World Energy Outlook

Energy Subsidies

The IEA, within the framework of the World Energy Outlook, has been measuring fossil-fuel subsidies in a systematic and regular fashion for more than a decade. Its analysis is aimed at demonstrating the impact of fossil-fuel subsidy removal for energy markets, climate change and government budgets. The IEA’s latest estimates indicate that fossil-fuel consumption subsidies worldwide amounted to $493 billion in 2014, $39 billion down on the previous year, in part due to the drop in international energy prices, with subsidies to oil products representing over half of the total. Those subsidies were over four-times the value of subsidies to renewable energy.

Since 2009 the IEA has provided ongoing input to the G-20 and APEC in support of their commitments to “rationalize and phase out over the medium term inefficient fossil fuel subsidies that encourage wasteful consumption”. Many countries are now pursuing reforms, but steep economic, political and social hurdles will need to be overcome to realise lasting gains.

The IEA has also established an on-line database ‌to increase the availability and transparency of energy subsidy data as this is seen as an essential step in building momentum for global fossil-fuel subsidy reform. Improved access to data on fossil-fuel subsidies will raise awareness about their magnitude and incidence and encourage informed debate on whether the subsidy represents an economically efficient allocation of resources or whether it would be possible to achieve the same objectives by alternative means.

The IEA’s World Energy Outlook Special Report, Energy and Climate Change, highlighted how the (partial) phase-out of subsidies to fossil-fuel consumption could help keep the 2 °C target alive while international negotiations continue.