Fossil Fuel Subsidy Reforms ― A Guide to Economic and Political Complexity

Countries around the world are spending close to $500 billion per year on subsidising fossil fuel consumption. The G20 countries alone spend another $450 billion on subsidising fossil fuel production. In addition, the indirect social welfare costs of these subsidies have been shown to be substantial – for instance due to air pollution, road congestion, climate change, and economic inefficiency, to name a few. Considering these numbers, there is no doubt that fossil fuel subsidies cause severe economic distortions that compromise countries’ prospects of achieving equitable and sustainable development.

This book provides a guide to the complex challenge of designing, assessing, and implementing effective fossil fuel subsidy reforms. It shows that to reform subsidies means to understand and balance economic and political trade-offs, to mitigate adverse effects on vulnerable households, and to assist firms with implementing efficiency enhancing measures. Going beyond the purely fiscal perspective, this book emphasises that smart subsidy reforms can contribute to all three dimensions of sustainable development – environment, society, and economy. Over the course of eight chapters, this book considers a wide range of agents and stakeholders, markets, and policy measures in order to distil the key principles of designing effective fossil fuel subsidy reforms.

This book will be of great relevance to scholars and policy makers with an interest in energy economics and policy, climate change policy, and sustainable development more broadly.

Jun Rentschler is an Economist at the World Bank’s climate change department. Until 2017, he was a Doctoral Researcher at University College London (UCL), and a Visiting Fellow at the Oxford Institute for Energy Studies, and at the Graduate Institute for Policy Studies in Tokyo. He has also worked as a consultant at the European Bank for Reconstruction and Development, and as an Economic Adviser at the German Foreign Office. Jun holds a PhD in environmental and development economics from UCL.