IEA Releases Brief on Benefits of Reducing Fossil Fuel Subsidies

8 June 2010: Following the G-20 Finance Ministers and Central Governors' Meeting on 4-5 June 2010, in Busan, Republic of Korea, on the implementation of the G-20 Pittsburgh mandate to phase out inefficient fossil fuel subsidies, the International Energy Agency (IEA) has published a brief on fossil fuel subsidies based on data from 37 countries representing over 95% of global fossil fuel subsidization.

The IEA found that in these countries, annual fossil fuel subsidies skyrocketed from US$342 billion in 2007 to US$557 billion in 2008. It notes, however, that this increase reflects fluctuating oil prices, currency strengths, and shifts in demand and domestic policy. The IEA adds that the figure for 2009 is expected to be significantly lower. The brief focuses on the burden placed on economies subsidizing fossil energy consumption and highlights that, by phasing them out, incentives would be created to use energy more efficiently and to move to cleaner alternative fuel sources.

The results of modeling carried out by IEA, which would see fossil fuel subsidies phased out between 2011-2020, would cut: global energy demand by 5.8%; global oil demand by 6.5 million barrels a day; and carbon dioxide emissions by 6.9%. The brief concludes by stressing the care needed in reducing subsidies for kerosene, liquid petroleum gas (LPG) and electricity in countries where access to energy services remains limited. [The Brief] [Climate Change Policy & Practice Story on the G-20 June Meeting]