Fossil Fuel Subsidy Reform and the Just Transition

This research paper by the International Institute for Sustainable Development (IISD) examines the synergy between fossil fuel subsidy reform (FFSR) and the 'just transition' framework. It argues that reforming subsidies not only reduces greenhouse gas emissions and market distortions but also unlocks significant financial resources to support workers and communities affected by the shift to a green economy.

• The global elimination of fossil fuel subsidies for both production and consumption is estimated to reduce carbon emissions by approximately 10 per cent. Specifically, removing consumption subsidies could lead to a decrease of between 6.4 and 8.2 per cent by 2050, while removing production subsidies would save 37 Gt of carbon dioxide emissions over the same period.
• Global fossil fuel subsidies are valued at at least USD 425 billion per year. The highest spenders include Iran (USD 52.400 billion) and Saudi Arabia (USD 48.650 billion), while outside the OPEC group, Russia, China, and India have the largest subsidies, estimated at USD 30.333 billion, USD 19.240 billion, and USD 19.210 billion respectively.
• Fossil fuel subsidies are often socially regressive and fail to benefit the poor. A 2010 IMF review of developing countries found that 92 per cent of consumption subsidies were realized by the top four quintiles of society, with benefits weighted toward the top quintile for all fuels studied.
• The cost of a just transition is high; for example, supporting U.S. workers in fossil fuel production is estimated at USD 600 million per year. In the Netherlands, a transition for mining workers cost approximately EUR 11.6 billion in national subsidies, with re-investment in new economic activities estimated at EUR 300,000–400,000 per long-term job created.
• Renewable energy sectors are more labour-intensive than fossil fuel sectors. One study projected that solar photovoltaic capacity generates between seven and 11 times as many jobs per megawatt as coal and natural gas.
• Successful fossil fuel subsidy reform requires three core elements: getting the prices right, managing impacts, and building support. This includes moving toward market-based prices while using temporary adjustment mechanisms to protect consumers and workers from price shocks.
• Reforming subsidies creates 'budgetary space' that can fund just transition initiatives. Examples include Indonesia, where savings were reinvested in regional transfers and poverty programs, and Germany, where the 2007 Hard Coal Financing Act phased out production subsidies through 2018 and used remaining funds for early-retirement schemes.

APA

Gass, P., & Echeverria, D. (2017). Fossil Fuel Subsidy Reform and the Just Transition. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/fossil-fuel-subsidy-reform-just-transition-summary.pdf

Chicago

Gass, Philip, and Daniella Echeverria. Fossil Fuel Subsidy Reform and the Just Transition. International Institute for Sustainable Development, 2017. https://www.iisd.org/system/files/publications/fossil-fuel-subsidy-reform-just-transition-summary.pdf.

Wikipedia

{{cite report |last1=Gass |first1=Philip |last2=Echeverria |first2=Daniella |title=Fossil Fuel Subsidy Reform and the Just Transition |publisher=International Institute for Sustainable Development |date=December 2017 |url=https://www.iisd.org/system/files/publications/fossil-fuel-subsidy-reform-just-transition-summary.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{gass2017fossil, author = {Gass, Philip and Echeverria, Daniella}, title = {{Fossil Fuel Subsidy Reform and the Just Transition}}, institution = {International Institute for Sustainable Development}, year = {2017}, month = dec, url = {https://www.iisd.org/system/files/publications/fossil-fuel-subsidy-reform-just-transition-summary.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }