Fossil Fuel Subsidies

Subsidies are intended to protect consumers by keeping prices low, but they come at a high cost. Subsidies have sizable fiscal costs (leading to higher taxes/borrowing or lower spending), promote inefficient allocation of an economy’s resources (hindering growth), encourage pollution (contributing to climate change and premature deaths from local air pollution), and are not well targeted at the poor (mostly benefiting higher income households). Removing subsidies and using the revenue gain for better targeted social spending, reductions in inefficient taxes, and productive investments can promote sustainable and equitable outcomes. Fossil fuel subsidy removal would also reduce energy security concerns related to volatile fossil fuel supplies.