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  • Matters Arising
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Reply to: Why fossil fuel producer subsidies matter

Nature volume 578, pages E5–E7 (2020)Cite this article

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The Original Article was published on 05 February 2020

Replying to: P. Erickson et al. Nature https://doi.org/10.1038/s41586-019-1920-x (2020)

In 2009, the G20 countries pledged to phase out fossil fuel subsidies1. Our original Letter highlighted that about 95% of subsidies go to consumers and two-thirds are in the Middle East, Russia and Latin America2. We also found the largest emission reductions from subsidy removal would occur in those three regions, where low oil prices provided a unique political opportunity and the reforms would harm fewer poor people. In the accompanying Comment3, Erickson et al. argue that we downplay the impact of subsidy removal and the effect of subsidies for oil producers, such as the USA’s intangible drilling cost (IDC) scheme. Here we show large variations in such schemes and estimate their impact to be within the range of the sensitivity analysis from our original article. The USA IDC may represent a unique political opportunity for producer subsidy reform, but reforming such schemes may be counterproductive in countries where they are applied in tandem with high taxes for oil production.

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Data availability

The authors declare that the data supporting the calculations are available in the Methods or from publicly available sources cited in the Methods.

Code availability

No custom code or algorithms were developed for the discounted cash flow results reported in this paper.

References

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Acknowledgements

This work was supported by the Research Council Norway under the Contractions project (“Analyzing past and future energy industry contractions: towards a better understanding of the flip-side of energy transitions”) under grant agreement number 267528/E10. We thank A. Cherp for discussions on the discounted cash flow model.

Author information

Authors and Affiliations

  1. Division of Physical Resource Theory, Department of Space, Earth and Environment, Chalmers University of Technology, Gothenburg, Sweden

    Jessica Jewell

  2. Centre for Climate and Energy Transformations, University of Bergen, Bergen, Norway

    Jessica Jewell & Vadim Vinichenko

  3. Department of Geography, Faculty of Social Sciences, University of Bergen, Bergen, Norway

    Jessica Jewell & Vadim Vinichenko

  4. Risk and Resilience Program, International Institute for Applied Systems Analysis, Laxenburg, Austria

    Jessica Jewell

  5. RFF-CMCC European Institute on Economics and the Environment, Milan, Italy

    Johannes Emmerling, Loïc Berger & Massimo Tavoni

  6. Fondazione Centro Euromediterraneo sui Cambiamenti Climatici, Lecce, Italy

    Johannes Emmerling, Loïc Berger & Massimo Tavoni

  7. Potsdam Institute for Climate Impact Research, Member of the Leibniz Association, Potsdam, Germany

    Christoph Bertram

  8. IESEG School of Management, CNRS, Université Lille, UMR 9221–LEM, Lille, France

    Loïc Berger

  9. MaREI, the SFI Research Centre for Energy, Climate and Marine, Environmental Research Institute, University College Cork, Cork, Ireland

    Hannah E. Daly

  10. UCL Energy Institute, University College London, London, UK

    Ilkka Keppo

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

    Volker Krey & Keywan Riahi

  12. Industrial Ecology and Energy Transitions Programmes, Norwegian University of Science and Technology (NTNU), Trondheim, Norway

    Volker Krey

  13. Copernicus Institute for Sustainable Development, University of Utrecht, Utrecht, The Netherlands

    David E. H. J. Gernaat & Detlef van Vuuren

  14. PBL Netherlands Environmental Assessment Agency, The Hague, The Netherlands

    David E. H. J. Gernaat & Detlef van Vuuren

  15. National Technical University of Athens, Athens, Greece

    Kostas Fragkiadakis & Leonidas Paroussas

  16. Electric Power Research Institute, Palo Alto, CA, USA

    David McCollum

  17. Institute of Thermal Engineering, Graz University of Technology, Graz, Austria

    Keywan Riahi

  18. Department of Management, Economics and Industrial Engineering, Politecnico di Milano, Milan, Italy

    Massimo Tavoni

Authors
  1. Jessica Jewell
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  2. Johannes Emmerling
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  4. Christoph Bertram
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  6. Hannah E. Daly
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  15. Detlef van Vuuren
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Contributions

The change in composition (removal of Nawfal Saadi and addition of Hannah Daly) and order of the author list in this Matters Arising compared to the original Letter reflects the contributions to the Matters Arising Reply, which relied on a discounted cash flow model and additional empirical research in order to validate the assumptions and sensitivity analysis from the original article. J.J., J.E., V.V. and C.B. wrote the Reply with contributions from L.B., H.D., I.K., V.K., D.E.H.J.G., K.F., D.M, L.P., K.R., M.T. and D.V. The numerical model was conceived and designed by J.J. and V.V. and implemented by V.V. The results were analysed by J.J. and V.V.

Corresponding author

Correspondence to Jessica Jewell.

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Supplementary Methods

This file contains Supplementary Methods, including Methods Table 1-4, and Supplementary References.

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Jewell, J., Emmerling, J., Vinichenko, V. et al. Reply to: Why fossil fuel producer subsidies matter. Nature 578, E5–E7 (2020). https://doi.org/10.1038/s41586-019-1921-9

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