Time to change the game: fossil fuel subsidies and climate

Two years ahead of a crucial UN climate change summit, global fossil fuel subsidies now top half a trillion dollars. This ODI report argues that it is time to 'change the game' on fossil fuel subsidies.

What's at stake?

Many of the world’s richest countries continue to pour money into fossil fuel subsidies, with average spending running at $112 per adult. In developing countries the majority of benefits from fossil fuel subsidies go to the richest 20% of households.

This is an expensive business. Fossil fuel subsidies cost over half a trillion dollars globally in 2011, and up to $90 billion in the OECD alone.

And the negative effects are profound. Fossil fuel subsidies are creating perverse incentives - where investment in carbon-intensive energy is favoured. This presents a major obstacle to green investment, and seriously undermines attempts to put a price on carbon.

In addition, domestic and international support for fossil fuels dwarfs spending on health and education in a number of countries, and outstrips climate finance and aid.

What can be done?

At the moment, fossil fuel subsidies are increasing. This ODI report calls for bold action to phase out these subsidies by 2020, led by the G20 and with rich countries making the deepest and earliest cut. Phasing out fossil-fuel subsidies in G20 countries by 2020 (and globally by 2025), with proper safeguards for the poor, would support growth that is both inclusive and green.