Executive Summary Reform for Phasing Out Inefficient Fossil Fuel Subsidies in Latin America

This executive summary outlines a methodology for phasing out 'inefficient' fossil fuel subsidies in Latin America, prioritizing the removal of production subsidies over consumption subsidies. Through case studies in Colombia and Mexico, the report demonstrates that production subsidies—specifically oil infrastructure subsidies in Colombia and PIDIREGAS in Mexico—result in net economic losses when environmental costs and value-added losses are included. The document recommends reallocating these funds to sectors with higher employment and investment multipliers, such as construction, agriculture, and renewable electricity, to support a just energy transition.

• Fossil fuel subsidies in Latin America and the Caribbean (LAC) showed significant volatility and growth in recent years, increasing from USD 29.5 billion in 2020 to USD 98.6 billion in 2022, before decreasing to USD 57.2 billion in 2023.
• The developed methodology prioritizes the removal of direct production subsidies over consumption subsidies, as production subsidies represent a high fiscal burden without providing direct benefits to vulnerable communities.
• In Colombia, the 'Subsidy for the Development of Oil Infrastructure in Strategic Areas' was identified as the priority for phase-out. A cost-benefit analysis from 2015 to 2023 found that for every dollar invested, USD 0.58 was lost due to the subsidy and value-added costs, rising to USD 0.73 when environmental costs are included.
• In Mexico, the 'Deferred Investment Projects in the Expenditure Register' (PIDIREGAS) was selected for phase-out because it represents a larger portion of the budget than other direct production subsidies. Between 2015 and 2023, for every dollar invested in the sector, USD 0.33 was lost due to the subsidy, increasing to USD 0.77 when including value-added and environmental costs.
• The document identifies strategic sectors for the reallocation of funds freed by subsidy removal based on investment and employment multipliers. In Colombia, these are construction, water and sanitation, and agriculture. In Mexico, the priority sectors are electricity, construction, and manufacturing industries.

APA

Figueredo, P. D. O., Naranjo, S. B., Patiño, D. C. B., Zapata, D. F., & Mogollón, A. M. (2025). Executive Summary Reform for Phasing Out Inefficient Fossil Fuel Subsidies in Latin America. Transforma. https://transforma.global/wp-content/uploads/2025/07/250703-Summary-Subsidios.pdf

Chicago

Figueredo, Paula Daniela Osorio, Santiago Barbosa Naranjo, Diana Carolina Barba Patiño, Diego Fernando Zapata, and Ana María Mogollón. Executive Summary Reform for Phasing Out Inefficient Fossil Fuel Subsidies in Latin America. Transforma, 2025. https://transforma.global/wp-content/uploads/2025/07/250703-Summary-Subsidios.pdf.

Wikipedia

{{cite report |last1=Figueredo |first1=Paula Daniela Osorio |last2=Naranjo |first2=Santiago Barbosa |last3=Patiño |first3=Diana Carolina Barba |last4=Zapata |first4=Diego Fernando |last5=Mogollón |first5=Ana María |title=Executive Summary Reform for Phasing Out Inefficient Fossil Fuel Subsidies in Latin America |publisher=Transforma |date=July 2025 |url=https://transforma.global/wp-content/uploads/2025/07/250703-Summary-Subsidios.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{figueredo2025executive, author = {Figueredo, Paula Daniela Osorio and Naranjo, Santiago Barbosa and Patiño, Diana Carolina Barba and Zapata, Diego Fernando and Mogollón, Ana María}, title = {{Executive Summary Reform for Phasing Out Inefficient Fossil Fuel Subsidies in Latin America}}, institution = {Transforma}, year = {2025}, month = jul, url = {https://transforma.global/wp-content/uploads/2025/07/250703-Summary-Subsidios.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }