Researchers call fossil fuel subsidies the worst energy policy — Mongabay

Energy policy experts Paasha Mahdavi and Michael Ross criticized government subsidies for fossil fuel consumers introduced in response to rising energy prices in an editorial for the journal Science. As Mongabay reports, the authors called this practice the worst energy policy in the world.

Costs for budgets

Mahdavi, an associate professor at the University of California, Santa Barbara, and Ross, a professor at the University of California, Los Angeles, note that subsidies make it possible to keep fuel prices low for consumers. Governments cover the price difference through taxes, borrowing or cuts to other spending.

According to the editorial’s authors, this policy drains public budgets, worsens air pollution, discourages investment in renewable energy and is difficult to abolish once introduced. They explain this in part by the fact that consumers are particularly sensitive to changes in gasoline prices, which they regularly see at gas stations.

Reforms often do not last

According to data cited by the authors, of approximately 130 attempts to reform subsidies among the 21 largest subsidizers during 2016–2023, 70% failed within the first year. More than 90% of such reforms did not last for three years.

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Ross told Mongabay that he had not found a fuel subsidy reform model that could be widely applied. As an example of a successful, though lengthy and complicated, process, he cited the abolition of subsidies in Mexico around 2017.

Targeted support instead of broad subsidies

Jonas Kühl, an energy researcher at the International Institute for Sustainable Development who was not a co-author of the editorial, said that protecting people from a sudden price spike is often necessary. At the same time, in his assessment, open-ended fuel subsidies are poor policy, although temporary support for low-income households or critical transport services can sometimes be justified.

Kühl added that broad mechanisms, including price caps, fuel tax cuts and fixed prices at gas stations, disproportionately benefit businesses and people who consume the most fuel. Among the alternatives, he cited remote-work Fridays for civil servants in Indonesia and a monthly off-peak rail pass in the Netherlands.