Energy subsidies

Energy subsidies are measures that keep prices for consumers below market levels or for producers above market levels, or reduce costs for consumers and producers. Energy subsidies may be direct cash transfers to producers, consumers, or related bodies, as well as indirect support mechanisms, such as tax exemptions and rebates, price controls, trade restrictions, and limits on market access. They may also include energy conservation subsidies. The development of today's major modern energy industries have all relied on substantial subsidy support.

Global fossil fuel subsidies represented 6.5% of global GDP in 2015. The elimination of these subsidies is widely seen as one of the most effective ways of reducing global carbon emissions.

Main arguments for energy subsidies are:

Main arguments against energy subsidies are:

Types of energy subsidies are:

Overall, energy subsidies require coordination and integrated implementation, especially in light of globalization and increased interconnectedness of energy policies, thus their regulation at the World Trade Organization is often seen as necessary.

A 2016 study estimated that global fossil fuel subsidies were $5.3 trillion in 2015, which represents 6.5% of global GDP. The study found that "China was the biggest subsidizer in 2013 ($1.8 trillion), followed by the United States ($0.6 trillion), and Russia, the European Union, and India (each with about $0.3 trillion)." The authors estimated that the elimination of "subsidies would have reduced global carbon emissions in 2013 by 21% and fossil fuel air pollution deaths 55%, while raising revenue of 4%, and social welfare by 2.2%, of global GDP." According to the International Energy Agency, the elimination of fossil fuel subsidies worldwide would be the one of the most effective ways of reducing greenhouse gases and battling global warming. In May 2016, the G7 nations set for the first time a deadline for ending most fossil fuel subsidies; saying government support for coal, oil and gas should end by 2025.

According to the OECD, subsidies supporting fossil fuels, particularly coal and oil, represent greater threats to the environment than subsidies to renewable energy. Subsidies to nuclear power contribute to unique environmental and safety issues, related mostly to the risk of high-level environmental damage, although nuclear power contributes positively to the environment in the areas of air pollution and climate change. According to Fatih Birol, Chief Economist at the International Energy Agency without a phasing out of fossil fuel subsidies, countries will not reach their climate targets.

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