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World fossil fuel subsidies and global carbon emissions in a model with interfuel substitution

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  • Larsen, Bjorn

Abstract

The author presents a simple empirical framework for estimating the level of world fossil fuel subsidies and analyzing their implications for carbon dioxide emissions. The author extends Larsen and Shah (1992) by applying a simple model with interfuel substitution, using a more detailed sectoral data set that includes energy prices and consumption for an expanded sample of countries. The author concludes that substantial fossil fuel subsidies prevail in a handful of large carbon-emitting countries. The fiscal implications for some countries are significant - as much as 10 percent of GDP in some countries. World subsidies are estimated to be more than $210 billion, or 20 to 25 percent of the value of world fossil fuel consumption at world prices. Removing such subsidies, the author estimates, would reduce national carbon emissions by more than 20 percent relative to baseline emissions in some countries. It would reduce global carbon emissions by 7 percent.

Suggested Citation

  • Larsen, Bjorn, 1994. "World fossil fuel subsidies and global carbon emissions in a model with interfuel substitution," Policy Research Working Paper Series 1256, The World Bank.
    • Handle: RePEc:wbk:wbrwps:1256
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    References listed on IDEAS

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    1. Nordhaus, William D, 1991. "To Slow or Not to Slow: The Economics of the Greenhouse Effect," Economic Journal, Royal Economic Society, vol. 101(407), pages 920-937, July.
    2. Anwar Shah & Bjorn Larsen, 2014. "Carbon taxes, the greenhouse effect, and developing countries," Annals of Economics and Finance, Society for AEF, vol. 15(1), pages 353-402, May.
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    7. Burgess, Joanne C., 1990. "The contribution of efficient energy pricing to reducing carbon dioxide emissions," Energy Policy, Elsevier, vol. 18(5), pages 449-455, June.
    8. Larsen, Bjorn & Shah, Anwar & DEC, 1992. "World fossil fuel subsidies and global carbon emissions," Policy Research Working Paper Series 1002, The World Bank.
    9. Thomas Sterner, 1989. "Oil Products in Latin America: The Politics of Energy Pricing," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 25-46.
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    Cited by:

    1. Moor, Andre P.G. de, 1997. "Key issues in subsidy policies and strategies for reform," Sede de la CEPAL en Santiago (Estudios e Investigaciones) 34314, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    2. Shreekant Gupta, 2000. "Incentive-Based Approaches for Mitigating Greenhouse Gas Emissions: Issues and Prospects for India," Working papers 85, Centre for Development Economics, Delhi School of Economics.
    3. André de Moor, 2001. "Towards a grand deal on subsidies and climate change," Natural Resources Forum, Blackwell Publishing, vol. 25(2), pages 167-176, May.
    4. Li, Yingzhu & Shi, Xunpeng & Su, Bin, 2017. "Economic, social and environmental impacts of fuel subsidies: A revisit of Malaysia," Energy Policy, Elsevier, vol. 110(C), pages 51-61.
    5. Farzin, Y. H., 1996. "Optimal pricing of environmental and natural resource use with stock externalities," Journal of Public Economics, Elsevier, vol. 62(1-2), pages 31-57, October.
    6. Shreekant Gupta, 2010. "Incentive Based Approaches for Mitigating Greenhouse Gas Emmissions : Issues And Prospects for India," Working Papers id:2638, eSocialSciences.

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