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Change in world CO2 emissions through fossil-fuel subsidy reform in the 4-for-2°C Scenario, 2020

Figure 2.11 - Change in world Co, emissions through fossil-fuel subsidy reform in the 4-for-2 °C Scenario relative to the New Policies Scenario, 2020 Savings: 360 Mt Other non-OECD 13% Russia 7% Latin America 11% Middle East 54% Africa 15%

Change in world CO2 emissions through fossil-fuel subsidy reform in the 4-for-2°C Scenario, 2020

shared by W.E.R.I on Jul 07

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------ Fossil-fuel subsidies phase-out: --- Estimates from the WEO-2012 suggest that fossil-fuel consumption subsidies worldwide amounted to $523 billion in 2011, up almost 30% on 2010 and six tim... es higher than the financial support given to renewables (IEA, 2012a).17 Fossil-fuel subsidies were most prevalent in the Middle East, at around 40% of the global total. These estimates indicate the extent to which end-user prices are reduced below those that would prevail in an open and competitive market. Such subsidisation occurs when energy is imported at world prices and sold domestically at lower, regulated prices, or, in the case of countries that are net exporters of a product, where domestic energy is priced below international market levels. In recognition that subsidy reform is likely to be a challenging and slow process in many countries because of political obstacles, the 4-for-2 °C Scenario does not encourage high expectations for a universal phase-out in the short term. A total phase-out by 2020 is assumed in fossil-fuel importing countries, as in the New Policies Scenarios but in exporting countries (where sustained reforms are likely to be more difficult), we assume a more gradual phase-out: relative to the New Policies Scenario, subsidisation rates are reduced by an additional 25% by 2020, before being completely removed by 2035.18 As a result of these efforts, CO2 emissions are reduced by 360 Mt in 2020, relative to the New Policies Scenario (Figure 2.11). Savings are greatest in the countries of the Middle East, which account for 54% of all savings, followed by Africa at 15%, and latin America at 11%. Besides the cautious approach adopted towards subsidy reform in the 4-for-2 °C Scenario, the fact that these savings come on top of those already achieved in the New Policies Scenario explains the relatively low share of abatement resulting from fossil-fuel subsidy reform,compared with the effect of the other policies adopted in the 4-for-2 °C Scenario.