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GTAP Resource #3352

"Mitigation potential of removing fossil fuel subsidies: a general equilibrium assessmentine"
by Burniaux, Jean-Marc and Jean Chateau

Quoting a joint analysis made by the OECD and the IEA, G20 Leaders committed in September 2009 to “rationalize and phase out over the medium term inefficient fossil fuel subsidies that encourage wasteful consumption”. This analysis was based on the OECD ENV-Linkages General Equilibrium model and showed that removing fossil fuel subsidies in a number of non-OECD countries could reduce world Greenhouse Gases (GHG) emissions by 10% in 2050. Indeed, these subsidies are huge. The IEA reports that total energy-related consumption subsidies in 20 non-OECD countries accounting for 40% of the world energy demand amounted to 310 USD billion in 2007 (IEA, 2008). This represents 3 times the yearly aid flows to developing countries defined as the Official Development Assistance (ODA). This paper discusses the assumptions, data and both environmental and economics implications of removing these subsidies. It shows that, though removing these subsidies would amount to roughly a fifth of the effort needed to stabilize GHG concentration at a safe level, the full environmental benefit of this policy option can only be achieved if emissions are capped in OECD countries in order to offset the carbon leakage generated in these countries by the subsidy removal in non-OECD countries. Finally, though removing these subsidies qualifies as being a “win-win” option at the global level, this is no longer true for all countries/regions. The paper also provides some discussion about the robustness of these results.

Resource Details (Export Citation) GTAP Keywords
Category: GTAP Application
Status: Not published
Date: 2010
Created: Burniaux, J. (4/15/2010)
Updated: Batta, G. (5/10/2010)
Visits: 1,638
No keywords have been specified.

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