subidy reform

Here's hoping that 21 will be the magic number, and there will be real progress on a global agreement to constrain greenhouse gas emissions at COP21 meetings now underway in Paris. 

Removing subsidies to fossil fuels are now well recognized as a central element to getting energy prices right, and the topic is evident in the COP21 agenda and side events.  For people interested in getting up to speed on what subsidies are and recent assessments of their magnitude, I've assembled a list of resources on in this posting.  As a testament to the growing recognition of the important role of subsidy reform, it is notable that many of these analysis have been produced during 2015.

1)  Fossil Fuel Subsidy Events at CoP21 

Thanks to Laura Merrill at the Global Subsidies Initiative (GSI) for pulling together a listing of the many events at the Paris meetings focused on fossil fuel subsidy reform. 

2)  What are subsidies, how are they measured, and why do they matter?

These resources are helpful for people looking to gain a general understanding of how energy subsidies work and why they are a problem.

  • Subsidies to Energy Industries (2015).  This is one of my papers, recently updated for Elsevier and re-released.  It provides an overview of generic subsidies to energy fuel cycles, along with some background information on the different ways that people have measured subsidies over time. 
  • An animated introduction to fossil fuel subsidies done by the GSI in 2014.  It's an entertaining and understandable way to learn about this complicated topic.
  • If you want to dig in to more details, I'd also highly recommend this comprehensive Subsidy Primer written for GSI by Ron Steenblik.  
  • Why do subidy estimates vary across studies?  Fossil Fuel Subsidies: Approaches and Valuation is an (admittedly technical) overview that I wrote with Masami Kojima of the World Bank.  For detail on what the commonly-used price gap approach captures and does not capture, this paper prepared for the GSI may also be helpful.

3)  How big are fossil fuel subsidies globally?

  • Fossil Fuel Subsidy Reform: From Rhetoric to Reality (2015).  Working paper by Shelagh Whitley and Laurie van der Burg for the New Climate Economy (itself a very interesting initiative).  Summarizes global data on fossil fuel subsidies, their detrimental impacts on economies, and strategies for reform.  See also their review of fossil fuel subsidy reform in sub-Saharan Africa.
  • OECD Inventory of Support Measures for Fossil Fuels, 2015.  The latest installment of OECD's detailed policy-level review of subsidies to fossil fuels within the OECD and BRIIC countries.  Jehan Sauvage, project manager; Franck Jésus and Ronald Steenblik, project supervisors.  See also my blog post on the analysis.
  • Empty promises: G20 subsidies to oil, gas and coal production (2015).  Detailed review of production subsidies to fossil fuels in the context of carbon lock-in jointly released by Oil Change International and the Overseas Development Institute.  Presents country-specific data that includes distortionary patterns of support through export credit agencies and state-owned enterprises (SOEs).  Although only gross flows through credit and SOEs could be quantified, the analysis demonstrates the importance of these interventions, underscoring the need for much greater visibility on the terms of credit and state support to SOEs going forward.   Elizabeth Bast, Alex Doukas, Sam Pickard, Laurie van der Burg and Shelagh Whitley. 
  • See also OCI's joint report with WWF on the role of OECD financing of coal infrastructure on human health.  Hidden Costs: Pollution from Coal Power Financed by OECD Countries (2015).  Written by Michael Westphal, Sebastien Godinot, and Alex Doukas
  • IEA's updated data on price gap subsidies (2015).  IEA's most recent World Energy Outlook (unfortunately not accessible for free) again contains comprehensive updates to their multi-year effort to track price gap subsidies to fossil fuels in the world's major fossil fuel producing and consuming nations.  As in past years, this section was overseen by Amos Bromhead of IEA.  Subsidy data from WEO 2014 is accessible here; and there is some discussion of more recent data starting on page 90 of this IEA special report.  However, the full dataset used in WEO 2015 does not appear to have been posted yet.
  • The International Monetary Fund also has a variety of assessments of fossil fuel subsidies released in 2014 and 2015.  Their assessments incorporate imputed taxes and externalities in addition to other forms of government support, and as a result report significantly larger global tallies.  In addition to their publications, the Fund is providing access to some of their core data so other researchers can build upon the work. 

4)  How big are energy subsidies in the United States?

The good news is that multiple parts of the US federal government have taken up the issue of subsidies to energy.  The less-good news is that the "official" analyses tend to use a fairly narrow definition of subsidies, often primarily driven by a sub-set of the available tax breaks.  Credit support, subsidized insurance, embedded subsidies within state-owned enterprises (yes, these exist even within the United States), market price support, and other more opaque subsidy transfer mechanisms are generally included only in part or not at all.  Like the parable of the blind men and the elephant, if you examine only part of the beast, you can come up with an inaccurate assessment of what the full animal really looks like.

  • Federal Support for the Development, Production, and Use of Fuels and Energy Technologies (2015).  U.S. Congressional Budget Office.  Good coverage of common tax expenditures and federal energy R&D.  Analysis includes renewables and nuclear as well as fossil fuels, though valuation challenges on credit subsidies and missing subsidy types make the nuclear figures unrepresentative of actual government support to the sector.  Interesting metrics of subsidy cost-effectiveness (see page 11), a topic that should get much more attention.  Philip Webre and Terry Dinan prepared this report in collaboration with Mark Booth.
  • Direct Federal Financial Interventions and Subsidies in Energy in Fiscal Year 2013 (2015).  US Energy Information Administration.  One of EIA's periodic reviews of domestic energy subsidies to all fuels (their first one was in the early 1990s).  Good detail in many areas, but also with some systemic gaps that tend to dramatically understate federal support to the nuclear fuel cycle and also understate subsidies to fossil fuels.  For more details on core EIA assumptions and omissions and how they affect EIA's estimates, see this review I did a few years ago.  EIA's 2015 report is the first time the Administration has even acknowledged this criticism publicly, which is at least a step in the right direction.
  • Assessments outside of government have tended to come up with larger subsidy values.  Cashing in on All of the Above: U.S. Fossil Fuel Production Subsidies under Obama, produced by Oil Change International in 2014 is a good example.  This analysis includes a broader array of support instruments, though focuses only on the production side of the oil and gas fuel cycle. 

Do you have a favorite study or resource on the subsidy issue that I've missed?  Email it to me.