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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Discussion – 1 comment

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Re: IIASA Study: Limited Emission Reductions from Fossil Fuel Subsidy Removal
#1
2018-Feb-24 12:44 AM

Seems counter intuitive to me, if an industry is receiving subsidies so it can sell more cheaply would not then it's prices rise accordingly to how much the subsidies bullwarked that lower price? - say if subsidies allowed you to sell your oil at 50Cents/barrel instead of 100 cents, would not the price then return to 100 cents per barrel upon the removal of the subsidy?

Should the company have used the subsidy money to enrich the corrupted within it, then they should all be jailed and their assets confiscated, including share holders and beneficial families, and the resources of that company sold by auction to other companies able to argue they would do better with those resources, but that is a whole other matter.

Back to the prices, so oil at $100;/barrel would be harder to sell, and the gas and coal subsidy removed prices would be higher also so retailers would look at genuinely cheaper products such as wind, solar and storage, which are generally much less subsidised so should stand out as cheaper, or if all subsidies were removed then wind and Solar are much cheaper already so would be the beneficiaries.

What could possibly change that reality?

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