A political economy theory of fossil fuel subsidy reforms in OECD countries

Nils Droste (), Benjamin Chatterton and Jakob Skovgaard
Additional contact information
Nils Droste: Lund University
Benjamin Chatterton: Lund University
Jakob Skovgaard: Lund University

Nature Communications, 2024, vol. 15, issue 1, 1-14

Abstract: Abstract Fossil fuel subsidies continue to be a considerable barrier to meeting the targets of the Paris Agreement. It is thus crucial to understand the political economy of fossil fuel subsidies and their reform. To understand these mechanisms in the developed world, we use a database of different types of fossil fuel subsidy reforms among Organisation for Economic Co-operation and Development (OECD) countries. We find evidence for four intertwined processes i) a market-power mechanism: higher market shares for renewables ease fossil fuel subsidy reforms, and ii) a policy mechanism: reforms reduce the levels of fossil fuel subsidies. Importantly, both effects are contingent on iii) a polity mechanism where institutional quality influences the feasibility and effectiveness of political reforms, and iv) a feedback mechanism where systemic lock-ins determine the effectiveness of market competition. Our results even suggest that reforms carried out by effective governments with low corruption control are associated with increasing subsidies per capita. Renewable energy support can however provide a leverage point to break path-dependencies in fossil fuel-based economies. This turns out to be more effective when coupled with improvements to institutional quality and the insulation of political processes from pro-subsidy interests.

Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.nature.com/articles/s41467-024-49835-4 Abstract (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nat:natcom:v:15:y:2024:i:1:d:10.1038_s41467-024-49835-4

Ordering information: This journal article can be ordered from
https://www.nature.com/ncomms/

DOI: 10.1038/s41467-024-49835-4

Access Statistics for this article

Nature Communications is currently edited by Nathalie Le Bot, Enda Bergin and Fiona Gillespie

More articles in Nature Communications from Nature
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().