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OECD work on fossil fuel subsidies
www.oecd.org/env/cc/econ
Helen Mountford
Acting Deputy Director
OECD Environment Directorate
14 December 2009
Removing energy subsidies can reduce
GHG emissions by over 10%
% deviation relative to Business as Usual
Impact of energy subsidy removal on GHG emissions in 2050
0
-5
-10
-15
-20
-25
-30
-35
-40
-45
World
China
India
Oilexporting
countries
Russia
Non-EU
Eastern
European
countries
Source: joint OECD-IEA analysis, cited in OECD (2009), Economics of Climate Change Mitigation:
Policies and Options for Global Action beyond 2010, based on IEA data on subsidies
Greater GHG benefits if subsidy removal
is combined with caps on emissions
15
2050
10
% deviation from baseline
5
0
-5
-10
-15
-20
-25
carbon leakage : 20%
-30
-35
World
EU27 plus EFTA
Japan
United States
Canada
Australia and
New Zealand
Brazil
Rest of
the World
China
India
Oil-producing
countries *
Russia
Rest of Annex I
-40
Source: joint OECD-IEA analysis, cited in OECD (2009), Economics of Climate Change Mitigation:
Policies and Options for Global Action beyond 2010, based on IEA data on subsidies
Unilateral removal of energy subsidies
brings real income gains…
% deviation relative to the baseline
2.5
2050
2.0
1.5
1.0
0.5
Brazil
Rest of
the world
China
Oilproducing
countries **
India
Russia
0.0
Source: joint OECD-IEA analysis, cited in OECD (2009), Economics of Climate Change Mitigation:
Policies and Options for Global Action beyond 2010, based on IEA data on subsidies
… but not everybody will gain from
multilateral removal
4
2050
% deviation relative to the baseline
3
2
1
0
-1
-2
GDP
-3
Income
-4
-5
Rest of
Annex I
Oil-producing
countries **
Russia
Canada
Australia and
New Zealand
WORLD
Rest of
the World
United States
Brazil
China
Japan
EU27 plus
EFTA
India
-9.3 -15.2
Source: joint OECD-IEA analysis, cited in OECD (2009), Economics of Climate Change Mitigation:
Policies and Options for Global Action beyond 2010, based on IEA data on subsidies
Conclusions & next steps
Removing fossil fuel subsidies will:
• Reduce GHG emissions
• Reduce the costs of global mitigation action
• Increase economic efficiency and, in most countries, real income
Best to combine subsidy phase-out with:
• Emission caps in developed countries (reduces carbon leakage)
• Targeted measures to address social impacts
Next steps in OECD work:
• Methodology for estimating producer & consumer subsidies in developed
countries
• Analysis of GHG, economic, trade, & social impacts of subsidy phase-out
• Advice & recommendations on how to implement phase-out in practice
www.oecd.org/env/cc/econ