Shifting Public Financial Flows from Fossil Fuels to Clean Energy under the Paris Agreement

The report argues that governments have failed to fulfill commitments to shift public financial flows away from fossil fuels, with subsidies increasing since the Paris Agreement. It identifies significant data gaps regarding state-owned enterprise investments and provides a framework for fossil fuel subsidy reform based on pricing, impact management, and stakeholder support.

• Global fossil fuel subsidies have increased since the adoption of the Paris Agreement, reaching USD 732 billion in 2021, which is 35% higher than the USD 543 billion recorded in 2015.
• Preliminary IEA estimates indicate that fossil fuel consumption subsidies exceeded USD 1 trillion for the first time in 2022, totaling at least USD 1.1 trillion.
• Public financial support for clean energy is significantly lower than for fossil fuels; for example, between 2016 and 2018, only 16.5% of tracked energy finance from G20 export credit agencies, development finance institutions, and major MDBs went to clean energy.
• COVID-19 recovery measures showed a mixed record: 41% (USD 515 billion) of new public money commitments by 38 major economies and eight MDBs in 2020-2021 were for fossil-intensive sectors, while 38% (USD 488 billion) were for clean energy.
• There are three critical knowledge gaps in tracking public financial flows: unquantified investments by state-owned enterprises (SOEs), limited transparency in project-level finance delivered via intermediaries, and a lack of systematic country-level assessments of renewable energy subsidies.
• Fossil fuel subsidies act as a barrier to the Paris Agreement by artificially lowering costs, which incentivizes higher consumption and emissions while distorting the market against clean energy technologies.
• Consumer fossil fuel subsidies are often regressive, with the wealthiest groups receiving the most benefit; in a review of 32 countries, the top quintile of households benefited at least six times more than the bottom quintile.
• Reform of fossil fuel subsidies can have significant climate impacts; for 32 countries, subsidy reform alone could reduce GHG emissions by 6% by 2030, and adding a 10% fossil energy tax with revenue recycling could increase this reduction to 11.8%.
• Successful subsidy reform requires a three-pronged planning approach: 'getting the prices right' through automatic adjustment mechanisms, 'managing impacts' via social protection and just transition frameworks, and 'building support' through stakeholder consultation and transparent communication.
• International accountability is hindered by the use of vague terms like 'inefficient' subsidies in agreements, which allows governments to circumvent reform commitments.

APA

Urazova, I., Flinner, S., Beaton, C., & Gerasimchuk, I. (2023). Shifting Public Financial Flows from Fossil Fuels to Clean Energy under the Paris Agreement. International Institute for Sustainable Development. https://www.iisd.org/system/files/2023-03/global-stocktake-shifting-public-financial-flows.pdf

Chicago

Urazova, Indira, Susanne Flinner, Christopher Beaton, and Ivetta Gerasimchuk. Shifting Public Financial Flows from Fossil Fuels to Clean Energy under the Paris Agreement. International Institute for Sustainable Development, 2023. https://www.iisd.org/system/files/2023-03/global-stocktake-shifting-public-financial-flows.pdf.

Wikipedia

{{cite report |last1=Urazova |first1=Indira |last2=Flinner |first2=Susanne |last3=Beaton |first3=Christopher |last4=Gerasimchuk |first4=Ivetta |title=Shifting Public Financial Flows from Fossil Fuels to Clean Energy under the Paris Agreement |publisher=International Institute for Sustainable Development |date=March 2023 |url=https://www.iisd.org/system/files/2023-03/global-stocktake-shifting-public-financial-flows.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{urazova2023shifting, author = {Urazova, Indira and Flinner, Susanne and Beaton, Christopher and Gerasimchuk, Ivetta}, title = {{Shifting Public Financial Flows from Fossil Fuels to Clean Energy under the Paris Agreement}}, institution = {International Institute for Sustainable Development}, year = {2023}, month = mar, url = {https://www.iisd.org/system/files/2023-03/global-stocktake-shifting-public-financial-flows.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }