Fossil Fuel Subsidy Reform and the Just Transition

The document argues that fossil fuel subsidies are often socially regressive and environmentally damaging, and that their reform can provide the necessary budgetary space to fund a just transition for workers and communities. It outlines strategies for successful reform, including market-based pricing, impact management, and stakeholder engagement, while highlighting the higher employment potential of renewable energy sectors compared to fossil fuels.

• Global fossil fuel subsidies are estimated at at least USD 425 billion per year. The largest subsidies are paid by Iran (USD 52.400 billion) and Saudi Arabia (USD 48.650 billion), followed by Russia (USD 30.333 billion), China (USD 19.240 billion), and India (USD 19.210 billion).
• Eliminating all global subsidies for fossil fuel production and consumption could reduce carbon emissions by approximately 10 per cent. Specifically, removing consumption subsidies could lead to a decrease of 6.4 to 8.2 per cent by 2050, while removing production subsidies would save 37 Gt of carbon dioxide emissions over the same period.
• Fossil fuel subsidies are frequently socially regressive. An IMF review of developing countries in 2010 found that 92 per cent of consumption subsidies benefited the top four quintiles of society, with benefits weighted toward the top quintile for all fuels studied.
• The renewable energy sector offers significantly higher employment potential than fossil fuels. Solar photovoltaic capacity is projected to generate between 7 and 11 times more jobs per megawatt than coal or natural gas.
• Successful fossil fuel subsidy reform requires three core elements: getting prices right through market-based structures, managing the resulting economic and social impacts, and building political support through stakeholder engagement.
• Reforming subsidies creates 'budgetary space' that can be used to fund just transition initiatives. Examples include Indonesia, which reinvested savings into regional transfers and poverty programs, and Germany, which used the Hard Coal Financing Act of 2007 to fund early-retirement schemes during a production subsidy phase-out through 2018.
• The cost of just transition is substantial. For U.S. workers in fossil fuel production, supports for retrenchments and pensions are estimated at USD 600 million per year. In the Netherlands, mining worker transitions cost approximately EUR 11.6 billion in national subsidies.

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} }