OECD Observer
Fossil folly
fossil fuels, climate change

If the world is to make a dent on climate change, breaking the arm-lock of fossil fuels is inevitable. After all, limiting the rise in global temperatures to no more than 2°C by the end of the 21st century demands curbing greenhouse-gas emissions between 40% and 70% by 2050 compared with 2010 levels, which means replacing fossil fuels–coal, oil and gas–with low-carbon energy sources and developing technologies to capture and store CO2.

But OECD countries and leading emerging nations are still spending US$160-200 billion a year to support fossil fuel production and consumption, by lowering exploration and exploitation costs for oil and gas companies and reducing prices for consumers. Besides undermining efforts to tackle climate change, these subsidies make it hard for competing energy sources, aggravate pollution problems and represent a strain on public funds. This means fewer resources for other strategic investments.

The OECD Companion to the Inventory of Support Measures for Fossil Fuels 2015 identifies almost 800 tax breaks and spending programmes subsidising fossil fuels in OECD countries and emerging economies.

The report assesses the progress made on this front over the past three years in OECD countries: fossil fuels subsidies are indeed on a downward trend since 2011-12, largely owing to the collapse of international oil prices last year, but to policy changes also. In Mexico, the government eliminated its support to the consumption of gasoline and diesel fuel through a new tax, the Excise Tax on Products and Services on Gasoline and Diesel (Impuesto Especial sobre Producción y Servicios por Enajenación de Gasolinas y Diesel). Outside the OECD, support has receded too since 2012 in emerging economies, though less so: India’s government, for instance, has decided to reform incentives that encourage consumption of diesel.

Although total support to fossil fuels remains too high, the data compiled in the database show some progress compared with the 2013 edition.

OECD (2015), OECD Companion to the Inventory of Support Measures for Fossil Fuels 2015, OECD Publishing.  

To access the online tool, visit www.oecd.org/site/tadffss/data/   

See www.oecd.org/env/cc/cop21.htm and http://oe.cd/12D

©OECD Observer No 304, November 2015