OECD work on fossil fuel subsidies Helen Mountford Acting Deputy Director OECD Environment Directorate 14 December 2009

Removing energy subsidies can reduce GHG emissions by over 10% Impact of energy subsidy removal on GHG emissions in 2050 Source: joint OECD-IEA analysis, cited in OECD (2009), Economics of Climate Change Mitigation: Policies and Options for Global Action beyond 2010, based on IEA data on subsidies

Greater GHG benefits if subsidy removal is combined with caps on emissions carbon leakage : 20% Source: joint OECD-IEA analysis, cited in OECD (2009), Economics of Climate Change Mitigation: Policies and Options for Global Action beyond 2010, based on IEA data on subsidies

Unilateral removal of energy subsidies brings real income gains… Source: joint OECD-IEA analysis, cited in OECD (2009), Economics of Climate Change Mitigation: Policies and Options for Global Action beyond 2010, based on IEA data on subsidies

… but not everybody will gain from multilateral removal Source: joint OECD-IEA analysis, cited in OECD (2009), Economics of Climate Change Mitigation: Policies and Options for Global Action beyond 2010, based on IEA data on subsidies

Conclusions & next steps Removing fossil fuel subsidies will: Reduce GHG emissions Reduce the costs of global mitigation action Increase economic efficiency and, in most countries, real income Best to combine subsidy phase-out with: Emission caps in developed countries (reduces carbon leakage) Targeted measures to address social impacts Next steps in OECD work: Methodology for estimating producer & consumer subsidies in developed countries Analysis of GHG, economic, trade, & social impacts of subsidy phase-out Advice & recommendations on how to implement phase-out in practice