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.

Global progress and backsliding on gasoline taxes and subsidies

Nature Energy volume 2, Article number: 16201 (2017) Cite this article

Subjects

Abstract

To reduce greenhouse gas emissions in the coming decades, many governments will have to reform their energy policies. These policies are difficult to measure with any precision. As a result, it is unclear whether progress has been made towards important energy policy reforms, such as reducing fossil fuel subsidies. We use new data to measure net taxes and subsidies for gasoline in almost all countries at the monthly level and find evidence of both progress and backsliding. From 2003 to 2015, gasoline taxes rose in 83 states but fell in 46 states. During the same period, the global mean gasoline tax fell by 13.3% due to faster consumption growth in countries with lower taxes. Our results suggest that global progress towards fossil fuel price reform has been mixed, and that many governments are failing to exploit one of the most cost-effective policy tools for limiting greenhouse gas emissions.

Since the early 2000s, the Intergovernmental Panel on Climate Change, the International Energy Agency, the International Monetary Fund (IMF), and the World Bank have urged governments to remove subsidies for fossil fuels and instead tax them at rates that account for their social and environmental costs1,2,3. The IMF estimates that global fossil fuel subsidies—including social and environmental costs—reached US$5.3 trillion in 2015, equivalent to6.5% of global GDP (gross domestic product)4. The removal of fossil fuel subsidies is widely regarded as one of the most cost-effective ways for governments to meet their commitments under the Paris climate agreement to curtail greenhouse gas (GHG) emissions5,6. At the same time, reduced subsidies and higher taxes can generate local benefits by reducing road congestion, traffic fatalities, and local air pollution from nitrogen oxide, ozone, and fine particulates7.

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

Relevant articles

Open Access articles citing this article.

Access options

Rent or buy this article

Prices vary by article type

from$1.95

to$39.95

Learn more

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

Figure 1: Gasoline prices by country and benchmark price trends over time.
Figure 2: Net taxes and subsidies by country in 2003 versus 2015.
Figure 3: Net taxes and subsidies over time.
Figure 4: Net taxes and subsidies by region over time.
Figure 5: Net taxes and subsidies in the G20.
Figure 6: Price fixity over time.

References

  1. Gupta, S. & Mahler, W. Taxation of petroleum products: theory and empirical evidence. Energy Econ. 17, 101–116 (1995).

    Article  Google Scholar 

  2. Bacon, R. Petroleum taxes: trends in fuel taxes (and subsidies) and the implications. Viewpoint (World Bank) 240, 1–4 (2001).

    Google Scholar 

  3. IPCC Climate Change 2001: The Scientific Basis (eds Houghton, J. T. et al.) (Cambridge Univ. Press, 2001).

    Google Scholar 

  4. Coady, D., Parry, I., Sears, L. & Shang, B. How large are global energy subsidies? IMF Working Paper 105, 1–41 (2015).

    Google Scholar 

  5. Rentschler, J. & Bazilian, M. Reforming fossil fuel subsidies: drivers, barriers and the state of progress. Clim. Policy 16, 1–24 (2016).

    Article  Google Scholar 

  6. Davis, L. W. The economic cost of global fuel subsidies. Am. Econ. Rev. 104, 581–585 (2014).

    Article  Google Scholar 

  7. Parry, I. W., Heine, M. D., Lis, E. & Li, S. Getting Energy Prices Right: From Principle to Practice (International Monetary Fund, 2014).

    Google Scholar 

  8. de Oliveira, A. & Laan, T. Lessons Learned from Brazil’s Experience with Fossil-Fuel Subsidies and their Reform (International Institute for Sustainable Development, 2010).

    Google Scholar 

  9. Aldy, J. E. & Pizer, W. A. Alternative metrics for comparing domestic climate change mitigation efforts and the emerging international climate policy architecture. Rev. Environ. Econ. Policy 10, 3–24 (2016).

    Article  Google Scholar 

  10. Vagliasindi, M. Implementing Energy Subsidy Reforms: Evidence from Developing Countries (The World Bank, 2013).

    Google Scholar 

  11. Victor, D. G. The Politics of Fossil-Fuel Subsidies (IISD Global Subsidies Initiative Series, 2009).

  12. Cheon, A., Urpelainen, J. & Lackner, M. Why do governments subsidize gasoline consumption? An empirical analysis of global gasoline prices, 2002–2009. Energy Policy 56, 382–390 (2013).

    Article  Google Scholar 

  13. Wagner, A. International Fuel Prices 2012/2013 (accessed 1 July 2014); https://energypedia.info/index.php/International_Fuel_Prices

  14. Koplow, D. Measuring Energy Subsidies Using the Price-Gap Approach: What Does it Leave Out? (IISD Trade, Investment and Climate Change Series, 2009).

  15. Fattou, B. & El-Katiri, L. Energy subsidies in the Middle East and North Africa. Energy Strateg. Rev. 2, 108–115 (2013).

    Article  Google Scholar 

  16. G20 Leaders’ Statement The Pittsburgh Summit, September 24–25, 2009 (accessed 14 May 2016); https://www.treasury.gov/resource-center/international/g7-g20/Documents/pittsburgh_summit_leaders_statement_250909.pdf

  17. Clements, B. et al. Energy Subsidy Reform: Lessons and Implications (International Monetary Fund, 2013).

    Google Scholar 

  18. Kojima, M. Petroleum product pricing and complementary policies: experience of 65 developing countries since 2009. World Bank Policy Research Working Paper 6396, 1–116 (2013).

    Google Scholar 

  19. Coady, D. et al. Petroleum Product Subsidies: Costly, Inequitable, and Rising (International Monetary Fund, 2010).

    Google Scholar 

Download references

Acknowledgements

We thank K. Bawn, M. Bazilian, D. Coady, A. Cooley, J. Kyle, Y.-M. Liou, I. Parry, D. Posner, B. Shang and D. Treisman for their suggestions on the analysis, IMF and World Bank staff for sharing their country data, and E. Chenoweth and A. Glynn for their early guidance on the research design. Our data collection efforts were supported by the UCLA Burkle Center and the Natural Resources Governance Institute. Earlier versions of this paper were presented to seminars at the World Bank, the Council on Foreign Relations, the 2015 meeting of the American Political Science Association, the 2015 meeting of the International Political Economy Society, Georgetown University, UCLA Law School, Yale University and Columbia University.

Author information

Authors and Affiliations

  1. Department of Political Science, University of California Los Angeles, Los Angeles, California 90095, USA

    Michael L. Ross

  2. Departments of Statistics and Political Science, University of California Los Angeles, Los Angeles, California 90095, USA

    Chad Hazlett

  3. McCourt School of Public Policy, Georgetown University, Washington DC 20057, USA

    Paasha Mahdavi

Authors
  1. Michael L. Ross
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Chad Hazlett
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Paasha Mahdavi
    View author publications

    You can also search for this author in PubMed Google Scholar

Contributions

M.L.R. secured project funding and designed the study; M.L.R. and P.M. supervised the data collection; P.M. and C.H. analysed the data; P.M. created the figures; and M.L.R., P.M. and C.H. drafted and edited the manuscript.

Corresponding author

Correspondence to Michael L. Ross.

Ethics declarations

Competing interests

The authors declare no competing financial interests.

Supplementary information

Supplementary Information

Supplementary Figures 1–4, Supplementary Tables 1–2, Supplementary Notes 1–2. (PDF 283 kb)

Rights and permissions

Reprints and Permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Ross, M., Hazlett, C. & Mahdavi, P. Global progress and backsliding on gasoline taxes and subsidies. Nat Energy 2, 16201 (2017). https://doi.org/10.1038/nenergy.2016.201

Download citation

  • Received:

  • Accepted:

  • Published:

  • DOI: https://doi.org/10.1038/nenergy.2016.201

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