This publication is part of a collection of papers that analyse several aspects of the fight against climate change as well as issues related to low-carbon and climate-resilient development. This work series was led by IDDRI and jointly prepared with experts from three Latin American & Caribbean think tanks (Argentina, Peru, Bolivia).
Highlights:
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REFORM OF THE FOSSIL FUEL SUBSIDY REGIMES - TAKING ADVANTAGE OF THE SOCIAL AND POSITIVE ECONOMIC IMPACTS
Fossil fuel subsidies have considerable negative, environmental, economic, and social effects. The reform of the fossil fuel subsidy regime in Latin America and the Caribbean allows us to benefit from the favourable economic, fiscal, social and environmental impacts resulting from the removal of the existing subsidies. The change in the incentives structure for the energy system also facilitates the development of renewable energy, contributing to removing the investment barriers put in place by the current incentives and freeing up fiscal resources that can be rerouted into social policies and help fulfil sustainable development objectives.
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REFORM OF THE FOSSIL FUEL SUBSIDY REGIMES - BARRIERS TO REFORM AND POLICY DESIGN
Despite the benefits of removing the subsidies, experiences in LAC demonstrate that there are substantial barriers standing in the way of subsidy reform, from a wide-reaching social base, that limit the room for the reforms, often causing delays or neutralising them completely. Although the drive for reform has gained impetus both in the region and on a global scale, it is necessary to define a careful reform strategy that protects the most vulnerable groups from potential negative impacts, and which clearly communicates the favourable effects of the various stages of the reforms, eliminating the price distortions that result from wasteful consumption and the inefficient allocation of resources.
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REFORM OF THE FOSSIL FUEL SUBSIDY REGIMES - A SUBSTANTIAL CONTRIBUTION TO MITIGATING CLIMATE CHANGE THAT SHOULD BE ENCOURAGED AND RECOGNISED BY THE PARIS AGREEMENT
The reduction in greenhouse gas emissions due to the removal of fossil fuel subsidies is considerable, according to global and regional estimates. The 2015 agreement should promote and facilitate the reforms by recognising their importance, providing technical support for quantifying the impacts, and supplying funding for the transformation processes implied by these reforms. Implementing a work programme on the reform of the subsidy regime within the framework of the Convention, with technical and methodological components, should facilitate reforms on a global scale.
