Consumption, innovation and the environment

Launch of the OECD Inventory of Estimated Budgetary Support and Tax Expenditures Relating to Fossil Fuels


Opening remarks by Angel Gurría, OECD Secretary-General

Paris, 4 October 2011

Ladies and Gentlemen,

Let me welcome you to the launch of OECD’s Inventory of Estimated Budgetary Support and Tax Expenditures for Fossil Fuels.

I am very pleased that Ms. Maria van der Hoeven, Executive Director of the International Energy Agency, is here with me today to launch IEA’s latest data on fossil fuel consumer subsidies in emerging and developing economies.

Phasing out fossil fuel subsidies is a win-win for the economy and the environment

Today’s launch comes at a critical time. The recovery from the worst economic crisis of our lifetimes remains fragile. Meanwhile, the room for policy manoeuvres is increasingly limited, especially in more advanced economies. In the context of fiscal consolidation efforts, effective public spending becomes critical.

There are very few quick wins though. And one of them is the reform of fossil fuel subsidies. This can contribute to achieving economic and fiscal objectives, while also tackling environmental problems like climate change. New analysis by the OECD using IEA data shows that phasing out subsidies to fossil-fuel consumption alone could reduce greenhouse gas emissions by 6% in 2050 compared with business as usual, while increasing economic efficiency.

It is in this context that the work that we have done on identifying support for fossil fuel production and use in OECD countries is so relevant for policy making.

This Inventory also provides a critical input to G20 countries as they follow-up on their 2009 commitment to “rationalise and phase out over the medium term inefficient fossil fuel subsidies that encourage wasteful consumption”.  But reform requires first knowing the nature and scope of the subsidies. As the adage goes, “what gets measured, gets managed”. And this is why measurement of support for fossil fuels is so important.

The OECD has filled a critical information gap

While estimates for fossil fuel consumption subsidies in many emerging and developing economies have been available (through the work of the IEA), until today there was no data on fossil fuel support in advanced economies. This is because support in these countries is often provided through mechanisms such as tax expenditures that are harder to measure. In providing reliable and comparable data on support or tax expenditures for fossil fuel production or use in OECD countries this Inventory fills a critical information gap.

The OECD Inventory is the product of an intensive collaboration over one and a half years in close engagement with experts in OECD countries. It builds upon close to three decades of experience that we have in measuring agricultural support in OECD countries, as well as the work that we have done to measure support for fisheries.

In this Inventory, we identify more than 250 mechanisms that support fossil fuel production or use across 24 OECD countries. Many of these policies are provided at the sub-national level – states, provinces, Länder – which is itself a crucial finding.

We estimate that the annual value of the transfers generated by these policies has ranged from about USD 45 billion to 75 billion a year in recent years. This wide range is, in part, influenced by the price of crude oil. In 2008, when oil prices peaked at over 140 dollars a barrel, the support for fossil fuel production and use had risen to around 75 billion dollars. In 2010, when oil prices were lower, the total support dropped to around 60 billion dollars.

A first step towards greater transparency, productive debate and reform

This Inventory marks an important first step in increasing transparency about government policies that influence fossil fuel consumption and use. I hope that it will spur productive debate about policies and facilitate reform.

My colleague, Helen Mountford, will tell you more about our new Inventory in just a moment, and we have experts from the Trade and Tax Departments to answer your questions.

But first let me turn to Maria van der Hoeven, who will tell us about the latest IEA estimates in emerging and developing countries.

Thank you all very much.