Phase them out!

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Fossil fuel subsidies keep fuel prices artificially low, and weigh heavily on government budgets and on the climate too. Phasing out these subsidies will help reduce CO2 emissions and possibly raise public revenues as well.

Total fossil fuel subsidies amounted to US$151 billion in 2016 in the 43 countries covered by the OECD’s Inventory of Support Measures for Fossil Fuels, marking a significant decline from US$249 billion in 2012. Fossil fuel subsidies have plateaued in OECD member countries over the last two years, hovering around US$82 billion. In eight selected partner economies of the OECD, such as Argentina, China, Indonesia and South Africa, subsidies have declined even more sharply from US$142 billion in 2013 to US$69 billion in 2016. This has been due to factors such as the recent low oil price regime and policy reforms.

What can be done to further curb these subsidies? More international pressure can help. The reform of fossil fuel subsidies has gained global momentum, encouraged along by multilateral fora such as the Asia-Pacific Economic Cooperation (APEC),  the G20 and the OECD, which support peer reviews to help countries phase out inefficient and distortive support measures. Still, more effort is needed to stop supporting fossil fuels and start focusing the freed-up resources on developing cleaner technologies for tomorrow.

OECD, OECD Companion to the Inventory of Support Measures for Fossil Fuels 2017, OECD Publishing, Paris, forthcoming 2017.

©OECD Observer No 312 Q4 December 2017

Economic data

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Last update: 10 Nov 2020

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