Zombie Energy: Climate benefits of ending subsidies to fossil fuel production

The report argues that fossil fuel production subsidies create "zombie energy"—reserves that are only viable due to government support—and contribute to carbon lock-in. Using the GSI-IF(p) model and G20 data as a proxy, the authors estimate that a global removal of these subsidies could reduce GHG emissions by 37 to 175 Gt of CO2 between 2017 and 2050, depending on market price assumptions. It further finds that 120–138 Gt of CO2 equivalent in reserves would become uneconomical to produce, representing 13–15% of existing and under-construction reserves as of 2015. The report emphasizes that capex subsidies provide the strongest long-term signals for investment and carbon lock-in.

• Fossil fuel production subsidies create "zombie energy," which are fossil fuel deposits that would not be commercially viable to produce without government support.
• Subsidies to capital expenditure (capex) have a significantly higher impact on carbon lock-in than operating expenditure (opex) subsidies because they influence long-term investment decisions. Based on the time value of money, a dollar of capex subsidy is 2.5 to 3 times more valuable to investment decision makers than a dollar of opex or consumption subsidy.
• Under the IEA Current Policies scenario, a global removal of fossil fuel production subsidies is estimated to reduce GHG emissions by up to 37 Gt of CO2 equivalent between 2017 and 2050. This is approximately 1.1 Gt of CO2 per year, which is roughly equivalent to eliminating all emissions from the aviation sector.
• If fossil fuel prices were to remain constant at 20152016 levels (approximately USD 50 per barrel for oil), the aggregate CO2 emissions reduction from removing production subsidies could increase to 175 Gt over 20172050.
• The removal of production subsidies would render 120138 Gt of CO2 equivalent of fossil fuel reserves uneconomical to produce between 2017 and 2050, which is 1315% of all reserves in existing and under-construction fields and mines as of 2015.
• The impact of subsidy removal on reserves varies by fuel: oil reserves affected are estimated between 105 and 150 billion barrels, natural gas between 325 and 550 trillion cubic feet, and coal between 11 and 21 trillion metric tonnes (depending on the cost curve used).
• Production subsidies act as a negative carbon price, artificially lowering production costs and market prices, which encourages higher fossil fuel consumption and undermines the competitiveness of renewable energy and energy efficiency.
• G20 countries provided an average of USD 70 billion per year in direct spending and tax breaks for fossil fuel production in 2013 and 2014, with oil receiving the largest share at USD 32 billion.

APA

Gerasimchuk, I., Bassi, A. M., Ordonez, C. D., Doukas, A., Merrill, L., & Whitley, S. (2017). Zombie Energy: Climate benefits of ending subsidies to fossil fuel production. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/zombie-energy-climate-benefits-ending-subsidies-fossil-fuel-production.pdf

Chicago

Gerasimchuk, Ivetta, Andrea M. Bassi, Carlos Dominguez Ordonez, Alexander Doukas, Laura Merrill, and Shelagh Whitley. Zombie Energy: Climate benefits of ending subsidies to fossil fuel production. International Institute for Sustainable Development, 2017. https://www.iisd.org/system/files/publications/zombie-energy-climate-benefits-ending-subsidies-fossil-fuel-production.pdf.

Wikipedia

{{cite report |last1=Gerasimchuk |first1=Ivetta |last2=Bassi |first2=Andrea M. |last3=Ordonez |first3=Carlos Dominguez |last4=Doukas |first4=Alexander |last5=Merrill |first5=Laura |last6=Whitley |first6=Shelagh |title=Zombie Energy: Climate benefits of ending subsidies to fossil fuel production |publisher=International Institute for Sustainable Development |date=February 2017 |url=https://www.iisd.org/system/files/publications/zombie-energy-climate-benefits-ending-subsidies-fossil-fuel-production.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{gerasimchuk2017zombie, author = {Gerasimchuk, Ivetta and Bassi, Andrea M. and Ordonez, Carlos Dominguez and Doukas, Alexander and Merrill, Laura and Whitley, Shelagh}, title = {{Zombie Energy: Climate benefits of ending subsidies to fossil fuel production}}, institution = {International Institute for Sustainable Development}, year = {2017}, month = feb, url = {https://www.iisd.org/system/files/publications/zombie-energy-climate-benefits-ending-subsidies-fossil-fuel-production.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }