Do Political Institutions Influence the Dismantling of Fossil Fuel Subsidies? Lessons from the OECD Countries and a Comparative Analysis of Canadian and German Production Subsidies

Abstract

Despite a global consensus that fossil fuel subsidies should be reformed, limited progress has been made. The study assesses whether domestic political institutions insulating politicians from backlash and compensating those affected by reforms make subsidies easier to dismantle. It was found that proportional representation and corporatism were correlated with lower levels of fossil fuel subsidies in OECD countries. A comparative case study of coal production subsidies in Germany and gas production subsidies in Canada suggests that political insulation and compensation contributed towards the dismantling of fossil fuel subsidies. The findings provide an understanding of the impact of corporatism and electoral systems on reform.