Fossil Fuel Subsidy Reform (LINGO Incentives)

Fossil fuel subsidies persist despite international efforts to eliminate them, peaking at US$1.5 trillion in 2022. These subsidies often fail to benefit the poorest, instead promoting wasteful energy consumption, pollution, and delaying climate goals. Reforming them is crucial to cut emissions, redirect funds to green investments, and enhance fiscal efficiency, though political and economic barriers remain significant. 

A more effective approach should feature time-bound roadmaps, close loopholes, and provide tailored support for lower-income nations. UN Environment has worked with countries like Ghana, Kenya, Mauritius, and Mozambique to reform energy taxes and channel revenues into sustainable projects, with a 2016 study in Kenya illustrating how increased fuel taxes could fund green investments while compensating poorer households to maintain social equity.

Resources :

• Skovgaard, J., van Asselt, H., Beaton, C. et al. (2024) Revitalizing international fossil fuel subsidy phase-out commitments through roadmaps, closing loopholes, and support. April 2024

• IISD (2022), Fossil Fuel Subsidy Reform, Background Note, September 2022
• Carbon Tracker (2024), Fossil fuel subsidy reform: A significant energy transition risk that needs addressing, Blog Post, September 2024
• I4CE (2017), Fossil fuel subsidy reforms: state of play and ways forward, Climate Brief, October 2017
• Droste, N., Chatterton, B. & Skovgaard, J. (2024), A political economy theory of fossil fuel subsidy reforms in OECD countries, Paper, June 2024