Most governments around the world, rich and poor alike, encourage fossil fuel production or consumption with financial support. Globally, subsidies to fossil fuels may be on the order of US$ 500 billion per year, of which about US$ 100 billion is provided to producers.Nobody knows the real number, however, because there is no international framework for regularly monitoring fossil-fuel subsidies.
Clearly a more accurate picture is needed. Subsidies to consumers that show up in end-user prices are relatively easy to estimate but producer subsidies come in many forms. These include tax breaks, low-interest loans, discounted royalties or access rights, and insurance guarantees. Support from such sources is rarely explicit in government budgets.
The GSI is forging a new global understanding about these subsidies by:
- Undertaking a detailed survey of fossil-fuel subsidies and their characteristics across five significant and representative countries: China, Germany, Indonesia, Nigeria and the United States.
- Promoting improved transparency by showing people where they can find information, encouraging governments to share more data and generating new information about subsidies in selected countries.
- Developing an internationally-consistent approach to data collection on fossil-fuel subsidies. The method will be applied in selected countries, starting with oil and gas in Indonesia.
Our report on this theme has an expected release date of November 2009.
Further research on measuring subsidies, in the context of a price-gap approach, can be found under IISD's 'From Bali to Copenhagen', a project that investigates how trade and investment policies can be harnessed to help achieve climate change objectives.
