Mongabay · Climate & nature

Fossil Fuel Subsidies Criticized as Worst Energy Policy

Energy policy experts Paasha Mahdavi and Michael Ross argue that consumer fossil fuel subsidies, often implemented in response to rising prices, are the "worst energy policy in the world."

The researchers state that these subsidies, financed through taxes, borrowing, or reduced spending, drain government budgets, worsen air pollution, and hinder renewable energy investment. They are also notoriously difficult to eliminate once in place, with a high rate of reform collapses.

Mahdavi and Ross note that consumers are highly sensitive to gasoline prices, making subsidy removal politically challenging. While some countries like Mexico have managed reforms, successful and widely applicable examples are rare.

The experts suggest that policymakers should focus on reducing fossil fuel demand through measures supporting electric vehicles and renewable energy installations.

Energy researcher Jonas Kuehl agrees that open-ended fuel subsidies are ineffective, though time-limited support for low-income households or essential transport might be justifiable. He highlights that blanket subsidies often benefit high consumers more than the poor and reduce incentives for energy conservation.

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