" for workers and communities. The document provides evidence from India, Indonesia, Zambia, and Morocco to demonstrate the feasibility of this approach and suggests that governments should focus on large-scale on-grid renewables and leveraging private finance to maximize impact.

• Fossil fuel subsidies hinder the transition to clean energy, and while their removal reduces emissions, a "swap"—reallocating savings to clean energy—is necessary to ensure permanent emission reductions and provide broader economic, health, and gender equality benefits.
• Global trends show a shift in financial flows, with renewable investments exceeding fossil fuel-based generation investments since 2008 and renewable capacity additions exceeding fossil fuel installments since 2014, though 70 per cent of total energy demand growth in 2018 was still met by fossil fuels.
• Subsidy swaps can mitigate the economic risks of stranded assets by preventing the deployment of uneconomic fossil fuel infrastructure and providing resources for retraining and social protection for affected workers and communities.
• The removal of consumer fossil fuel subsidies could reduce global carbon emissions by 2.32 to 10 per cent by 2030, but combining this with appropriate taxation and clean energy swaps can increase reductions significantly, potentially up to 18 per cent in some modeled scenarios.
• India has shifted public financial flows from petroleum products to renewable energy between FY 2014 and FY 2017, with renewable energy support increasing nearly six-fold, though electricity consumer subsidies still predominantly benefit fossil fuels.
• Indonesia has a history of successful fuel subsidy reform, such as saving USD 15.6 billion in 2015, but the transition to renewables is slowed by coal subsidies and price caps that make coal artificially cost-competitive.
• Zambia can implement a de facto swap by replacing expensive diesel-generated electricity (costing USD 0.16—0.17 per kWh) with solar PV (costing USD 0.07 per kWh) and by promoting energy efficiency in the mining sector to reduce electricity subsidies.
• Morocco can use savings from reforming its butane gas subsidies, which were expected to cost USD 1.2 billion in 2018, to fund solar water heaters for households and solar pumps for agriculture.
• To maximize impact, governments should prioritize large-scale on-grid renewable energy, implement correct fossil fuel taxation to internalize externalities, and use public funds to de-risk projects to leverage private finance.

APA

Bridle, R., Sharma, S., Mostafa, M., & Geddes, A. (2019). Fossil Fuel to Clean Energy Subsidy Swaps. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/fossil-fuel-clean-energy-subsidy-swap.pdf

Chicago

Bridle, Richard, Shruti Sharma, Mostafa Mostafa, and Anna Geddes. Fossil Fuel to Clean Energy Subsidy Swaps. International Institute for Sustainable Development, 2019. https://www.iisd.org/system/files/publications/fossil-fuel-clean-energy-subsidy-swap.pdf.

Wikipedia

{{cite report |last1=Bridle |first1=Richard |last2=Sharma |first2=Shruti |last3=Mostafa |first3=Mostafa |last4=Geddes |first4=Anna |title=Fossil Fuel to Clean Energy Subsidy Swaps |publisher=International Institute for Sustainable Development |date=June 2019 |url=https://www.iisd.org/system/files/publications/fossil-fuel-clean-energy-subsidy-swap.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{bridle2019fossil, author = {Bridle, Richard and Sharma, Shruti and Mostafa, Mostafa and Geddes, Anna}, title = {{Fossil Fuel to Clean Energy Subsidy Swaps}}, institution = {International Institute for Sustainable Development}, year = {2019}, month = jun, url = {https://www.iisd.org/system/files/publications/fossil-fuel-clean-energy-subsidy-swap.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }