coll. - OECD companion to the inventory of support measures for fossil fuels 2018.

Two years after the historical ratification of the Paris Agreement, the momentum to tackle climate change persists and has led to several policy changes around the world. Estimates of support for fossil fuels continue their downward trend, mainly driven by fuel pricing reforms in non-OECD economies. Partner economies of the OECD, in particular India and Indonesia, have made great strides in phasing-out their consumer price supports. A number of fuel tax exemptions have been phased-out in OECD countries, and carbon taxes have been introduced in countries such as Mexico and France to internalise the external costs of fossil fuel consumption. Several G-20 and APEC countries have either completed or are currently undergoing peer reviews processes of national fossil fuel subsidies that encourage wasteful consumption.

This report and its associated database updates the status of existing support measures for fossil fuels, incorporates recently implemented measures, and expands country coverage. More than 1 000 policies conferring a benefit to the use or production of fossil fuels in 43 countries are identified. The majority of these policies were introduced decades ago in the form of tax expenditures, which are not revised with the same regularity as budgetary transfers, and thus continue in part because of this procedural summed to approximately between USD 150 and USD 250 billion annually over the period 2010-2016. The combined IEA and OECD estimates for fossil fuel support among 76 economies totals between USD 370 and USD 620 billion annually over the period 2010-2015. While several international organisations and NGOs develop their own data repositories of support measures for fossil fuels, the need for greater co-ordination is necessary in order to deliver a strong message to policy makers. To reconcile the OECDs bottom-up estimates of government support to individual programmes, with the IEAs top-down estimates of consumer price support, this edition of the Companion to the Inventory of Support Measures for Fossil Fuels suggests a solution to combine the two sets of estimates, and thus present a single figure on support given to fossil fuels.

The present report offers a practical strategy on how to incorporate government credit assistance in the Inventory. It explains a credit rating-based approach, developed by Deborah Lucas from MIT, to quantify the support element of government credit assistance (i.e. preferential loans and loan guarantees) to fossil-fuel-related projects. The current OECD database is comprised solely of support measures provided via budgetary transfers or tax expenditures, although its scope can be extended to cover other mechanisms through which government support can be granted. Government credit assistance can confer substantial benefits to carbon-intensive infrastructure, thus hampering the transition towards a low-carbon world, while inducing revenue losses for governments. Quantifying the support element of such measures therefore enhances transparency on the use of public resources.