Orderly reform of fossil fuel subsidies in Latin America: Case studies from Brazil and Colombia

This executive summary, published by Transforma in June 2026, outlines a framework for the orderly reform of fossil fuel subsidies in Latin America, focusing on case studies from Brazil and Colombia. It advocates for the creation of national inventories to quantify subsidy costs and proposes a prioritized roadmap for reform—categorizing subsidies as 'quick', 'gradual', or 'deferred'—to ensure fiscal sustainability and a just energy transition.

• Fossil fuel subsidies in Latin America and the Caribbean saw a significant decline between 2022 and 2024, dropping from USD 97 billion to USD 52.8 billion.
• In Brazil, fossil fuel subsidies totaled USD 7.78 billion in 2024, representing a 53.23% decrease from the USD 16.62 billion recorded the previous year. Indirect subsidies were the largest component, accounting for 58.22% (USD 4.53 billion) of the total, while production-side funding accounted for 54%.
• The REPETRO subsidy is Brazil's largest fossil fuel incentive, totaling USD 2.80 billion in 2024. Analysis indicates a loss-making relationship for the state; by 2022, every 1 dollar of inward investment cost the state USD 12.6 in subsidies.
• Colombia's annual fiscal cost for fossil fuel subsidies is at least COP 46.2 trillion (USD 10.5 billion). The majority of these subsidies (72% by value and 44% by number) require gradual reform to improve targeting for low-income consumers or to redirect production supports toward transition minerals.
• Regional experiences highlight that abrupt subsidy removal without compensation or communication can lead to social instability, as seen in Bolivia in 2025. Conversely, Ecuador's progressive approach since 2018, utilizing a price band system of 5% to 10%, is presented as a more successful model.
• The document recommends a three-tiered prioritization roadmap for subsidy reform: 'Quick reform' for high-cost/low-impact subsidies, 'Gradual reform' for those requiring compensation to avoid social backlash, and 'Deferred reform' for those essential to basic energy access.
• Funds recovered from subsidy reforms should be strategically redirected. In Colombia, the report suggests increasing financing through IPSE projects and Bancóldex's 'Sostenible Adelante' line. In Brazil, since large-scale renewables are self-sustaining, funds should target community distributed generation, energy storage, and the decarbonization of hard-to-abate industries.

APA

Osorio, P., Hoyos, Ó., Barba, D. C., Mogollón, A. M., Carvalho, C., & Cardoso, A. (2026). Orderly reform of fossil fuel subsidies in Latin America: Case studies from Brazil and Colombia. Transforma. https://transforma.global/wp-content/uploads/2026/06/Executive-Summary-Orderly-reform-subsidies-LatinAmerica-web.pdf

Chicago

Osorio, Paula, Óscar Hoyos, Diana Carolina Barba, Ana María Mogollón, Cássio Carvalho, and Alessandra Cardoso. Orderly reform of fossil fuel subsidies in Latin America: Case studies from Brazil and Colombia. Transforma, 2026. https://transforma.global/wp-content/uploads/2026/06/Executive-Summary-Orderly-reform-subsidies-LatinAmerica-web.pdf.

Wikipedia

{{cite report |last1=Osorio |first1=Paula |last2=Hoyos |first2=Óscar |last3=Barba |first3=Diana Carolina |last4=Mogollón |first4=Ana María |last5=Carvalho |first5=Cássio |last6=Cardoso |first6=Alessandra |title=Orderly reform of fossil fuel subsidies in Latin America: Case studies from Brazil and Colombia |publisher=Transforma |date=June 2026 |url=https://transforma.global/wp-content/uploads/2026/06/Executive-Summary-Orderly-reform-subsidies-LatinAmerica-web.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{osorio2026orderly, author = {Osorio, Paula and Hoyos, Óscar and Barba, Diana Carolina and Mogollón, Ana María and Carvalho, Cássio and Cardoso, Alessandra}, title = {{Orderly reform of fossil fuel subsidies in Latin America: Case studies from Brazil and Colombia}}, institution = {Transforma}, year = {2026}, month = jun, url = {https://transforma.global/wp-content/uploads/2026/06/Executive-Summary-Orderly-reform-subsidies-LatinAmerica-web.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }