Fossil Fuel Subsidy Reform and the Just Transition: Integrating approaches for complementary outcomes

Executive Summary:

This paper articulates how fossil fuel subsidy reform (FFSR) can contribute to a just transition, and how FFSR can be more successful under a just transition framework. The report explores a number of reasons for a framework, including alignment of the objectives of FFSR and just transition and, very importantly, FFSR’s ability to unlock revenues for implementing just transition. According to the ILO Guidelines for a Just Transition Towards Environmentally Sustainable Economics and Societies for All, transitions to environmentally and socially sustainable economies can become a strong driver of job creation, job upgrading, social justice and poverty eradication. (International Labour Organization, 2015).

Fossil fuel subsidies act against sustainability, while reform is consistent with just transition principles. These subsidies also exacerbate greenhouse gas emissions, which contribute to climate change: “Research estimates that the removal of global fossil fuel subsidies to fossil fuel consumption would lead to a global decrease in carbon emissions of between 6.4 and 8.2 per cent by 2050” (Merrill, et al., 2017). In addition, a removal of global subsidies to fossil fuel production would save 37 Gt of carbon dioxide emissions over the same timeline (Gerasimchuk, Bassi, Ordonez, Doukas, & Merrill, 2017). Thus, the elimination of all subsidies to fossil fuel production and consumption globally will reduce emissions by roughly 10 per cent.

This paper goes into detail about the various ways in which FFSR can be consistent with just transition. The scale of current fossil fuel subsidies in the world coupled with the massive financial needs for transition are early indicators of the benefits of approaching FFSR with just transition in mind. Leveraging this misspent finance to support just transition is just one of many ways in which these issues can coalesce.

Keyword: Fossil Fuel Subsidy Reform (FFSR)