The IEA, within the framework of the World Energy Outlook, has been measuring fossil-fuel subsidies in a systematic and regular fashion for more than a decade. Its analysis is aimed at demonstrating the impact of fossil-fuel subsidy removal for energy markets, climate change and government budgets. The IEA’s latest estimates indicate that fossil-fuel consumption subsidies worldwide amounted to $409 billion in 2010, up from $300 billion in 2009, with subsidies to oil products representing almost half of the total. Changes in international fuel prices are chiefly responsible for differences in subsidy costs from year to year. The increase in the global amount of subsidy in 2010 closely tracked the sharp rise in international fuel prices.
Since 2009 the IEA has provided ongoing input to the G-20 in support of their commitment to “rationalize and phase out over the medium term inefficient fossil fuel subsidies that encourage wasteful consumption”. Many countries are now pursuing reforms, but steep economic, political and social hurdles will need to be overcome to realise lasting gains.
The IEA has also established an online database to increase the availability and transparency of energy subsidy data as this is seen as an essential step in building momentum for global fossil-fuel subsidy reform. Improved access to data on fossil-fuel subsidies will raise awareness about their magnitude and incidence and encourage informed debate on whether the subsidy represents an economically efficient allocation of resources or whether it would be possible to achieve the same objectives by alternative means.
Presentation: IEA analysis of fossil-fuel subsidies