Phasing Out Fossil Fuel Subsidies Would Result in Large Reduction in Greenhouse Gas Emissions by 2020—New Research

BONN—October 22, 2015—Removing fossil fuel subsidies would significantly cut greenhouse gas emissions within 5 years. Governments can further reduce emissions by simultaneously investing some of those savings into renewable energy and energy efficiency.

This is according to new research by the International Institute for Sustainable Development (IISD) and the Nordic Council of Ministers (NCM) in a report, “Tackling Fossil Fuel Subsidies and Climate Change: Levelling the energy playing field.”

IISD and NCM modeled the impact of removing fossil fuel subsidies in 20 countries between now and 2020. They found that this alone would reduce national emissions, against business as usual, by an average of 11 per cent. By taking 30 per cent of subsidy savings, and investing in renewable energy and energy efficiency, national emissions are reduced further to an average of 18 per cent by 2020. In total, from across just 20 countries by 2020, it is estimated that 2.8 Gt of CO2 would be removed from the atmosphere.

“The numbers point to an important opportunity for both national carbon emissions reductions, and for financing the transformation of our energy systems,” said Scott Vaughan, president-CEO of IISD.

The estimated emission reductions vary significantly by country. Those countries with large fossil fuel subsidies, and which have the greatest potential for switching to cleaner and more efficient energy, would see the largest reductions.

The research was carried out by IISD’s Global Subsidies Initiative, in partnership with NCM

Nordic countries have been important supporters of fossil fuel subsidy reform. Norway, Sweden, Denmark and Finland are members of the Friends of Fossil Fuel Subsidy Reform, a grouping that also includes New Zealand, Costa Rica, Switzerland and Ethiopia. In the lead up to the Paris Climate Change Conference, the Friends are backing a Communiqué that calls on the international community to increase efforts to phase-out subsidies to fossil fuels.

"With average yearly financial savings to governments of around US$ 93 per tonne of carbon removed from the system, fossil fuel subsidy reform is one policy tool that governments can no longer afford to ignore," said Anna Lindstedt, Climate Ambassador for Sweden.

“Tackling Fossil Fuel Subsidies and Climate Change: Levelling the energy playing field” is available here.

Background information:

• IISD and NCM developed and applied an economic simulation model that tracks energy demand at the national level by sector and source. The model uses social and economic drivers to determine future energy consumption and related greenhouse gas emissions.
• The countries modeled are: Saudi Arabia, Iran, India, China, Indonesia, Russia, Venezuela, Iraq, Egypt, Algeria, United Arab Emirates, Bangladesh, United States of America, Pakistan, Nigeria, Viet Nam, Tunisia, Morocco, Ghana, and Sri Lanka. These are subset of countries that subsidise fossil fuels.
• The Nordic Council of Ministers is the official inter-governmental body for co-operation in the Nordic Region.
• The Global Subsidies Initiative was established by IISD in 1995 to quantify and analyse subsidies, and support countries in the reform of subsidies that are detrimental to sustainable development.
• The International Energy Agency estimates that subsidies for the consumption of fossil fuels amounted to US$ 550 billion in 2013.

For more information please contact Sumeep Bath at sbath@iisd.org or +1 (204) 958-7740 (in Canada) or Damon Vis-Dunbar at dvis-dunbar@iisd.org or +41 22 917-8848 (in Switzerland).