Fossil-fuel Subsidies Research Articles

The Political Economy of Fossil Fuel Subsidy Removal

The Political Economy of Fossil Fuel Subsidy Removal

Analysis of Fossil Fuel Subsidy Removal Policy in Nigeria

Elite interest in energy policy reform has often been neglected in analysing subsidy removal policy on fossil fuel in Nigeria, which is the reason for this study. The study explained the reasons for the fossil fuel subsidy removal policy in Nigeria, identified the reasons for protests against fossil fuel subsidy removal policy in the country, and analysed the reasons for acceptance of protested fossil fuel subsidy removal policy in the country. Information for the study was obtained through a systematic review of 13 purposively selected peer-reviewed published journal articles between 1996 and 2023. Subsidy removal policy has been influenced by internal and external factors in Nigeria. Protests recorded against the policy have been noted to result from exploitation from the government and multinational oil companies, an increase in the poverty rate, an increase in the crime rate, a failed private investment quest, and a contradiction to the constitutional provisions on the welfare of the citizens. The acceptance of the policy is informed by the need to have sustainable access to fossil fuel, the capability of the government to provide services locally and nationally within the country, and the involvement of the labour unions in the negotiation on fuel subsidy removal. The study concluded that elite interest sustains subsidies removal policy on fossil fuel in the country

ASEAN Financing Climate Policy: The Effect of Fossil Fuel Subsidies on CPI and GHGs

Abstract The Association of Southeast Asian Nations (ASEAN) employs fossil fuel subsidies to promote economic development, although such action may have a negative effect on the environment. This study employs panel data analysis to examine whether ASEAN’s fossil fuel (oil, gas, coal, and electricity) subsidies decrease the consumer price index (CPI; Model 1) and, on the other hand, increase greenhouse gas emissions (GHGs; Model 2) from energy levels, using yearly data of five ASEAN countries from 2010 to 2021. The findings demonstrate that ASEAN’s fossil fuel subsidies for oil, gas, coal and electricity do not reduce the CPI and, therefore, cannot be interpreted as reducing inflation. In addition, there is no effect of gas and coal subsidies on GHGs. This might be due to the small average of the five ASEAN countries from 2010 to 2021 in terms of gas and coal subsidies. Following the expectation, oil subsidy, which is the highest amount on average (4,635.44 real 2021 million USD), has a strong positive effect on GHGs. However, electricity subsidy, which is the second highest amount on average (1,963.22 real 2021 million USD), has a significant negative effect on GHGs.

Actions speak louder than words: the case for responsible scientific activism in an era of planetary emergency.

The world's understanding of the climate and ecological crises rests on science. However, scientists' conventional methods of engagement, such as producing ever more data and findings, writing papers and giving advice to governments, have not been sufficiently effective at persuading politicians to act on the climate and ecological emergency. To date, governments' decisions (such as continuing with vast subsidies for fossil fuels) clearly show that powerful vested interests have been much more influential than the amassed scientific knowledge and advice. We argue that in the face of this inaction, scientists can have the maximum amount of influence by lending their support to social movements pressing for action, joining as active participants and considering civil disobedience. Scientists seeking to halt continued environmental destruction also need to work through our institutions. Too many scientific organizations, from national academies of science to learned societies and universities, have not taken practical action on climate; for example, many still partner with fossil fuel and other compromised interests. We therefore also outline a vision for how scientists can reform our scientific institutions to become powerful agents for change.

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

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.

Antecedent and outcome study on energy transition - empirical evidence from G7 countries in TBL approach

Increasing investment in energy R&D (SDG 7.4) is critical to fostering the renewable energy transition (SDG 7.2) and in a way to meet the global climate target (SDG 13). Although public investments in renewable energy are increasing, they remain insufficient to meet the G7 countries' climate commitments. In the present study, renewable R&D investment (RRDI) is considered as an antecedent variable to determine its influence on the outcome variable renewable energy share (RES) when mediated by transition variables. The energy transition variables are categorized into Triple Bottom Line (TBL) factors namely, Economic factors (Fossil Energy Price, Low carbon trade), Social factors (Nationally determined contributions, Unemployment), and Environmental factors (Renewable energy installed Capacity, Environmental Tax, Fossil Fuel Subsidies), they play the role of the mediating variables. The proposed conceptual framework is supported by regulatory focus theory to promote R&D investment. The hypotheses are tested for G7 countries' annual data spanning the years 2000 to 2021 using SPSS mediation analysis with Process-Macro. The analysis reveals that TBL factors are significantly enhancing the RRDI and RES relationships in Germany, Japan, and the UK. The USA and Japan experience less economic impact from oil price fluctuations. The NDCs are mediating to a greater extent to improve the relationship between R&D and renewable energy in Canada, France, and the UK. The lack of significant mediation effects of economic, social, and environmental factors in the USA and Italy indicates that policies in the USA and Italy are not strategically managed to improve the relationship between RRDI and RES. Further, the study suggests designing policies considering TBL principles to increase their average renewable R&D public investments to attain Sustainable Development Goal 7 (SDG7). The G7 energy transition has slowed down due to an imbalance in the policies to regulate the prevention-promotional aspects of the energy transition.

Azerbaijan: pathways for decarbonization in a global context

ABSTRACT As economies around the world are increasing their mitigation ambitions, Azerbaijan’s lingering dependency on fossil fuel exports threatens its medium – and long-term economic development prospects. Global decarbonization is expected to directly impact the country’s resource rents through lower fossil fuel demand and prices. In this regard, it is crucial to understand the potential implications of the global mitigation efforts on the economy of Azerbaijan and evaluate the domestic mitigation policies. To address this gap in the literature, we use a global dynamic computable general equilibrium model and explore a set of forward-looking climate policy scenarios till 2060. Our results suggest that while being adversely impacted by decarbonization efforts in countries around the world, it is in Azerbaijan’s self-interest to implement domestic mitigation policies. With proper sequencing and design of such policies, including a combination of fossil-fuel subsidies reform, the introduction of carbon prices post-2030 and recycling of the additionally collected revenue via reduced factor taxes, the country could achieve NDC targets, boost economic growth and increase economic diversification. More ambitious mitigation efforts, consistent with reaching net-zero emissions by 2060 would result in substantial health co-benefits from improved air quality, which could almost fully outweigh the direct economic costs of such mitigation.

Impact of Financial Development Shocks on Renewable Energy Consumption in Saudi Arabia

The demand for renewable energy is increasing globally due to concerns about climate change, pollution, and the finite nature of fossil-fuel resources, and renewable energy has been recognized as a significant factor in realizing sustainable development. The government of Saudi Arabia adopted the reduction in fossil-fuel subsidies policy as a financial motivation for supporting both the production and consumption of fossil fuels. Therefore, this study aims to investigate the influence and shocks of Saudi financial development indicators on renewable energy consumption (REC) and to examine the track of causality between financial development indicators and REC. The study covers the annual data period of 1990–2021 and applies the Basic Vector Autoregressive model (VAR), the Granger causality test, forecast-error variance decomposition (FEVD), and the impulse response function (IRF). In the short run, the VAR results indicate a positive and significant impact of stock price volatility and private credit on REC. The results of causality between REC and financial development indicators were conflicting. The Granger causality test shows significant causality running from stock price volatility and private credit to REC. The FEVD results reveal that REC variation is explained by its innovative shocks and has a positive response to shocks in financial development. The IRF results show that REC has a positive response to shock on private credit, liquid liabilities, and stock price volatility. Authorities can encourage investment in renewable energy consumption by providing financial incentives; also, governments can foster national and international partnerships between investors, policymakers, and industry stakeholders. Employing different determinants of financial development indicators and incorporating population factors in the REC function will be highly recommended for forming the renewable energy demand in Saudi Arabia. Conducting a micro-level analysis of specific sectors within renewable energy, such as solar, wind, and others, can provide actionable insights for policymakers.

Extending the resource curse hypothesis to sustainability: Unveiling the environmental impacts of Natural resources rents and subsidies in Fossil Fuel-rich MENA Countries

The resource curse hypothesis (RCH) has been extensively studied in various domains, including economic growth, democracy, and financial development. However, the relationship between RCH and environmental degradation has been largely overlooked. In this study, drawing on the experience of the MENA region, we aim to extend the RCH to environmental degradation and hypothesize that the resource curse also affects the environment. Applying the resource curse framework, we investigate the effects of natural resource rents (NRR), fossil fuel subsidies (FFSs), and Gross National Income (GNI) on the transition from fossil fuels consumption (FFC) to renewable energy consumption (REC), a critical aspect of achieving sustainability. Using the PMG ARDL panel cointegration technique and panel data from 2009 to 2021 for nine fossil fuel-rich MENA countries, which are among the top 20 most heavily subsidized fossil fuel markets globally, we provide a comprehensive analysis. Our findings confirm the existence of the resource curse, as both NRR and subsidies have negative effects on the transition to REC, while GNI positively influences REC. We further support these results by employing the FMOLS panel cointegration approach as a robustness check. The study highlights the necessity of implementing various policy interventions, such as diversifying energy sources, undertaking energy pricing reforms, phasing out fossil fuel subsidies, and promoting renewable energy adoption.

Aspects of renewable energy influenced by natural resources: How do the stock market and technology play a role?

Subsidies for fossil fuels are one of the major financial barriers to the shift to renewable energy in the world. A sustainable and safe world is based on renewable energy, which is derived from natural resources that are abundant and continuously replenished. This study investigates the impact of natural resources on renewable energy consumption in N-11 countries. It moderates the roles of economic growth, stock market capitalization, and technology from 1990 to 2020. This study involves the development of an empirical analysis, the application of advanced econometric methodologies, and the development of a comprehensive policy report. Technology and the stock market are negatively related to renewable energy consumption in the short and long run. There is a positive relationship between natural resources and renewable energy consumption both in the short and long term. A positive relationship exists between economic growth and renewable energy consumption over the long term. Energy policies must be clear, robust, transparent, supported by public support, and backed up by modern energy transmission systems implanted in N-11 countries to accelerate wind and solar energy adoption. In addition to reducing emissions, shifting subsidies to renewable energy supports sustainable economic growth, job creation, improved public health, and greater equity is recommended. Study limitations and direction for future research discussed.

The Impacts of Removing Fossil Fuel Subsidies and Increasing Carbon Taxation in Ireland

Though the magnitude of fossil fuel subsidies eclipses carbon pricing revenues, policies and economic literature focus on carbon taxation. This paper aims to show that removing fossil fuel subsidies can reduce emissions as much as carbon taxation without making producers and consumers worse off. Using a dynamic intertemporal CGE model of Ireland, we compare removing eight Irish fossil fuel subsidies and increasing the carbon tax to €100 per tonne by 2030. We find that both policies result in similar emission reductions. Carbon taxation results in lower negative GDP and investment impacts, whereas subsidy removal results in lower negative employment impacts, higher revenues, an improved trade balance and lower debt. The impacts across sectors and households are distributed more evenly under a carbon tax, where subsidy removal results in extreme impacts for specific sectors and households. Excluding households’ subsidies from removal can alleviate these household distributional impacts at no cost to emission reduction. With revenue recycling reducing tax rates, a double-dividend is found at the expense of worsened income distribution. The economic benefit of revenue recycling is greater when removing subsidies than with carbon taxation and results confirm the importance of fossil fuel subsidies in climate policy.

Emission Reduction via Fossil Fuel Subsidy Removal and Carbon Pricing, Creating Synergies with Revenue Recycling

The removal of fossil fuel subsidies and the introduction of carbon pricing have been discussed for more than a decade, but their potential contribution to emission reduction is still uncertain, especially in relation to the potential indirect impact of revenue recycling. We have created a simulation model, GSI-IF, designed to assess the emission reduction potential resulting from removing fossil fuel subsidies and recycling part of the avoided subsidy and additional revenue from carbon pricing to renewable energy and energy efficiency. Our results show that emissions could decline by 7.1% in 2030 and up to 19.8% in 2050 compared to a baseline scenario. We find that subsidy removal is most effective in reducing emissions in countries with a high incidence of fossil fuel subsidies and it has stronger impact in the short term. The recycling of carbon pricing is most relevant for larger economies and its impact accumulates over time, generating growing GHG reductions year after year. In the current context (year 2022) with high energy prices, heavy stress on fiscal balances, and the renewed ambition of most governments to reduce emissions toward Net Zero in 2050, subsidy removal and carbon pricing hold promise in the toolbox of decarbonization options while improving fiscal sustainability.

Ending Fossil Fuel Subsidies: A Guide for Democratic Reformers

Ending Fossil Fuel Subsidies: A Guide for Democratic Reformers

Multi-Criteria Decision Methods for Selecting a Wind Farm Site Using a Geographic Information System (GIS)

Wind energy is an economically, technically, and environmentally attractive option due to its cheapness and availability in different regions. The most important obstacle to developing renewable resources in Iran is subsidies for fossil fuels. The Iranian government has recently decided to reduce subsidies for electricity and fossil fuels, which has led to an increase in the prices of fossil fuels and electricity and makes renewable technologies more attractive to use. This study uses a multi-criteria decision method to identify wind energy potential in Khuzestan province. A GIS is used to determine the wind energy potential in this province. The technical, environmental, and economic criteria, which are a total of 14 layers of information, were examined by considering different values for each and from a Boolean point of view. The results show that, from the economic point of view, Shadegan city has the most potential and, from the technical point of view, Khorramshahr city has the highest amount of electricity production through wind energy. Furthermore, Dasht-e Azadegan city, due to its population, can supply the maximum amount of electricity it needs through wind energy. Among the three 550, 2500, and 8000 kW turbines, the 550 kW turbine has the most potential in the region.

The Regulation of Environmentally Harmful Fossil Fuel Subsidies: From Obscurity to Prominence in the Multilateral Trading System

Abstract Environmentally harmful fossil fuel subsidies were notably absent from efforts to enhance the mutual supportiveness of trade and environment in the multilateral trading system. However, a combination of factors has recently propelled the regulation of such subsidies up the trade and environment agenda. The recently launched initiative to negotiate a plurilateral Agreement on Climate Change, Trade and Sustainability (ACCTS) represents the latest and most ambitious of the growing number of initiatives to discipline fossil fuel subsidies. This article examines the factors that brought the regulation of fossil fuel subsidies to prominence and the prospects of the ACCTS initiative to introduce binding rules on fossil fuel subsidies. The article argues that such an initiative is long overdue, but it faces significant hurdles to succeed. Drawing on past and present intergovernmental initiatives to tackle environmentally harmful subsidies, the article highlights the key challenges on the road ahead and suggests possible ways forward.

“Stepping Down the Ladder”: The Impacts of Fossil Fuel Subsidy Removal in a Developing Country

This paper provides quasi-experimental evidence from Ghana on the impact of fossil fuel subsidy removal on cooking fuel choices. We find that households “stepped down the energy ladder”: modern fuel use decreased, while the use of transition and traditional fuels expanded. Price increases of 50% for liquefied petroleum gas (LPG) and 20% for diesel caused the share of households who mainly use firewood to increase by 3 percentage points. Urban households increased charcoal consumption by around 17%, while LPG expenditure remained constant—indicating that consumption dropped. Back-of-the-envelope cost-benefit calculations suggest that overall welfare costs, including from increased cooking-related greenhouse gas emissions, were slightly higher than fiscal savings. The LPG subsidy removal in particular was likely socially damaging. Our findings highlight the ambiguous impacts of removing LPG subsidies in developing-country contexts, where they contribute to the adoption and use of clean cooking fuels.

The Effectiveness and Trade-Offs of Renewable Energy Policies in Achieving the Dual Decarbonization Goals in China: A Dynamic Computable General Equilibrium Analysis.

China’s government has enforced a series of renewable energy policies to promote renewable energy development and achieve the dual decarbonization goals. However, there exists great disparity in previous studies on the effectiveness and suitability of renewable energy policies in abating carbon emissions. This study employs a dynamic general equilibrium model and assesses the effectiveness and trade-offs of renewable energy policies in achieving the dual decarbonization goals by 2060 in China. These policies include carbon market (CRP), the reduction of feed-in tariffs (FIT), the reduction of fossil fuel subsidies (FSB), the reduction of renewable energy costs (REC), resource taxes (RTX), and renewable portfolio standards (REP) as well as the mix of these policies. We find that renewable energy policies together could abate China’s CO2 emissions in 2060 by 2.57 billion tons, but their effectiveness is very different. The REC would have the greatest effectiveness in abating CO2 emissions, followed by REP and CRP. Renewable energy policies would cause relatively slight damage to China’s GDP, with the exception of the REC (raising GDP by 1.1713%). Regarding trade-offs, most policies will sacrifice China’s internal and external demand but benefit employment. Renewable energy policies will effectively promote the low-carbon transformation of China’s energy structure.

Drivers and Barriers of Fossil Fuel Subsidy Reforms in Developing Countries: A Review

While all the countries around the world agree to the urgency of eliminating fossil fuel subsidy reforms due to the rising awareness of their environmental, economic, and social effects, the magnitude of fossil fuel subsidies remains substantially high. Efforts of reforms of fossil fuel subsidies were aborted in many developing countries.

Addressing the UN SDGs in sustainability reports: An analysis of Latin American oil and gas companies

This article aims to establish an overview of the sustainable practices developed by the major oil and gas enterprises in Latin America and analyse how these practices are related to the Sustainable Development Goals (SDGs) 7, 9, 11 and 12. The methodological strategy used was the content analysis of the sustainability reports published by companies in the sector. Considering the ten oil and gas companies with the highest revenue in Latin America, 7 of them published sustainability reports in 2020 (base 2019), and these reports were analysed via content analysis technique. The findings showed that 244 sustainable practices were reported in sustainability reports by these seven companies. These practices were summarised by twenty different keywords (the practice can be represented by more than one keyword) and related with the targets of SDGs 7, 9, 11 and 12. It was found that few practices were related with the following targets: (a) greater access of small-sized companies, especially from developing countries, to financial services (target 9.3), (b) encouragement of companies to use sustainable practices and add sustainability information in their reporting cycle (target 12.6) and (c) the rationalisation of inefficient fossil-fuel subsidies (target 12.c). However, one company stands out amongst its competitors, having practices that, on average, were related with a higher number of targets of SDGs 7, 9, 11 and 12. This research has an exploratory character. The information reported here is of great value in guiding CSR actions of companies in the oil and gas sector and future research in the area to discuss how such companies can contribute to targets 9.3, 12.6, and 12.c.

Political Leadership Has Limited Impact on Fossil Fuel Taxes and Subsidies

Political Leadership Has Limited Impact on Fossil Fuel Taxes and Subsidies