Raising Ambition Through Fossil Fuel Subsidy Reform

This research paper assesses the impact of removing consumer fossil fuel subsidies by 2025 across 26 countries, finding a simple average GHG emission reduction of 6% by 2030 compared to business as usual. The study argues that while FFSR alone is insufficient to meet Paris Agreement goals, combining it with a 10% energy tax and reallocating 30% of savings into renewable energy and energy efficiency could increase average reductions to 13.2% by 2030. It highlights that FFSR is a cost-effective tool, saving governments an average of USD 93 per tonne of CO2e removed. The paper also reviews the regressive nature of fuel subsidies and advocates for 'subsidy swaps' toward sustainable energy and social safety nets, noting that only 8% of current NDCs explicitly include FFSR.

• The removal of consumer fossil fuel subsidies by 2025 across 26 modelled countries results in a simple average GHG emission reduction of 6% from 2018 until 2025 compared to business as usual.
• Combining fossil fuel subsidy reform with a 10% energy tax (from 2025 to 2030) and reallocating 30% of the resulting savings and revenues into renewable energy and energy efficiency investments increases average GHG emission reductions to 13.2% by 2030.
• Fossil fuel subsidy reform is a fiscally beneficial mitigation tool, with governments saving an average of USD 93 for every tonne of CO2e removed.
• Cumulative fiscal savings from fossil fuel subsidy reform alone across the 26 analyzed countries total USD 2.56 trillion by 2030, with 4.8 Gt of CO2e abated.
• Countries with the highest relative subsidies as a share of GDP, such as Venezuela, Iraq, Saudi Arabia, Algeria, and the UAE, see the highest percentage of emission reductions (averaging above 20% by 2030).
• In high-consumption and high-carbon intensity countries like China, the US, and India, a subsequent energy tax and investment in energy efficiency provide larger absolute emission reductions than subsidy removal alone.
• Fossil fuel subsidies are socially regressive; for example, IMF research on 35 countries shows the top income quintile receives more than six times the subsidies of the bottom quintile.
• Only 8% of current Nationally Determined Contributions (NDCs) specifically include fossil fuel subsidy reform as an action for GHG mitigation.
• Global studies indicate that removing fossil fuel subsidies and applying appropriate taxation could reduce global emissions by 28%.
• Producer subsidies are consistently underreported and often determine the viability of new fossil fuel projects; for instance, in the US, tax reductions were decisive for up to half of all new oil fields at USD 50 per barrel.

APA

International Institute for Sustainable Development (2019). Raising Ambition Through Fossil Fuel Subsidy Reform. https://www.iisd.org/system/files/publications/raising-ambition-through-fossil-fuel-subsidy-reform.pdf

Chicago

International Institute for Sustainable Development. Raising Ambition Through Fossil Fuel Subsidy Reform. 2019. https://www.iisd.org/system/files/publications/raising-ambition-through-fossil-fuel-subsidy-reform.pdf.

Wikipedia

{{cite report |author=International Institute for Sustainable Development |title=Raising Ambition Through Fossil Fuel Subsidy Reform |date=June 2019 |url=https://www.iisd.org/system/files/publications/raising-ambition-through-fossil-fuel-subsidy-reform.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{internationalinstituteforsustainabledevelopment2019raising, author = {{International Institute for Sustainable Development}}, title = {{Raising Ambition Through Fossil Fuel Subsidy Reform}}, institution = {International Institute for Sustainable Development}, year = {2019}, month = jun, url = {https://www.iisd.org/system/files/publications/raising-ambition-through-fossil-fuel-subsidy-reform.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }