“There are two primary types of fossil fuel subsidies. Production subsidies offset the costs for companies involved in energy production. Consumption subsidies make the final product less expensive for consumers.”
“Fuel subsidies lower the cost of energy and incentivize consumption: When the price of fuel is artificially lowered, more people will drive and fewer will turn to carpooling and other commuting alternatives. After all, there’s a reason that demand for electric cars surges whenever oil prices spike.”
“A decade ago, a study published by the National Bureau of Economic Research estimated that ending all fossil fuel subsidies would decrease global consumption by 29 billion gallons annually.
Last year’s Glasgow Climate Pact was the first time an international climate agreement included a call to revoke subsidies. Even then, it came after significant opposition from developing countries such as India and China.
The IPCC report notes that ending subsidies can hurt “the most economically vulnerable.” But the IEA noted that “subsidies are rarely well-targeted to protect vulnerable groups and tend to benefit better-off segments of the population.” It recommends prioritizing “structural changes” over short-term relief, while the IPCC report argues that if you want to help poor people pay for transportation, it may make more sense to redistribute the revenue you saved by cutting the subsidies. “