Advertisement

Climatic Change

, Volume 131, Issue 4, pp 465–472 | Cite as

Using importers’ windfall savings from oil subsidy reform to enhance international cooperation on climate policies

  • Michael JakobEmail author
  • Jérôme Hilaire
Essay

Abstract

Fossil fuel subsidy reform would not only decrease consumption, but also lower the world market price of traded fossil energy carriers, in particular oil. As a consequence, oil importers would lower their import bills by more than US$ 30 bn per year. Recycling at least a part of these savings to support low-carbon energy technologies in countries that reduce their subsidies could provide a mechanism to jointly incentivize transformation of the energy system and alter the political economy of subsidy reform.

Keywords

Recipient Country World Market Price Deadweight Loss Export Revenue Fossil Fuel Subsidy 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

Notes

Acknowledgments

We thank Patrick Doupé, Christian Flachsland, Jan Steckel and three anonymous referees for useful comments and suggestions. Funding from the German Federal Ministry of Education and Research (BMBF) in the call “Okonomie des Klimawandels” (funding code 01LA11020B/Green Paradox) is gratefully acknowledged.

Supplementary material

10584_2015_1406_MOESM1_ESM.docx (26 kb)
ESM 1 (DOCX 26 kb)

References

  1. Baldwin R (1993) A domino theory of regionalism. NBER Working Papers 4465. National Bureau of Economic Research, Inc. http://ideas.repec.org/p/nbr/nberwo/4465.html
  2. Barrett S (2005) Environment and statecraft: the strategy of environmental treaty-making. OUP Catalogue 9780199286096. Oxford University Press. http://ideas.repec.org/b/oxp/obooks/9780199286096.html
  3. Bowen A (2011) Raising climate finance to support developing country action: some economic considerations. Clim Pol 11(3):1020–1036. doi: 10.1080/14693062.2011.582388 CrossRefGoogle Scholar
  4. Burniaux J-M, Chateau J, Sauvage J (2011) The trade effects of phasing out fossil-fuel consumption subsidies. OECD Publishing. http://www.indiaenvironmentportal.org.in/files/file/Phasing%20Out%20Fossil-Fuel.pdf
  5. Carraro C, Massetti E (2012) Beyond Copenhagen: a realistic climate policy in a fragmented world. Clim Chang 110(3–4):523–542. doi: 10.1007/s10584-011-0125-6 CrossRefGoogle Scholar
  6. Clements B, CoadyD, Fabrizio S, Gupta S, Shang B (2014) Energy subsidies: how large are they and how can they be reformed? Econ Energy Environ Policy 3(1). doi: 10.5547/2160-5890.3.1.bcle
  7. Coxhead I, Anan W, Nguyen CV (2013) Are carbon taxes good for the poor? A general equilibrium analysis for Vietnam. World Dev 51(0):119–131. doi: 10.1016/j.worlddev.2013.05.013 CrossRefGoogle Scholar
  8. Davis LW (2013) The Economic cost of global fuel subsidies. NBER Working Papers 19736. National Bureau of Economic Research, Inc. http://ideas.repec.org/p/nbr/nberwo/19736.html
  9. del Granado A, Javier F, Coady D, Gillingham R (2012) The unequal benefits of fuel subsidies: a review of evidence for developing countries. World Dev 40(11):2234–2248. doi: 10.1016/j.worlddev.2012.05.005 CrossRefGoogle Scholar
  10. Edenhofer O, Jakob M, Creutzig F, Flachsland C, Fuss S, Kowarsch M, Lessmann K, Mattauch L, Siegmeier J, and Steckel JC (2015) Closing the Emission Price Gap. Global environmental changeGoogle Scholar
  11. Friedrichs J, Inderwildi OR (2013) The carbon curse: are fuel rich countries doomed to high CO2 intensities? Energy Pol 62(November):1356–1365. doi: 10.1016/j.enpol.2013.07.076 CrossRefGoogle Scholar
  12. GSI (2009) Untold billions: fossil-fuel subsidies, their impacts and the path to reform. http://www.iisd.org/gsi/untold-billions-fossil-fuel-subsidies-their-impacts-and-path-reform
  13. IEA (2011) World energy outlook. ParisGoogle Scholar
  14. IEA (2013) World Energy Outlook. ParisGoogle Scholar
  15. IEA (2014) World energy outlook. ParisGoogle Scholar
  16. IEA, OPEC, OECD, and World Bank (2011) Joint report by IEA, OPEC, OECD and world bank on fossil-fuel and other energy subsidies: an update of the G20 Pittsburgh and Toronto Commitments. www.oecd.org/site/tadffss/49006998.pdf
  17. IMF (2013) Energy subsidy reform: lessons and implications. http://www.imf.org/external/np/pp/eng/2013/012813.pdf
  18. Jakob M, Steckel JC (2014) How climate change mitigation could harm development in poor countries: how climate change mitigation could harm. Wiley Interdiscip Rev Clim Chang 5(2):161–168. doi: 10.1002/wcc.260 CrossRefGoogle Scholar
  19. Jakob M, Steckel JC, Klasen S, Lay J, Grunewald N, Martinez-Zarzoso I, Renner S, Edenhofer O (2014) Feasible mitigation actions in developing countries. Nat Clim Chang 4(11):961–968CrossRefGoogle Scholar
  20. Keohane RO (1984) After hegemony: cooperation and discord in the world political economy. Princeton University PressGoogle Scholar
  21. Koplow D (2009) Measuring energy subsidies using the price-gap approach: what does it leave out? www.iisd.org/pdf/2009/bali_2_copenhagen_ff_subsidies_pricegap.pdf
  22. Maggi, G, Rodriguez-Clare A (2005) A political-economy theory of trade agreements. NBER Working Papers 11716. National Bureau of Economic Research, Inc. http://ideas.repec.org/p/nbr/nberwo/11716.html
  23. Matar W, Murphy F, Pierru A, Rioux B (2014) Lowering Saudi Arabia’s fuel consumption and energy system costs without increasing end consumer prices. KS-1403-DP02C. KAPSARC Discussion Paper. http://www.kapsarc.org/en/Publications/KS1403DP02C_optimizing_saudi_energy_system_discussion_paper.pdf
  24. Rao ND (2012) Kerosene subsidies in India: when energy policy fails as social policy. Energy Sustain Dev 16(1):35–43. doi: 10.1016/j.esd.2011.12.007 CrossRefGoogle Scholar
  25. Regan DH (2006) What are trade agreements for? – two conflicting stories told by economists, with a lesson for lawyers. J Int Econ Law 9(4):951–988CrossRefGoogle Scholar
  26. Schwanitz VJ, Franziska P, Christoph B, Gunnar L (2014) Long-term climate policy implications of phasing out fossil fuel subsidies. Energ Policy 67(0):882–894. doi: 10.1016/j.enpol.2013.12.015 CrossRefGoogle Scholar
  27. Segal P (2012) How to spend it: resource wealth and the distribution of resource rents. Energ Policy 51(C):340–348CrossRefGoogle Scholar
  28. Sterner T, ed. (2011) Fuel taxes and the poor: the distributional effects of gasoline taxation and their implications for climate policy. Johns Hopkins University PressGoogle Scholar
  29. Strand, J (2013) Political economy aspects of fuel subsidies: A conceptual framework. policy research working paper series 6392. The World Bank. http://ideas.repec.org/p/wbk/wbrwps/6392.html
  30. UNEP (2008) Reforming energy subsidies. opportunities to contribute to the climate change agenda. www.unep.org/pdf/pressreleases/reforming_energy_subsidies.pdf
  31. World Bank (2012) Implementing energy subsidy reforms: evidence from developing countries. doi: 10.1596/978-0-8213-9561-5

Copyright information

© Springer Science+Business Media Dordrecht 2015

Authors and Affiliations

  1. 1.Mercator Research Institute on Global Commons and Climate ChangeBerlinGermany
  2. 2.Potsdam Institute for Climate Impact ResearchPotsdamGermany

Personalised recommendations