New Report Shows Potential for Significant Emission Reductions Through Fossil Fuel Subsidy Reform

Removing fossil fuel subsidies would significantly cut greenhouse gas emissions within five years

A recent   from the International Institute for Sustainable Development (IISD) and the Nordic Council of Ministers (NCM) presents research on potential emissions savings through fossil fuel subsidy reform across 20 countries, and suggests that with modest recycling of resources saved into renewables and energy efficiency, these reductions can be increased further.

The report describes a model that calculates the impact of removing fossil fuel subsidies in a select group of 20 countries between now and 2020. The result shows that subsidy removal would reduce national greenhouse gas emissions by an average of 11% by 2020, compared to business as usual, which translates to an economic savings of USD 93 per tonne of CO2 reduced. See thisinfographic for an illustrated view of the potential impacts of removing fossil fuel subsidies for the 20 countries.

Governments can also reduce emissions by simultaneously investing some of the savings from fossil fuel subsidy reform into renewable energy and energy efficiency. If governments reinvested 30% of savings on clean and efficient energy strategies, greenhouse gas emissions would be reduced by an average of 18% (as compared to a base of 11%) across the 20 countries in the next five years .

Notably, the top nine countries of the 20 countries analyzed make up a cumulative potential reduction of more than 80% of the total in 2025, with Saudi Arabia alone accounting for nearly 25% of the total share of potential reductions by 2025.

Table 1 illustrates the share of total potential reduction for each of the countries analyzed, which are dominated by petroleum-exporting countries.

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Table 1: Country results from GSI-IF model from removal of Fossil Fuel Subsidies from across 20 countries (cumulative Gt of CO2e, by 2020 and by 2025). Source: Authors (Merrill, Laura, Bassi, Andrea M. Bridle, Richard, Christensen, Lasse T).

Countries are including reforms in contributions towards a climate agreement. Authored by the Global Subsidies Initiative as part of the Nordic Prime Ministers’ green growth initiative, please see here.

The full report can be downloaded here.