
3 April 2023
Politically possible to abolish fossil fuel subsidies
The attitude in developing countries to removing fossil fuel subsidies is not significantly different from the attitude to carbon dioxide taxes. People become more positive about removal if the politicians inform about what the money will be used for instead. This is shown by a study of five developing countries that has been published in the reputable research journal Nature Climate Change
Many countries, especially developing countries, subsidize the consumption of fossil fuels – both for industry and for private individuals. As long as the subsidies remain, it will be pointless to introduce carbon taxes – a measure that has been shown to be effective in reducing carbon emissions.
Moreover, the subsidies are costly; the tax funds used to subsidize the consumption of fossil fuels could go to more pressing needs. According to a report by the OECD and the International Energy Council (IEA), 51 of the world's countries spend a total of $67.2 billion in fossil fuel subsidies in 2021. That was twice the amount compared to tprevious year and three times as much as would be needed to eradicate extreme poverty.
Good reasons to abolish subsidies
Thus, there are good reasons for the world's poor countries to abolish the subsidy of fossil fuels and introduce carbon dioxide taxes. But a prerequisite for it to be politically feasible is that the measures are perceived as legitimate by the country's voters.
“There is quite a lot of research on attitudes to carbon dioxide taxes, but very little on attitudes to subsidies for the consumption of fossil fuels. Our study is one of the first, says Simon Matti, Professor of Political science at Luleå University of Technology and one of the authors of the article.”
The researchers studied five developing countries with extensive subsidies of private consumption of fossil fuels: Ecuador, Egypt, India, Indonesia and Mexico. In each country, 2,000 randomly selected people were asked to answer questions about attitudes towards the abolition of subsidies and the introduction of a carbon tax.
Small differences of attitude
“To our surprise, there were no major differences in the attitude towards subsidies and carbon dioxide tax respectively. A common attitude is otherwise that you know what you have, and you would like to keep it, while it is more difficult to estimate the effects of something new”, says Simon Matti.
A less surprising result was that attitudes became more positive towards both a carbon tax and the abolition of subsidies when it was specified what the money would be used for instead. In the study, respondents were given information about one of four alternative uses: income tax reduction, public welfare, aid to the poor, and climate change adaptation measures. Investments in general welfare and adaptations to climate effects had the strongest positive effect on attitude. The latter in particular had a markedly positive effect in Mexico.
“Our study does not provide an explanation as to why Mexico stands out in this respect. But it could be that Mexico has a greater need for climate adaptation than the other countries and that they have come a bit further in adapting society to a warmer climate, which means that the respondents in Mexico see more clearly the benefit of the measure.”
Small selection
Simon Matti emphasizes that only five countries are included in the study and that attitudes towards political measures are strongly dependent on the individual country's political context and culture, for example the degree of trust in the state. It is therefore difficult to draw any general conclusions solely on the basis of the study.
“But if you put our study next to other studies that show that people have a more positive attitude towards various policy instruments if there is a plan for how the money is to be used, our results indicate that it would be perfectly possible to abolish fossil fuel subsidies, especially if the money is specified for use in other areas of need.”
The researchers behind the study are Simon Matti (Luleå University of Technology), Niklas Harring, Erik Jönsson, Sverker C. Jagers (all at Gothenburg University) and Gabriela Mundaca (University of Delaware).
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