Fossil Fuel Subsidy Reform as Part of a Green COVID-19 Recovery Organised by New Zealand's Ministry of Foreign Affairs and Trade for the WTO Trade and Environment Week 2020

1. Energy Sector Subsidies:
Post-Covid Recovery & the Energy Transition
Michael Taylor
mtaylor@irena.org
IRENA Innovation and Technology Centre

2. Energy sector subsidies are
ubiquitous, and yet…
Analysis of subsidies, aside from
some notable exceptions, have
rarely taken a global view and
never all fuels
Definitions, boundaries and
accounting methodologies are
rarely aligned
Energy sector subsidies

3. Direct subsidies to the
energy sector were at least
USD 634 billion in 2017
Indirect subsidies to FF are
significantly larger than
direct
Placeholder for value of
subsidies to nuclear
Direct & indirect subsidies to fossil fuels are 19 times higher
than to RE
Total direct & indirect energy sector subsidies (2017)

4. Direct subsidies to the energy sector
could fall to USD 475 billion in 2050
Total subsidies 25% lower than in
2017 and 45%(USD 390 bn) lower
than Reference Case
Rebalancing away from FF to
renewables and energy efficiency
Direct subsidies to fossil fuels
dominated by CCS in industrial
processes by 2050
Direct subsidies in the energy sector: 2017-2050

5. The energy transition in the end use sectors needs
accelerating

6. Impact of the crisis
• RE generation continues to grow and % rose
significantly across many regions
• Fossil fuel prices have dropped significantly
• CO2 permit price trends - forward prices hold
steady
• RE capacity additions roughly at last years level
• EV sales are up but growth less than expected
• Energy use and CO2 emissions have dropped
significantly
• Has lifestyle changed or is this a temporary
effect ?
6

7. Energy transformation investments to 2021-2023
Investments in energy transition
technologies needs to grow two-fold
between 2021 and 2023
(USD 2 trillion per year) compared to 2019
levels (USD 825 billion)
7
Immediate employment and
GDP benefits

8. AMBITION
Support implementation
of NDCs and energy
transition-related plans
PUBLIC
INTERVENTION
Mobilise investment,
encourage institutional
investors and
green bonds
EMPLOYMENT
Support the expansion
of the workforce in
energy transition-related
fields
INDUSTRY
Develop local industries
for energy transition-
related technologies
INVESTMENT
Scale up transition-related
investment in power,
heating and cooling and
transport
ACCESS
Continue efforts to
ensure universal energy
access
Key policy measures needed to bolster green
stimulus
8

9. • Crucial to leveling playing field for investment in the energy
transition
• Time for action is now to keep Paris Agreement Goals in play
• Dual COVID drivers: 1) lower fossil fuel prices and
2) increasing pressure on public finances
• Opportunity for action: COVID has raised awareness about high
damage-low probability risks (long-tail risks)
Why should we focus on subsidy reform?

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Thank you for your attention!
Michael Taylor
MTaylor@irena.org