Fossil Fuel to Clean Energy Subsidy Swaps

A “swap”— reallocating some of the savings from subsidy reform to fund the clean energy transition—could magnify the contributions to long-term, permanent emission reductions, the economy, jobs, public health and gender equality. [...] This report summarizes the International Institute for Sustainable Development’s experience of developing and documenting subsidy swaps over several years, sets out the international context of subsidy swaps, and makes the case for policy-makers to include subsidy swaps as part of their fiscal and energy policies. [...] In the case of subsidies to renewables, the correction of a market failure, principally the underpricing of pollution, provides a driver to consider fossil fuel and clean energy subsidies differently. [...] A GSI study of 20 countries with significant fossil fuel subsidies found that phasing out subsidies by 2020 and swapping 30 per cent of the savings from reform into energy efficiency and renewable energy led to increased emissions reductions from 11 to 18 per cent (Merrill, Harris, Casier, & Bassi, 2015), emphasizing the importance of not simply removing the subsidies but also making the swap to c [...] Phasing out fossil fuel subsidies and reallocating some of the savings to accelerate the clean energy transition would have benefits for the economy, the climate and society.