Reforming Subsidies Could Help Pay for a Clean Energy Revolution: Report

(this page was updated on 2019-08-08)

June 17, 2019 – Reforming the USD 372 billion countries spend each year on fossil fuel subsidies and reallocating between 10 and 30 per cent of the savings to renewable projects would help pay for a transition to clean energy.

This is the finding of a new study by the Global Subsidies Initiative (GSI) of the International Institute for Sustainable Development (IISD).

The report authors highlight that the “subsidy swap” concept could not only make the clean energy revolution possible but also save taxpayers’ money for other priorities. “Often fossil fuel subsidies are inefficient, costly to governments and undermine clean alternatives,” said Richard Bridle, IISD Senior Policy Advisor. “All countries should be looking to identify where swaps can kickstart their clean energy transitions.”

“The good news is that fossil fuel to clean energy subsidy swaps are already taking place,” said Bridle. Since 2008, annual global renewable investments have been greater than investments in fossil fuel-based generation. In 2014, annually installed renewable capacity started to exceed annually installed fossil generation capacity. “As renewables have become cheaper, the same dollars can now fund more renewable-powered generation,” he explained.

The report provides examples of four countries—India, Indonesia, Zambia and Morocco—where governments have already been taking concrete actions to reform fossil fuel subsidies and kickstart the replacement of fossil fuel energy sources with renewables. In India, petroleum subsidies have been cut by around 75 per cent since 2014, freeing up funds to support the development of world-leading wind and solar industries. Given country-specific political barriers to policy reform, sharing country experiences is a key tool to show how swaps can be a feasible option for other countries.

“Public money is far better spent delivering the clean energy transition than propping up the fossil fuel industry,” said Bridle. “Currently, there are far more subsidies directed toward fossil fuels than toward supporting renewable energy (USD 100 billion). The reform of subsidies alone is not enough to meet global emissions targets, but it is a good first step. Ultimately, the cost of each energy source should reflect its social and environmental impacts. That means increasing taxes on dirty energy and redirecting subsidies to align with government priorities,“ he concluded.

About Global Subsidies Initiative (GSI)

The IISD Global Subsidies Initiative (GSI) supports international processes, national governments and civil society organizations to align subsidies with sustainable development. For more information, please contact: Paulina Mlynarska, pmlynarska@iisd.org