Limited emission reductions from fuel subsidy removal except in energy-exporting regions

Abstract

Hopes are high that removing fossil fuel subsidies could help to mitigate climate change by discouraging inefficient energy consumption and levelling the playing field for renewable energy1,2,3. In September 2016, the G20 countries re-affirmed their 2009 commitment (at the G20 Leaders’ Summit) to phase out fossil fuel subsidies4,5 and many national governments are using today’s low oil prices as an opportunity to do so6,7,8,9. In practical terms, this means abandoning policies that decrease the price of fossil fuels and electricity generated from fossil fuels to below normal market prices10,11. However, whether the removal of subsidies, even if implemented worldwide, would have a large impact on climate change mitigation has not been systematically explored. Here we show that removing fossil fuel subsidies would have an unexpectedly small impact on global energy demand and carbon dioxide emissions and would not increase renewable energy use by 2030. Subsidy removal would reduce the carbon price necessary to stabilize greenhouse gas concentration at 550 parts per million by only 2–12 per cent under low oil prices. Removing subsidies in most regions would deliver smaller emission reductions than the Paris Agreement (2015) climate pledges and in some regions global subsidy removal may actually lead to an increase in emissions, owing to either coal replacing subsidized oil and natural gas or natural-gas use shifting from subsidizing, energy-exporting regions to non-subsidizing, importing regions. Our results show that subsidy removal would result in the largest CO2 emission reductions in high-income oil- and gas-exporting regions, where the reductions would exceed the climate pledges of these regions and where subsidy removal would affect fewer people living below the poverty line than in lower-income regions.

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Figure 1: Modelled high- and low-oil-price scenarios.
Figure 2: Current and projected fossil fuel subsidies without reform.
Figure 3: Global and regional impact of subsidy removal and NDCs on CO2 emissions from fossil fuels and industry under low oil prices.
Figure 4: Change in supply of different fuels resulting from subsidy removal in 2030 in four regions under low oil prices.

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Acknowledgements

The research leading to these results received funding from the European Union’s Seventh Programme FP7/2007-2013 under grant agreement number 308329 (ADVANCE). We thank the International Institute for Applied Systems Analysis, Energy Program for hosting the online database with the scenario data as well as P. Kolp, L. Groihofer and D. Garcia-Carbrera for data and database support; the International Energy Agency (in particular A. Bromhead, L. Cozzi, N. Selmet, G. Zazias and T. Shirai) for providing data and support related to their energy subsidy database; G. Luderer for contributing to the study design; and A. Cherp for commenting on the manuscript.

Author information

J.J., D.McC., V.K. and K.R. designed the experiment (with input from C.B. and M.T.). J.J. compiled the fossil fuel subsidies and energy price data. D.McC. and V.K. provided the MESSAGE model data. J.E. and L.B. provided the WITCH model data. D.E.H.J.G. and D.v.V. provided the IMAGE model data. K.F. and L.P. provided the GEM-E3 model data. C.B. provided the REMIND model data. J.J. made all the figures (with assistance from V.V. and D.E.H.J.G.). J.J. led the analysis of the modelling results and writing of the paper, with input from all authors.

Correspondence to Jessica Jewell.

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Reviewer Information Nature thanks H. McJeon, I. Parry and the other anonymous reviewer(s) for their contribution to the peer review of this work.

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This file contains Supplementary Methods, Code Availability Statement, Supplementary Figures 1-25, Supplementary Tables 1-20, Supplementary Text sections 1-10 and Supplementary References. (PDF 6871 kb)

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Jewell, J., McCollum, D., Emmerling, J. et al. Limited emission reductions from fuel subsidy removal except in energy-exporting regions. Nature 554, 229–233 (2018). https://doi.org/10.1038/nature25467

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