Reforming Energy Subsidies Opportunities to Contribute to the Climate Change Agenda

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Patterns of energy production and use threaten the stability of eco-systems and the health and well-being of current and future generations. Still, energy subsidies worldwide amount to around USD 300.000 billion per year, or around 0.7 per cent of GDP.

Fossil fuels remain the most heavily subsidised energy sources. Encouraging the production and use of fossil fuels inevitably has some harmful consequences particularly related to climate change and air pollution. In addition, subsidies act as a drain on government finances, reduce the incentive to use energy efficiently and do often not reach those they are intended for. On the other hand, certain subsidies can be beneficial in terms of enhancing access to sustainable modern energy and promoting cleaner technologies.

This report summarises, in a non-technical language, the nature, types and impacts of subsidies on energy that undermine the pursuit of sustainable development. It also offers recommendations to policy makers on how to design and implement subsidies reform in an environmentally, socially and economically sound manner.