Distributional and Health Co-Benefits of Fossil Fuel Subsidy Reforms
Governments around the world continue to subsidize fossil fuel use, incentivizing unsustainable consumption levels with consequences for the global climate and human health. However, governments have proven reluctant to reform fossil fuel subsidies (FFS). This is mainly due to concerns over potential adverse effects on poverty and equity; the positive effects on air quality and health are often overlooked. This study offers new insights on the distributional consumption incidence of FFS reforms and expected benefits through improved air quality and health outcomes. Using the World Bank-International Monetary Fund Climate Policy Assessment Tool, we conduct country-level analyses of a complete removal of domestic FFS, considering 19 countries for the distributional consumption analysis, and 25 countries for the health benefits analysis. Our findings suggest that across countries, the absolute consumption burden of FFS reform on the richest decile would be 13 times larger than on the lowest-income decile, supporting evidence that FFS are an extremely inefficient way of supporting lower-income groups. In relative terms, however, the disparity is much smaller, with the richest decile bearing a relative consumption burden that is just 1.1 times larger than that borne by the lowest-income decile. In terms of positive health effects, removing FFS in 25 countries could save a total of 360,000 lives by 2035. The magnitude of the health effect depends on country-specific factors, such as the size of initial subsidy programs, and the extent to which these cover the most polluting fuels. FFS reforms can be a first step in improving air quality and reducing the burden of disease associated with air pollution.
| Main Authors: | , , , |
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| Format: | Working Paper biblioteca |
| Language: | English English |
| Published: |
World Bank, Washington, DC
2023-04-13
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| Subjects: | DETOX DEVELOPMENT, ENERGY SUBSIDIES, FUEL SUBSIDIES, AIR POLLUTION, UNSUSTAINABLE CONSUMPTION, CLIMATE CHANGE, FOSSIL FUEL SUBSIDIES, |
| Online Access: | http://documents.worldbank.org/curated/en/099843204072311699/IDU088dc23960f2dd046cc090660a4a9756d5e97 https://openknowledge.worldbank.org/handle/10986/39685 |
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| Summary: | Governments around the world continue
to subsidize fossil fuel use, incentivizing unsustainable
consumption levels with consequences for the global climate
and human health. However, governments have proven reluctant
to reform fossil fuel subsidies (FFS). This is mainly due to
concerns over potential adverse effects on poverty and
equity; the positive effects on air quality and health are
often overlooked. This study offers new insights on the
distributional consumption incidence of FFS reforms and
expected benefits through improved air quality and health
outcomes. Using the World Bank-International Monetary Fund
Climate Policy Assessment Tool, we conduct country-level
analyses of a complete removal of domestic FFS, considering
19 countries for the distributional consumption analysis,
and 25 countries for the health benefits analysis. Our
findings suggest that across countries, the absolute
consumption burden of FFS reform on the richest decile would
be 13 times larger than on the lowest-income decile,
supporting evidence that FFS are an extremely inefficient
way of supporting lower-income groups. In relative terms,
however, the disparity is much smaller, with the richest
decile bearing a relative consumption burden that is just
1.1 times larger than that borne by the lowest-income
decile. In terms of positive health effects, removing FFS in
25 countries could save a total of 360,000 lives by 2035.
The magnitude of the health effect depends on
country-specific factors, such as the size of initial
subsidy programs, and the extent to which these cover the
most polluting fuels. FFS reforms can be a first step in
improving air quality and reducing the burden of disease
associated with air pollution. |
|---|