Into the mire: A closer look at fossil-fuel subsidies1

Stefanski (2014) develops a unique methodology to extract fossil-fuel subsidies from patterns in countries ’ carbon emission-to-GDP ratios. This methodology is useful since it: 1) overcomes the problem of scarce data; 2) derives a wider and more comparable measure of subsidies than existing measures and 3) allows for the performance of counterfactuals which help measure the impact of subsidies on emissions and growth. This paper presents a non-technical summary of the methodology developed in Stefanski (2014) and proceeds to examine the regional, temporal and country-specific trends emerging from resultant 170-country, 30-year database. I find that: 1) Both the direct and indirect financial- as well as environmental-costs of subsidies are very large and increasing- especially after 1998; 2) The overwhelming majority of the world’s subsidies come from only three countries: China, the US and the ex-USSR; 3) Whilst subsidies have been increasing almost everywhere, the vast majority of the increase comes from just two countries: China and the US. Removing these subsidies can help strained government budgets, contribute to higher levels of global GDP and make a significant (and cheap) contribution to the fight against climate change. 1All errors are my own. Contact