Letter

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

  • Nature volume 554, pages 229233 (08 February 2018)
  • doi:10.1038/nature25467
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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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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

Affiliations

  1. Energy Program, International Institute for Applied Systems Analysis, 2361 Laxenburg, Austria

    • Jessica Jewell
    • , David McCollum
    • , Volker Krey
    •  & Keywan Riahi
  2. Centre for Climate and Energy Transformations and Department of Geography, University of Bergen, 5020 Bergen, Norway

    • Jessica Jewell
  3. Howard H. Baker Jr. Center for Public Policy, University of Tennessee, Knoxville, Tennessee 37996, USA

    • David McCollum
  4. Fondazione Eni Enrico Mattei, 20123 Milan, Italy

    • Johannes Emmerling
    • , Loïc Berger
    •  & Massimo Tavoni
  5. Centro Euromediterraneo sui Cambiamenti Climatici, 73100 Lecce, Italy

    • Johannes Emmerling
    • , Loïc Berger
    •  & Massimo Tavoni
  6. Potsdam Institute for Climate Impact Research, Member of the Leibniz Association, PO Box 60 12 03, D-14473 Potsdam, Germany

    • Christoph Bertram
  7. Copernicus Institute for Sustainable Development, University of Utrecht, 3584 CS Utrecht, The Netherlands

    • David E. H. J. Gernaat
    •  & Detlef van Vuuren
  8. PBL Netherlands Environmental Assessment Agency, The Hague, The Netherlands

    • David E. H. J. Gernaat
    •  & Detlef van Vuuren
  9. School of Electrical and Computer Engineering, Department of Electric Power, National Technical University of Athens, 15773 Athens, Greece

    • Leonidas Paroussos
    •  & Kostas Fragkiadakis
  10. Department of Economics and Quantitative Methods, IESEG School of Management (LEM-CNRS), 59000 Lille, France

    • Loïc Berger
  11. UCL Energy Institute, University College London, London WC1H 0NN, UK

    • Ilkka Keppo
    •  & Nawfal Saadi
  12. Department of Management, Economics and Industrial Engineering, Politecnico di Milano, 20156 Milan, Italy

    • Massimo Tavoni
  13. Department of Environmental Sciences and Policy, Central European University, 1051 Budapest, Hungary

    • Vadim Vinichenko
  14. Institute of Thermal Engineering, Graz University of Technology, 8010 Graz, Austria

    • Keywan Riahi

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Contributions

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.

Competing interests

The authors declare no competing financial interests.

Corresponding author

Correspondence to Jessica Jewell.

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

Publisher's note: Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Supplementary information

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  1. 1.

    Supplementary Information

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

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