Inventory of estimated budgetary support and tax expenditures for fossil fuels

For the first time ever, the OECD has compiled an inventory of over 250 measures that support fossil-fuel production or use in 24 industrialised countries, which together account for 95% of energy supply in OECD countries. Those measures had an overall value of about USD 45-75 billion a year between 2005 and 2010.  In absolute terms, nearly half of this amount benefitted petroleum products (i.e. crude oil and its derivative products), with the rest equally split between coal and natural gas.  Main report.  Summary of key findings.

Because several OECD countries do not produce significant amounts of fossil fuels, consumer measures account for a large share of overall support. Producer support remains, however, far from negligible in those OECD countries that produce fossil fuels.  A significant portion of the support provided in OECD countries is through tax expenditures such as tax credits, exemptions or reduced rates. These provisions provide a preference for fossil fuels compared with the “normal” tax rules in the particular country. Since normal tax rules and rates vary so much between countries, however, this type of support is not readily comparable.

The OECD inventory marks a significant step towards greater transparency and accountability with respect to the policies that relate to the production or use of fossil fuels. This is a critical first step that will facilitate analysis and understanding of which of these mechanisms may be inefficient or wasteful, and for identifying options for reform.