Energy and Natural Resources

IIASA Study: Limited Emission Reductions From Fossil Fuel Subsidy Removal

09 February 2018

Impact of subsidy removal on cumulative change in emissions from 2020 to 2030 at the regional level (colored bars). Solid lines represent emission effects of unconditional NDCs (Nationally Determined Contributions) and dashed lines of conditional NDCs. Source: IIASAImpact of subsidy removal on cumulative change in emissions from 2020 to 2030 at the regional level (colored bars). Solid lines represent emission effects of unconditional NDCs (Nationally Determined Contributions) and dashed lines of conditional NDCs. Source: IIASA

Removing fossil fuel subsidies, which amount to hundreds of billions of dollars worldwide, would only slightly slow the growth of carbon dioxide emissions, according to a study led by the International Institute of Applied Systems Analysis (IIASA). By 2030, they would only be 1-5 percent lower than if subsidies had been maintained, regardless of whether oil prices are low or high. This equates to 0.5-2 gigatons (Gt/year) of CO2 by 2030, significantly less than the voluntary climate pledges made under the Paris climate agreement, which add up to 4-8 Gt/year and are themselves not enough to limit warming to 2 degrees Celsius.

Subsidy removal would reduce the carbon price necessary to stabilize greenhouse gas concentration at 550 parts per million by only 2-12 percent under low oil prices.

The largest effects of removing subsidies were found in areas that export oil and gas, such as Russia, Latin America, the Middle East and North Africa. In these regions, the emissions savings caused by subsidy removal would either equal or exceed their climate pledges.

Developing economies that are not major oil and gas exporters would generally experience much smaller effects of removing the subsidies. Some of the models used even suggest a rise in emissions for some regions, such as Africa and India, as a result of switching from unsubsidized oil and gas to coal.

To contact the author of this article, email sue.himmelstein@ieeeglobalspec.com


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