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This article explores the challenges of tracking and measuring energy subsidies worldwide, particularly in the fossil fuel sector. It highlights the need for standardized evaluation, data transparency, and international action to promote reforms. The goal is to establish a multinational research consortium to quantify and analyze subsidies and encourage policy changes.
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Energy subsidies: Identifying gaps and constraints by Ronald Steenblik Director of Research
GSI’s Main Themes • Develop and promote standardization of terms and methods • Fill in data gaps and establish transparent monitoring systems • Increase awareness, dialogue and action
Develop model WTO subsidy notifications Develop manual for subsidy estimation Establish international subsidy standards body RESEARCH COMMUNICATIONS Develop and promote standardization of terms and methods Fill in data gaps and establish transparent monitoring systems Increase awareness, dialogue and action Various projects on agriculture, energy, fisheries, and services: ● estimating total subsidies ●identifying top recipients ●proposing changes to rules and national policies Web site - portal Reports and commentary WORK BY OTHERS Direct dialogue with decision makers Media relations Paired studies between northern and southern researchers Work with developing-country experts to ensure feasibility Training and outreach
International subsidy change model Politicians and interests put their own spin on results Major quantitative analyses undertaken Public support for policies starts to wane Civil society pays attention More academics pay attention Media runs headlines Academic studies criticize policies Bureaucracy funds studies Proposals for multilateral disciplines or other action Vested interests defend policies 1st systematic subsidy estimates 1st quick-and-dirty subsidy estimates Exporting countries call for IGO work Media runs headlines ?? Media runs background stories IGO work eventually funded
The energy-subsidy problematique Attention has been directed at subsidies to energy generally, and fossil fuels in particular, since the late 1980s, and interest in these subsidies has waxed and waned ever since. With many governments now poised to devote even more resources to their energy sectors — both to reduce dependency on imported natural gas and oil, and to limit growth in carbon-dioxide (CO2) emissions — it would be helpful if they had a clear picture of how much and what kind of support is currently being provided to energy production and consumption. However, unlike subsidies to agriculture, and now fisheries, there is no single on-going process or consistent database that can be enlisted to serve that process.
Summary of incidence of subsidies to fossil fuels (including fossil-fuel-based electricity) and difficulty of estimating their values
Links between data work, international action and monitoring
Subsidy tracking and measurement is neither systematic nor easy • To date there has been no systematic or standardized evaluation of energy subsidies around the world. • Main approaches used to date: • Program-specific accounts: details on individual programs; can capture intermediation value. Data intensive; no insights into incidence. • Price gap: useful for multi-country studies, though challenges with finding appropriate reference price. Approach misses any subsidy that leaks to producers, investors, labor without affecting energy prices. • Wide dispersion of estimates; data on many types of subsidies (tax breaks, credit, idemnification, state-owned enterprises) sparse or lacking entirely.
Reporting options • Beef up reporting under the UNFCC. • Improve the WTO notifications on non-agricultural subsidies. • Encourage more attention to energy subsidies in WTO Trade Policy Reviews. • Encourage more attention to energy subsidies in IEA country reviews.
WTO leverage points • Demonstrate importance of energy policy in commodity and transport service flows; and in destruction of other sources of natural capital in LDCs. • Demonstrate linkage between energy policies and environmental profile of exported and deployed capital equipment. • Show distortions caused by subsidies to biofuels and to tied aid related to energy projects. • Highlight gaps in WTO notifications. • Help countries formulate questions in the Committee on Subsidies and Countervailing Measures about other countries’ subsidies to energy. • Support efforts to liberalize trade in renewable-energy products and associated technologies under DDA Paragraph 31(iii) negotiations on environmental goods.
Defensive arguments that can create barriers to reform • “We need to maintain this industry for energy security.” • “If we eliminate this subsidy, poor people will be hurt.” • “This subsidy is justified because it is for clean(er) energy.”
Getting to the Bottom of the Well:Revealing the Scale of Subsidies to Fossil Fuels
Overall ambition • To establish a multinational, interdisciplinary research consortium to measure and analyze subsidies to fossil fuels in the main subsidizing countries. • To communicate the results to both the academic community and policy makers, and to encourage reforms at the national and international levels.
The two phases • Phase 1 to prepare groundwork for Phase 2, through studying feasibility of project, preparing a research proposal for soliciting funds. • Phase 2 to undertake primary research on identifying subsidies to fossil fuels, modelling their impact, and recommending priorities for and approaches to their reform.
