United Nations Environment Programme
Division of Technology, Industry, and Economics
Economics and Trade Branch
Energy Subsidies
Patterns of energy production and use threaten the stability of eco-systems and the health and well-being of current and future generations. Still, energy subsidies worldwide amount to around USD 300.000 billion per year, or around 0.7 per cent of GDP.

Fossil fuels remain the most heavily subsidised energy sources. Encouraging the production and use of fossil fuels inevitably has some harmful consequences particularly related to climate change and air pollution. In addition, subsidies act as a drain on government finances, reduce the incentive to use energy efficiently and do often not reach those they are intended for. On the other hand, certain subsidies can be beneficial in terms of enhancing access to sustainable modern energy and promoting cleaner technologies.

This report summarises, in a non-technical language, the nature, types and impacts of subsidies on energy that undermine the pursuit of sustainable development. It also offers recommendations to policy makers on how to design and implement subsidies reform in an environmentally, socially and economically sound manner.
This publication aims to raise awareness of the actual and potential impact of energy subsidies and to provide guidance to policy-makers on how to design and implement energy subsidy reforms. It is based on work undertaken by UNEP in collaboration with the International Energy Agency. The report provides an overview of methodologies for policy makers and stakeholders to evaluate the economic, environmental and social effects of energy subsidies. This analytical framework sets the scene for a detailed discussion of energy subsidy issues at the country level, presenting nine country case-study experiences. It analyses the lessons learned and offers policy recommendations on how to design, implement and assess energy subsidies reform. Please note that this report was also published as a book by Greenleaf Publishing: Energy Subsidies: Lessons Learned In Assessing Their Impact and Designing Policy Reforms, edited by Anja von Moltke, Colin McKee and Trevor Morgan.

Reforming Energy Subsidies (Publication by UNEP-DTIE)

This report, published in 2002, arises out of several analyses conducted by UNEP in collaboration with IEA. The studies were presented and discussed during regional workshops on energy-subsidy reform and sustainable development in late 2000 and early 2001. This report discusses in non-technical language the findings of these analytical studies. More detailed information on the workshops and the synthesis report leading up to this publication can be found at www.uneptie.org and www.iea.org.