Skip to main content

The Politics and Governance of Energy Subsidies

  • Chapter
  • First Online:
The Palgrave Handbook of the International Political Economy of Energy

Part of the book series: Palgrave Handbooks in IPE ((PHIPE))

Abstract

Energy subsidies are an important tool through which governments can support domestic energy production and protect energy consumers. However, the exact size of these subsidies in many countries remains unclear. More importantly, energy subsidies have a variety of positive and negative economic, environmental and social effects, and it remains unclear how and under which political conditions negative effects stemming from energy subsidies could be mitigated. This chapter addresses these issues by examining the reasons why countries choose to subsidise energy production and consumption, the scope and effects of energy subsidies, and options for reform. The chapter also highlights the roles played by various international institutions in governing energy subsidies. It concludes with outlining areas for further inquiry.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Chapter
USD 29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD 259.00
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Hardcover Book
USD 329.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Similar content being viewed by others

Notes

  1. 1.

    Since the VAT on energy or fuels may be reduced or non-existing.

  2. 2.

    Producer subsidies are notoriously hard to measure, although first analyses offer insights into their scale. For instance, Bast et al. (2014) estimate subsidies in support of exploring fossil fuels at $88 billion/year.

  3. 3.

    Further case studies can be found at: http://www.iisd.org/gsi/fossil-fuel-subsidies/case-studies-lessons-learned-attempts-reform-fossil-fuel-subsidies, date accessed 20 October 2010.

References

  • Aldy, J. (2015, forthcoming). Policy surveillance in the G-20 fossil fuel subsidies agreement: Lessons for climate policy. Climatic Change (in press).

    Google Scholar 

  • Arze del Granado, F. J., & Coady, D. (2012). The unequal benefits of fuel subsidies: A review of evidence for developing countries. World Development, 40, 2234–2248.

    Article  Google Scholar 

  • Bárány, A., & Grigonytė, D. (2015). Measuring fossil fuel subsidies. ECFIN Economic Brief, 40, 1–13.

    Google Scholar 

  • Bast, E., Makhijani, S., Pickard, S., & Whitley, S. (2014). The fossil fuel bailout: G20 subsidies for oil, gas, and coal exploration. London/Washington, DC: ODI and OCI.

    Google Scholar 

  • Beaton, C., Gerasimchuk, I., Laan, T., Lang, K., Vis-Dunbar, D., & Wooders, P. (2013). A guidebook to fossil-fuel subsidy reform for policy-makers in Southeast Asia. Geneva: GSI.

    Google Scholar 

  • Benninghoff, V. (2013). Prioritizing fossil-fuel subsidy reform in the UNFCCC process: Recommendations for short-term actions. Geneva: GSI.

    Google Scholar 

  • Bridle, R., & Kitson, L. (2014). The impact of fossil-fuel subsidies on renewable electricity generation. Geneva: GSI.

    Google Scholar 

  • Bridle, R., Kitson, L., & Wooders, P. (2014). Fossil-fuel subsidies: A barrier to renewable energy in five Middle East and North African countries. Geneva: GSI.

    Google Scholar 

  • Burniaux, J., & Chateau, J. (2014). Greenhouse gases mitigation potential and economic efficiency of phasing-out fossil fuel subsidies. International Economics, 140, 71–88.

    Article  Google Scholar 

  • Casier, L., Fraser, R., Halle, M., & Wolfe, R. (2014). Shining a light on fossil fuel subsidies at the WTO: How NGOs can contribute to WTO notification and surveillance. World Trade Review, 13, 603–632.

    Article  Google Scholar 

  • Cheon, A., Urpelainen, J., & Lackner, M. (2013). Why do governments subsidize gasoline consumption? An empirical analysis of global gasoline prices, 2002–2009. Energy Policy, 56, 382–390.

    Article  Google Scholar 

  • Cheon, A., Lackner, M., & Urpelainen, J. (2015). Instruments of political control: National oil companies, oil prices, and petroleum subsidies. Comparative Political Studies, 48, 370–402.

    Article  Google Scholar 

  • Clarke, K., Sharma, S., & Vis-Dunbar, D. (2015). Ghost savings: Understanding the fiscal impacts of India’s LPG subsidy. http://www.iisd.org/gsi/india_ghost_savings_understanding_fiscal_impact_of_LPG_subsidy. Accessed 28 Oct 2010.

  • Clements, B., Coady, D., Fabrizio, S., Gupta, S., Alleyne, T., & Sdralevich, C. (2013). Energy subsidy reform; Lessons and implications. Washington: IMF.

    Google Scholar 

  • Coady, D., Parry, I., Sears, L., & Shang, B. (2015). How large are global energy subsidies? Washington: IMF.

    Google Scholar 

  • Commander, S. (2012). A guide to the political economy of reforming energy subsidies. Bonn: Institute for the Study of Labour.

    Google Scholar 

  • El-Katiri, L., & Fattouh, B. (2015). A brief political economy of energy subsidies in the Middle East and North Africa. Oxford: Oxford Institute for Energy Studies.

    Google Scholar 

  • Ganesan, K., Choudhury, P., Palakshappa, R., Jain, R., & Raje, S. (2014). Assessing green industrial policy: The India experience. Winnipeg/Delhi: IISD/CEEW.

    Google Scholar 

  • Ghosh, A. (2011). Seeking coherence in complexity?: The governance of energy by trade and investment institutions. Global Policy, 2, 106–119.

    Article  Google Scholar 

  • Ghosh, A., & Gangania, H. (2012). Governing clean energy subsidies: What, why, and how legal? Geneva: ICTSD.

    Google Scholar 

  • Ghosh, A., & Ganesan, K. (2015). Rethink India’s energy. Nature, 521, 156–157.

    Article  Google Scholar 

  • G20. (2009). G20 leaders statement: The Pittsburgh summit. http://www.g20.utoronto.ca/2009/2009communique0925.html. Accessed 20 Oct 2015.

  • Gerasimchuk, I. (2014). A crash course on subsidy definition by Dante, Shakespeare and Russian Folklore. http://www.iisd.org/gsi/news/crash-course-subsidy-definition-dante-shakespeare-and-russian-folklore. Accessed 20 Oct 2015.

  • GWEC and IRENA. (2012). 30 years of policies for wind energy lessons from 12 wind energy markets. Abu Dhabi: IRENA.

    Google Scholar 

  • IEA. (2014). World energy outlook 2014. Paris: IEA.

    Book  Google Scholar 

  • IEA. (2015). Energy and climate change (World Energy Outlook Special Report). Paris: IEA.

    Google Scholar 

  • IEA, OPEC, OECD, & World Bank. (2010). Analysis of the scope of energy subsidies and suggestions for the G-20 initiative. Joint report prepared for submission to the G-20 Summit meeting, 26–27 June. Paris etc.: IEA, OPEC, OECD and World Bank.

    Google Scholar 

  • IISD. (2014). India energy subsidy review: A biannual survey of energy subsidy policies. Geneva: IISD.

    Google Scholar 

  • IMF. (2000). Equity and efficiency in the reform of price subsidies: A guide for policymakers. Washington, DC: IMF.

    Google Scholar 

  • IMF. (2008). Fuel and food price subsidies: Issues and reform options. Washington, DC: IMF.

    Google Scholar 

  • IMF. (2015). Ukraine: Request for extended arrangement under the fund facility and cancellation of stand-by arrangement—Staff report. Washington, DC: IMF.

    Google Scholar 

  • Jakob, M., Chen, C., Fuss, S., Marxen, A., & Edenhofer, O. (2015). Development incentives for fossil fuel subsidy reform. Nature Climate Change, 5, 709–712.

    Article  Google Scholar 

  • Kalkuhl, M., Edenhofer, O., & Lessmann, K. (2013). Renewable energy subsidies: Second-best policy or fatal aberration for mitigation? Resource and Energy Economics, 35, 217–234.

    Article  Google Scholar 

  • Kirton, J., et al. (2012). Mapping G20 decisions implementation. Moscow/Toronto: The International Organizations Research Institute of the National Research, University Higher School of Economics, The G20 Research Group of the University of Toronto.

    Google Scholar 

  • Kitson, L., Wooders, P., & Moerenhout, T. (2011). Subsidies and external costs in electric power generation: A comparative review of estimates. Geneva: GSI.

    Google Scholar 

  • Koplow, D. (2009). Measuring energy subsidies using the price-gap approach: What does it leave out? Geneva: GSI.

    Google Scholar 

  • Koplow, D. (2014). Global energy subsidies: Scale, opportunity costs, and barriers to reform. In A. Halff, B. K. Sovacool, & J. Rozhon (Eds.), Energy poverty: Global challenges and local solution. Oxford: Oxford University Press.

    Google Scholar 

  • Laan, T., Beaton, C., & Presta, B. (2010). Strategies for reforming fossil-fuel subsidies: Practical lessons from Ghana, France and Senegal. Winnipeg: IISD.

    Google Scholar 

  • Lang, K., Wooders, P., & Kulovesi, K. (2010). Increasing the momentum of fossil-fuel subsidy reform: A roadmap for international cooperation. Winnipeg: IISD.

    Google Scholar 

  • Lewis, J., & Wiser, R. (2005). A review of international experience with policies to promote wind power industry development. Beijing: Energy Foundation China Sustainable Energy Program.

    Google Scholar 

  • Lin, B., & Ouyang, X. (2014). A revisit of fossil-fuel subsidies in China: Challenges and opportunities for energy price reform. Energy Conversion and Management, 82, 124–134.

    Article  Google Scholar 

  • Lindebjerg, E. S., Peng, W., & Yeboah, S. (2015). Do policies for phasing out fossil fuel subsidies deliver what they promise? Social gains and repercussions in Iran, Indonesia and Ghana. Geneva: UNRISD.

    Google Scholar 

  • Lockwood, M. (2014). Fossil fuel subsidy reform, rent management and political fragmentation in developing countries. New Political Economy, 20, 475–494.

    Article  Google Scholar 

  • Marhold, A. (2013). The World Trade Organization and energy: Fuel for debate. ESIL Reflections, 2(8). http://www.esil-sedi.eu/node/417. Accessed 20 Oct 2015.

  • Merrill, L., & Chung, V. (2015). Financing the sustainable development goals through fossil-fuel subsidy reform: Opportunities in Southeast Asia, India and China. Geneva: GSI.

    Google Scholar 

  • Merrill, L., Harris, M., Casier, L., & Bassi, A. M. (2015a). Fossil-fuel subsidies and climate change: Options for policy-makers within their intended nationally determined contributions. Copenhagen: Nordic Council of Ministers.

    Book  Google Scholar 

  • Merrill, L., Bassi, A. M., Bridle, R., & Toft Christen, L. (2015b). Tackling fossil fuel subsidies and climate change: Levelling the energy playing field. Copenhagen: Nordic Council of Ministers.

    Book  Google Scholar 

  • OECD. (2005). Environmentally harmful subsidies: Policy issues and challenges. Paris: OECD.

    Google Scholar 

  • OECD. (2010). Measuring support to energy. Paris: OECD.

    Google Scholar 

  • OECD. (2013). Inventory of estimated budgetary support and tax expenditures for fossil fuels 2013. Paris: OECD.

    Google Scholar 

  • OECD. (2015). OECD companion to the inventory of support measures for fossil fuels 2015. Paris: OECD.

    Google Scholar 

  • Oosterhuis, F., & Umpfenbach, K. (2014). Energy subsidies. In F. Oosterhuis & P. ten Brink (Eds.), Paying the polluter: Environmentally harmful subsidies and their reform. Cheltenham: Edward Elgar.

    Chapter  Google Scholar 

  • Ouyang, X., & Lin, B. (2014). Impacts of increasing renewable energy subsidies and phasing out fossil fuel subsidies in China. Renewable and Sustainable Energy Reviews, 37, 933–942.

    Article  Google Scholar 

  • Steenblik, R. (1995). A note on the concept of ‘subsidy’. Energy Policy, 23(6), 483–484.

    Article  Google Scholar 

  • Steenblik, R. (2003). Subsidy measurement and classification: Developing a common framework. In OECD (Ed.), Environmentally harmful subsidies: Policy issues and challenges. Paris: OECD.

    Google Scholar 

  • Steenblik, R., & Simón, J. (2011). A new template for notifying subsidies to the WTO. Geneva: Global Subsidies Initiative.

    Google Scholar 

  • Stefanski, R. (2014). Dirty little secrets: Inferring fossil-fuel subsidies from patterns in emission intensities. Oxford: University of Oxford, Department of Economics.

    Google Scholar 

  • Szarka, J. (2010). Bringing interests back in: Using coalition theories to explain European wind power policies. Journal of European Public Policy, 17, 836–853.

    Article  Google Scholar 

  • UNEP. (2015). Fossil fuel subsidies. Geneva: UNEP. http://www.unep.org/greeneconomy/Portals/88/documents/GE_BriefFossilFuelSubsidies_EN_Web.pdf. Accessed 20 Oct 2015.

  • Vagliasindi, M. (2013). Implementing energy subsidy reform: Evidence from developing countries. Washington, DC: World Bank.

    Google Scholar 

  • Van de Graaf, T., & Westphal, K. (2011). The G8 and G20 as global steering committees for energy: Opportunities and constraints. Global Policy, 2, 19–30.

    Article  Google Scholar 

  • Victor, D. G. (2009). The politics of fossil fuel subsidies. Geneva: Global Subsidies Initiative.

    Google Scholar 

  • Whitley, S. (2013). Time to change the game: Fossil fuel subsidies and climate. London: ODI.

    Google Scholar 

  • Whitley, S., & van der Burg, L. (2015, forthcoming). Fossil fuel subsidy reform: From rhetoric to reality. London: New Climate Economy.

    Google Scholar 

  • World Bank. (2013). From universal price subsidies to modern social assistance: The political economy of reform. Washington, DC: World Bank.

    Google Scholar 

  • World Bank, IMF, IEA, International Energy Forum, OECD, OPEC Fund for International Development (OFID), & OPEC. (2014). Transitional policies to assist the poor while phasing out inefficient fossil fuel subsidies that encourage wasteful consumption. Washington, DC: World Bank.

    Google Scholar 

  • World Economic Forum. (2013). Lessons drawn from reforms of energy subsidies. Geneva: World Economic Forum.

    Google Scholar 

Download references

Author information

Authors and Affiliations

Authors

Editor information

Editors and Affiliations

Copyright information

© 2016 The Author(s)

About this chapter

Cite this chapter

van Asselt, H., Skovgaard, J. (2016). The Politics and Governance of Energy Subsidies. In: Van de Graaf, T., Sovacool, B., Ghosh, A., Kern, F., Klare, M. (eds) The Palgrave Handbook of the International Political Economy of Energy. Palgrave Handbooks in IPE. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-137-55631-8_11

Download citation

Publish with us

Policies and ethics