Skip to main content

Thank you for visiting nature.com. You are using a browser version with limited support for CSS. To obtain the best experience, we recommend you use a more up to date browser (or turn off compatibility mode in Internet Explorer). In the meantime, to ensure continued support, we are displaying the site without styles and JavaScript.

Development incentives for fossil fuel subsidy reform

Nature Climate Change volume 5, pages 709–712 (2015)Cite this article

Subjects

A Correction to this article was published on 21 August 2015

This article has been updated

Reforming fossil fuel subsidies could free up enough funds to finance universal access to water, sanitation, and electricity in many countries, as well as helping to cut global greenhouse-gas emissions.

Fossil fuel subsidies are not only economically inefficient, but also harmful for the environment1,2,3. In 2011, fossil fuel consumption was subsidized by about US$550 billion per year, globally4 — oil subsidies alone account for economic inefficiencies (that is, annual deadweight losses) of about US$44 billion (ref. 5). Reducing fossil fuel subsidies would also help to protect the climate6. Estimates by the International Energy Agency7 indicate that a universal phase-out of fossil fuel subsidies would lower annual global CO2 emissions by 4.4%. From this perspective, reducing or even removing such subsidies seems to be a no-regret option8. However, substantial fossil fuel subsidies are granted in many countries, mostly targeted at oil and petroleum products or electricity consumption.

This is a preview of subscription content, access via your institution

Access options

Rent or buy this article

Get just this article for as long as you need it

$39.95

Learn more

Prices may be subject to local taxes which are calculated during checkout

Figure 1: Potential to achieve universal access to key infrastructures by 2030 through subsidy reform.

Change history

  • 06 August 2015

    In the Commentary 'Development incentives for fossil fuel subsidy reform' (Nature Clim. Change 5, 709–712; 2015), in the Acknowledgements, J. Steckel's surname was incorrectly spelled. This has been corrected in the HTML and PDF versions after print 6 August 2015.

References

  1. Reforming Energy Subsidies: Opportunities to Contribute to the Climate Change Agenda (UNEP, 2008); www.unep.org/pdf/pressreleases/reforming_energy_subsidies.pdf

  2. Untold Billions: Fossil-Fuel Subsidies, Their Impacts and the Path to Reform (GSI, 2009).

  3. Joint report by IEA, OPEC, OECD and World Bank on Fossil-Fuel and Other Energy Subsidies: An Update of the G20 Pittsburgh and Toronto Commitments (IEA, OPEC, OECD & World Bank, 2011); www.oecd.org/site/tadffss/49006998.pdf

  4. World Energy Outlook 2014 (IEA, 2014).

  5. Davis, L. W. The Economic Cost of Global Fuel Subsidies (National Bureau of Economic Research, 2013); http://ideas.repec.org/p/nbr/nberwo/19736.html

  6. Edenhofer, O. et al. Glob. Environ. Change 31, 132–143 (2015).

    Article  Google Scholar 

  7. World Energy Outlook 2011 (IEA, 2011).

  8. Fuel Taxes and the Poor: The Distributional Effects of Gasoline Taxation and Their Implications for Climate Policy (Johns Hopkins Univ. Press, 2011).

  9. Strand, J. Political Economy Aspects of Fuel Subsidies: a Conceptual Framework (World Bank, 2013); http://ideas.repec.org/p/wbk/wbrwps/6392.html

    Book  Google Scholar 

  10. Arze del Granado, F. J., Coady, D. & Gillingham, R. World Dev. 40, 2234–2248 (2012).

    Article  Google Scholar 

  11. Clements, B., Coady, D., Fabrizio, S., Gupta, S. & Shang, B. Econ. Energy Environ. Policy 3, (2014).

  12. Rao, N. D. Energy Sust. Dev. 16, 35–43 (2012).

    Article  Google Scholar 

  13. Implementing Energy Subsidy Reforms: Evidence from Developing Countries (World Bank, 2012); http://dx.doi.org/10.1596/978-0-8213-9561-5

  14. Energy Subsidy Reform: Lessons and Implications (IMF, 2013); http://www.imf.org/external/np/pp/eng/2013/012813.pdf

  15. Alkire, S. World Dev. 30, 181–205 (2002).

    Article  Google Scholar 

  16. Drèze, J. & Sen, A. An Uncertain Glory: India and Its Contradictions (Princeton Univ. Press, 2013).

    Book  Google Scholar 

  17. Jakob, M. & Hilaire, J. Climatic Change http://dx.doi.org/10.1007/s10584-015-1406-2 (2015).

    Google Scholar 

  18. Jakob, M. et al. Nature Clim. Change 4, 961–968 (2014).

    Article  Google Scholar 

  19. World Development Indicators (World Bank, 2014); http://go.nature.com/Oo93Bg

  20. World Telecommunication/ICT Indicators Database 18th edn (ITU, 2014); http://www.itu.int/en/ITU-D/Statistics/Pages/publications/wtid.aspx

  21. Pachauri, S. et al. Environ. Res. Lett. 8, 024015 (2013).

    Article  Google Scholar 

Download references

Acknowledgements

We thank S. Pachauri, N.D. Rao and J. Steckel for helpful comments and suggestions.

Author information

Authors and Affiliations

  1. Michael Jakob, Claudine Chen, Sabine Fuss, Annika Marxen and Ottmar Edenhofer are at the Mercator Research Institute on Global Commons and Climate Change, Torgauer Straße 12–15, 10829 Berlin, Germany,

    Michael Jakob, Claudine Chen, Sabine Fuss, Annika Marxen & Ottmar Edenhofer

  2. A.M. and O.E. are also at Technical University Berlin, Straße des 17. Juni 152, 10623 Berlin, Germany,

    Annika Marxen & Ottmar Edenhofer

  3. M.J. and O.E are also at Potsdam Institute for Climate Change Impact Research, Telegrafenberg 31, 14473 Potsdam, Germany,

    Michael Jakob & Ottmar Edenhofer

Authors
  1. Michael Jakob
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Claudine Chen
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Sabine Fuss
    View author publications

    You can also search for this author in PubMed Google Scholar

  4. Annika Marxen
    View author publications

    You can also search for this author in PubMed Google Scholar

  5. Ottmar Edenhofer
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Michael Jakob.

Supplementary information

Supplementary Information

Supplementary information (PDF 893 kb)

Rights and permissions

Reprints and Permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Jakob, M., Chen, C., Fuss, S. et al. Development incentives for fossil fuel subsidy reform. Nature Clim Change 5, 709–712 (2015). https://doi.org/10.1038/nclimate2679

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1038/nclimate2679

This article is cited by

Search

Advanced search

Quick links

Nature Briefing

Sign up for the Nature Briefing newsletter — what matters in science, free to your inbox daily.

Get the most important science stories of the day, free in your inbox. Sign up for Nature Briefing