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Mitigation Potential of Removing Fossil Fuel Subsidies: A General Equilibrium Assessment

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  • Jean-Marc Burniaux
  • Jean Chateau

Abstract

Quoting a joint analysis made by the OECD and the IEA, G20 Leaders committed in September 2009 to ?rationalize and phase out over the medium term inefficient fossil fuel subsidies that encourage wasteful consumption?. This analysis was based on the OECD ENV-Linkages General Equilibrium model and shows that removing fossil fuel subsidies in a number of non-OECD countries could reduce world Greenhouse Gas (GHG) emissions by 10% in 2050 (OECD, 2009). Indeed, these subsidies are huge. IEA estimates indicate that total subsidies to fossil fuel consumption in 37 non-OECD countries in 2008 amounted to USD 557 billions (IEA, OPEC, OECD, World Bank, 2010). This represents almost five times the yearly bilateral aid flows to developing countries as defined by the Official Development Assistance (ODA). This paper discusses the assumptions, data and both environmental and economic implications of removing these subsidies. It shows that, though removing these subsidies would amount to roughly a seventh of the effort needed to stabilize GHG concentration at a level of 450ppm or below 2°C, the full environmental benefit of this policy option can only be achieved if, in parallel, emissions are also capped in OECD countries. Finally, though removing these subsidies qualifies as being a ?win-win? option at the global level in terms of environmental and economic benefits, this is not true for all countries/regions. The paper also provides some discussion about the robustness of these results. Impact potentiel de l'élimination des subsides à la consommation des énergies fossiles sur les émissions de gaz à effet de serre : une évaluation en équilibre général Se réfèrant à une analyse entreprise conjointement par l'OCDE et l'AIE, les dirigeants du G20 se sont engagés en Septembre 2009 à "rationaliser et éliminer dans le moyen terme les subsides inefficaces des énergies fossiles qui encouragent un gaspillage de leur consommation". Cette analyse, fondée sur les résultats du modèle d'équilibre général ENV-Linkages de l'OCDE, montre que l'élimination des subsides à la consommation d'énergies fossiles dans un certain nombre de pays non-OCDE pourrait réduire les émissions mondiales de gaz à effet de serre (GES) de 10% en 2050 (OECD, 2009). Ces subsides sont, en effet, très importants. Les estimations de l'AIE indiquent que les subsides à la consommation d'énergies fossiles dans 37 pays non-OCDE correspondaient à 557 milliards de dollars US en 2008 (IEA, OPEC, OECD, World Bank, 2010). Ceci représente presque cinq fois la somme totale de l'aide bilatérale annuelle aux pays en développement telle que définie par le Comité d'aide au Développement de l'OCDE. Ce document décrit les hypothèses, les données et les conséquences tant environnementales qu'économiques de l'élimination de ces subsides. Il montre que, bien que l'élimination de ces subsides ne compterait que pour un septième environ de l'effort total requis pour stabiliser les concentrations de GES dans l'atmosphère à un niveau de 450 ppm, correspondant à une hausse de la température inférieure à 2°C, la totalité du bénéfice environnemental de cette option ne pourrait être atteint qu'à condition que les émissions dans les pays de l'OCDE soient simultanément sous contrainte. Enfin, malgré le fait que l'élimination de ces subsides implique des bénéfices au niveau mondial à la fois sur le plan environnemental et économique, ceci n'est pas nécessairement le cas au niveau des pays ou des régions. Le document contient aussi une analyse de la robustesse de ces résultats.

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Bibliographic Info

Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 853.

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Date of creation: 08 Apr 2011
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Handle: RePEc:oec:ecoaaa:853-en

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Keywords: fossil-fuel subsidies; GHGs emissions; general equilibrium models; Subsides des énergies fossiles; émissions des GES; modèles d'équilibre général;

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  1. 265 – Fossil fuel subsidies
    by David Pannell in Pannell Discussions on 2014-04-21 15:00:38
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Cited by:
  1. Nugumanova, Lyazzat, 2013. "Analysis of Fossil Fuel Subsidies in Kazakhstan," International Conference and Young Researchers Forum - Natural Resource Use in Central Asia: Institutional Challenges and the Contribution of Capacity Building, University of Giessen (JLU Giessen), Ce 159103, University of Giessen (JLU Giessen), Center for International Development and Environmental Research.
  2. Schwanitz, Valeria Jana & Piontek, Franziska & Bertram, Christoph & Luderer, Gunnar, 2014. "Long-term climate policy implications of phasing out fossil fuel subsidies," Energy Policy, Elsevier, Elsevier, vol. 67(C), pages 882-894.

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