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Making the Switch

From fossil fuel subsidies to sustainable energy

image of Making the Switch

This report estimates fossil fuel subsidies to be around USD 425 billion. Such subsidies represent large lost opportunities for governments to invest in renewable energy, energy efficiency and sustainable development. Removal of subsidies can lead to carbon emission reductions (6 to 8 per cent by 2050 globally), Reductions that can be improved further with a switch or a "SWAP" towards sustainable energy. This report describes the scale and impact of fossil fuel subsidies on sustainable development. It describes the SWAP concept to switch savings made from fossil fuel subsidy reform, towards sustainable energy, energy efficiency and safety nets. The report provides potential SWAP outlines for Bangladesh, Indonesia, Morocco and Zambia. "Making the Switch" was written for the Nordic Council Ministers by the Global Subsidies Initiative of IISD and Gaia Consulting.

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Fossil fuel subsidies and climate change

The primary motivation for reforming fossil fuel subsidies is to improve government balance sheets and reduce fiscal deficits. There is pressure to reform on importing countries from unsustainable fiscal deficits during times of high oil prices: during periods of low oil prices this pressure is felt by exporting countries. The current low oil price offers governments either the space or urgency to reform. Other key reasons for reform, as described in the preceding chapter, include freeing up resources for other government priorities, better targeting of subsidies toward the poor or toward women, or supporting policies to reduce air pollution.

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