Re f o r m i n g. Su b s i d i e s

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1 Re f o r m i n g En e r g y Su b s i d i e s Opportunities to Contribute to the Climate Change Agenda U n i t e d Na t i o n s En v i r o n m e n t Pr o g r a m m e

2 Copyright United Nations Environment Programme, 2008 Photo credit: Front cover: Germany, Grenvenbroich, coal power plant with smoking chimneys Hartmut Schwarzbach / argus / Still Pictures This publication may be reproduced in whole or in part and in any form for educational or non-profit purposes without special permission from the copyright holder, provided acknowledgement of the source is made. UNEP would appreciate receiving a copy of any publication that uses this publication as a source. No use of this publication may be made for resale or for any other commercial purpose whatsoever without prior permission in writing from UNEP. Disclaimer The designations employed and the presentation of the material in this publication do not imply the expression of any opinion whatsoever on the part of the United Nations Environment Programme concerning the legal status of any country, territory, city or area or of its authorities, or concerning delimitation of its frontiers or boundaries. Moreover, the views expressed do not necessarily represent the decision or the stated policy of the United Nations Environment Programme, nor does citing of trade names or commercial processes constitute endorsement. ISBN: UNEP promotes environmentally sound practices globally and in its own activities. This publication is printed on Cyclus Print produced from 100% recycled fibres and usage of vegetable-based inks. This brochure is printed by an ecolabelled FSC company. Our distribution policy aims to reduce UNEP s carbon footprint.

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35 About the UNEP Division of Technology, Industry and Economics The UNEP Division of Technology, Industry and Economics (DTIE) helps governments, local authorities and decision-makers in business and industry to develop and implement policies and practices focusing on sustainable development. The Division works to promote > sustainable consumption and production, > the efficient use of renewable energy, > adequate management of chemicals, > the integration of environmental costs in development policies. The Office of the Director, located in Paris, coordinates activities through: > The International Environmental Technology Centre - IETC (Osaka, Shiga), which implements integrated waste, water and disaster management programmes, focusing in particular on Asia. > Production and Consumption (Paris), which promotes sustainable consumption and production patterns as a contribution to human development through global markets. > Chemicals (Geneva), which catalyzes global actions to bring about the sound management of chemicals and the improvement of chemical safety worldwide. > Energy (Paris), which fosters energy and transport policies for sustainable development and encourages investment in renewable energy and energy efficiency. > OzonAction (Paris), which supports the phase-out of ozone depleting substances in developing countries and countries with economies in transition to ensure implementation of the Montreal Protocol. > Economics and Trade (Geneva), which helps countries to integrate environmental considerations into economic and trade policies, and works with the finance sector to incorporate sustainable development policies. UNEP DTIE activities focus on raising awareness, improving the transfer of knowledge and information, fostering technological cooperation and partnerships, and implementing international conventions and agreements. For more information, see

36 Patterns of energy production and use threaten the stability of eco-systems and the health and well-being of current and future generations. Still, energy subsidies worldwide amount to around USD billion per year, or around 0.7 per cent of GDP. Fossil fuels remain the most heavily subsidised energy sources. Encouraging the production and use of fossil fuels inevitably has some harmful consequences particularly related to climate change and air pollution. In addition, subsidies act as a drain on government finances, reduce the incentive to use energy efficiently and do often not reach those they are intended for. On the other hand, certain subsidies can be beneficial in terms of enhancing access to sustainable modern energy and promoting cleaner technologies. For more information, contact: UNEP DTIE Economics and Trade Branch 11-13, chemin des Anemones CH-1219 Geneva, Switzerland Tel: Fax: etb@unep.ch This report summarises, in a nontechnical language, the nature, types and impacts of subsidies on energy that undermine the pursuit of sustainable development. It also offers recommendations to policy makers on how to design and implement subsidies reform in an environmentally, socially and economically sound manner. ISBN: DTI/1072/GE