IEA World Energy Outlook 2011 - Analysis Of Fossil Fuel Subsidies

1. IEA analysis of fossil-fuel
subsidies
International Energy Agency
Paris , 4 October 2011
© OECD/IEA 2011

2. Fossil-fuel subsidies can have
unintended effects
Fossil-fuel subsidies result in an economically inefficient allocation of resources and market
distortions, while often failing to meet their intended objectives
© OECD/IEA 2011

3. Fossil-fuel consumption subsidies
remain big
World subsidies to fossil-fuel consumption
600
Billion dollars
Electricity
500 Coal
400 Natural gas
300 Oil
200
100
0
2007 2008 2009 2010
Fossil fuel subsidies have been driven higher by the rebound in international energy prices
they totalled $409 billion in 2010 – about $110 billion up on 2009
© OECD/IEA 2011

4. Major energy producers are among
the biggest subsidisers
World fossil-fuel consumption subsidies by net oil & gas importer/exporter, 2007-2010
450
Billio n dollars
Exporter
400
Importer
350
300
250
200
150
100
50
0
2007 2008 2009 2010
For importers, subsidies can impose a heavy burden on state budgets, while for producers
they quicken the depletion of resources, reducing export earnings over the long-term
© OECD/IEA 2011

5. Fossil-energy subsidies go
mostly to the rich
Share of fossil-fuel subsidies received by the lowest 20% income group, 2010
Subsidies are an extremely inefficient means of assisting the poor: only 8% of the $409 billion
spent on fossil-fuel subsidies in 2010 went to the poorest 20% of the population
© OECD/IEA 2011

6. Cutting fossil-fuel subsidies would bring
economic, energy & environmental benefits
 Without further reform, spending on fossil-fuel consumption subsidies is
set to reach $660 billion in 2020, or 0.7% of global GDP
 Phasing-out fossil-fuel consumptions subsidies by 2020 would:
 slash growth in energy demand by 4.1%
 reduce growth in oil demand by 3.7 mb/d
 cut growth in CO2 emissions by 1.7 Gt
 Many countries have started or planned reforms since early-2010
 key driver has been fiscal pressure on government budgets
 G20 & APEC commitments have also underpinned many reform efforts
 much more remains to be done to realise full extent of benefits
© OECD/IEA 2011