Cutting Emissions Through Fossil Fuel Subsidy Reform and Taxation

The report finds that the complete removal of fossil fuel consumption subsidies across 32 modelled countries could reduce greenhouse gas emissions by an average of 6.09% by 2030. When combined with a 'subsidy swap' (reinvesting savings into energy efficiency and renewables) and a 10% energy tax, the average national emission reduction increases to 11.84%. The analysis highlights that while some countries like Venezuela see reductions over 30%, G20 nations provide the largest absolute reductions due to their economic scale. Financially, fossil fuel subsidy reform (FFSR) alone could generate USD 2.99 trillion in cumulative savings by 2030, offering a cost-effective mechanism for a 'green recovery' from the COVID-19 pandemic.

• The complete removal of consumption fossil fuel subsidies (FFSR) by 2025 would reduce greenhouse gas emissions by an average of 6.09% across the 32 studied countries by 2030 compared to a business-as-usual scenario.
• Combining FFSR with a 'subsidy swap'—where 20% of savings are invested in energy efficiency and 10% in renewable energy—increases the average emission reduction to approximately 9% by 2030.
• The implementation of all four modelled scenarios—FFSR, a subsidy swap, a 10% energy tax, and earmarked tax revenues for green investment—results in an average national emission reduction of 11.84% by 2030.
• In absolute terms, the 14 G20 countries modelled contribute the most to global reductions, representing 76% of all absolute savings by 2030 when all scenarios are combined.
• Certain countries with high relative subsidy levels as a share of GDP experience the most significant percentage reductions; Venezuela's reductions exceed 35% by 2030.
• The cumulative fiscal savings from FFSR alone across the 32 analyzed countries are estimated at USD 2.99 trillion by 2030.
• FFSR is highly cost-effective, with governments saving an average of USD 546.47 for every tonne of CO2e removed through subsidy reform alone.
• The total cumulative greenhouse gas emissions abated by 2030 across the 32 countries would be 10.42 Gt CO2e if all policy instruments (FFSR, swap, tax, and earmarking) are used, which is equivalent to the annual emissions of roughly 2,000 coal-fired power plants.
• The report notes that current modelling results are likely underestimates because they rely on consumer price support data and do not capture producer subsidies.

APA

Kuehl, J., Bassi, A. M., Gass, P., & Pallaske, G. (2021). Cutting Emissions Through Fossil Fuel Subsidy Reform and Taxation. International Institute for Sustainable Development. https://www.iisd.org/system/files/2021-07/cutting-emissions-fossil-fuel-subsidies-taxation.pdf

Chicago

Kuehl, Jonas, Andrea M. Bassi, Philip Gass, and Georg Pallaske. Cutting Emissions Through Fossil Fuel Subsidy Reform and Taxation. International Institute for Sustainable Development, 2021. https://www.iisd.org/system/files/2021-07/cutting-emissions-fossil-fuel-subsidies-taxation.pdf.

Wikipedia

{{cite report |last1=Kuehl |first1=Jonas |last2=Bassi |first2=Andrea M. |last3=Gass |first3=Philip |last4=Pallaske |first4=Georg |title=Cutting Emissions Through Fossil Fuel Subsidy Reform and Taxation |publisher=International Institute for Sustainable Development |date=July 2021 |url=https://www.iisd.org/system/files/2021-07/cutting-emissions-fossil-fuel-subsidies-taxation.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{kuehl2021cutting, author = {Kuehl, Jonas and Bassi, Andrea M. and Gass, Philip and Pallaske, Georg}, title = {{Cutting Emissions Through Fossil Fuel Subsidy Reform and Taxation}}, institution = {International Institute for Sustainable Development}, year = {2021}, month = jul, url = {https://www.iisd.org/system/files/2021-07/cutting-emissions-fossil-fuel-subsidies-taxation.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }