Editing IPCC:AR6/WGIII/Chapter-6 (section)

=== Box 6.3 | Energy Subsidies ===

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Energy subsidies continue to be widely applied. Global fossil fuel subsidies represent more than half of total energy subsidies with predominantly adverse environmental, economic, and social effects ( ''high confidence'' ).

Energy subsidies can be defined as policy measures in the energy sector to lower the prices for consumers, raise the prices for producers, or reduce energy production costs ( [[#IEA--1999|IEA 1999]] ). There are subsidies for fossil fuels, renewables, and energy efficiency measures. The majority of the renewable subsidies are generation-based incentives for solar, wind or biomass in the form of feed-in-tariffs (Chapter 13), with total annual renewable subsidy estimates of about USD150 billion yr –1 globally ( [[#IEA--2018b|IEA 2018b]] ). Estimates of fossil fuel subsidies can vary by an order of magnitude. For the year 2017, the IEA estimated fossil fuel subsidies of USD300 billion using IEA’s pre-tax, price-gap method ( [[#IEA--2018b|IEA 2018b]] ), while the International Monetary Fund (IMF) included unpriced externalities in calculating subsidies of USD5.2 trillion or 6.5% of global GDP ( [[#Coady--2017|Coady et al. 2017]] , 2019; [[#World%20Bank--2019|World Bank 2019]] ). It has been estimated that the amount spent on fossil fuel subsidies was around double the amount of subsidies spent on renewables ( [[#IEA--2018b|IEA 2018b]] ). There are adverse environmental, economic and social consequences of fossil fuel subsidies ( [[#Rentschler--2017|Rentschler and Bazilian 2017]] ). More than 75% of the distortions created by fossil fuel subsidies are domestic, and studies indicate that reforming them can have substantial in-country benefits ( [[#Coady--2017|Coady et al. 2017]] , 2019). Some of the G20 countries have implemented subsidy reforms based on low oil prices ( [[#Jewell--2018|Jewell et al. 2018]] ).

Fossil fuel subsidies most commonly pursue non-climate objectives, for example, enhanced access to energy sources ( ''high confidence'' ). In some cases, these energy access subsidies have helped extend modern energy sources to the poor ( [[#Kimemia--2016|Kimemia and Annegarn 2016]] ) and thereby contribute to SDG 7. However, the subsidies have proven to be regressive in most cases, with little benefit reaching the poor ( [[#Lockwood--2015|Lockwood 2015]] ). For example, Indonesia has introduced LPG subsidies for cooking. The kerosene-to-LPG conversion programme (‘Zero Kero’) was launched in 2007 and provided mainly households with free initial LPG equipment and LPG at a low subsidised price ( [[#Imelda--2018|Imelda et al. 2018]] b; [[#Thoday--2018|Thoday et al. 2018]] ). Besides the national government, provincial governments and industry played a crucial role in implementation. Overall, the LPG conversion programme in Indonesia reduced cooking kerosene use ( [[#Andadari--2014|Andadari et al. 2014]] ; [[#Imelda--2018|Imelda et al. 2018]] b) and GHG emissions ( [[#Permadi--2017|Permadi et al. 2017]] ) with positive health effects ( [[#Imelda--2018|Imelda et al. 2018]] b; [[#Thoday--2018|Thoday et al. 2018]] ). However, the programme is generally viewed as regressive and has failed to reduce traditional solid fuel use ( [[#Andadari--2014|Andadari et al. 2014]] ; Toft 2016; [[#Thoday--2018|Thoday et al. 2018]] ). Furthermore, even if the programme decreased GHG emissions relative to continued kerosene use, these subsidies are still targeted at fossil fuels and contribute to GHG emissions.

India started a large LPG programme in 2015 that provided a capital cost subsidy to poor households (e.g., [[#Gould--2018|Gould 2018]] ; Jose et al. 2018; [[#Kar--2019|Kar et al. 2019]] ). While the programme has increased adoption of LPG in India (e.g., [[#Sharma--2019|Sharma et al. 2019]] ), it has not yet achieved a sustained use of LPG and replacement of solid fuels for cooking, amplifying the need for complementary policy measures ( [[#Gould--2018|Gould 2018]] ; [[#Kar--2019|Kar et al. 2019]] ; [[#Mani--2020|Mani et al. 2020]] ). The climate impacts of switching from biomass to LPG depend on the degree of biomass combustion in stoves and the extent to which biomass originates from non-renewable sources ( [[#Singh--2015|Singh and Rao 2015]] ; Jose et al. 2018). Barriers to increasing LPG use for cooking further included abundance of solid fuels at zero (monetary) costs ( [[#Mani--2020|Mani et al. 2020]] ) as well as benefits of solid fuels, such as maintaining the traditional taste of food and space heating in colder seasons ( [[#Gould--2018|Gould 2018]] ; [[#Sharma--2020|Sharma et al. 2020]] ).

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