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Implications of Switching Fossil Fuel Subsidies to Solar: A Case Study for the European Union

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  • Jon Sampedro

    (Basque Centre for Climate Change (BC3), 48940 Leioa, Spain)

  • Iñaki Arto

    (Basque Centre for Climate Change (BC3), 48940 Leioa, Spain)

  • Mikel González-Eguino

    (Basque Centre for Climate Change (BC3), 48940 Leioa, Spain
    Department of Foundations of Economic Analysis, University of the Basque Country (UPV/EHU), 48940 Bilbao, Spain)

Abstract

Fossil fuel subsidies (FFS) constitute one of the most obvious barriers to tackling climate change, as they encourage inefficient energy consumption and divert investment away from clean energy sources. According to the International Monetary Fund, FFS amounted globally to $233 billion in 2014, over four times the value of subsidies awarded to promote renewable energy. In this study an integrated assessment model is used to analyse the CO 2 implications in the European Union of eliminating FFS and recycling the revenues to promote rooftop PV. It is found that eliminating FFS would give rise to a small reduction in CO 2 due to fuel-switching from coal to gas. If the revenues were recycled to promote solar, then the CO 2 reduction would increase from 1.8% to 2.2% by 2030. Eliminating FFS is not a panacea from the mitigation point of view, even if the revenues are recycled, but other important objectives, such as those related to renewable energy promotion and the reduction of air pollution, are advanced at zero cost for the government.

Suggested Citation

  • Jon Sampedro & Iñaki Arto & Mikel González-Eguino, 2017. "Implications of Switching Fossil Fuel Subsidies to Solar: A Case Study for the European Union," Sustainability, MDPI, vol. 10(1), pages 1-12, December.
  • Handle: RePEc:gam:jsusta:v:10:y:2017:i:1:p:50-:d:124415
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    References listed on IDEAS

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