Global Fossil-fuel Subsidy Reform and Paris Agreement

41 Pages Posted: 28 Jan 2019

See all articles by Maksym Chepeliev

Maksym Chepeliev

Purdue University, Department of Agricultural Economics

Dominique van der Mensbrugghe

World Bank

Date Written: January 16, 2019


The recent downward trend in the international energy prices, combined with the rapid transition in the national energy mix and widespread efforts towards national energy market liberalization have challenged the mitigation potential of the global fossil-fuel subsidy reform. In this paper, we focus on 25 countries with large fossil-fuel consumption subsidies and estimate the impacts of fossil-fuel subsidy reform on achieving country-specific emissions reduction targets defined by the Nationally Determined Contributions (NDCs) under different oil price projections. Our results suggest that the elimination of the fossil-fuel consumption subsidies could be an efficient mechanism for meeting NDC targets for an important subset of countries, even if only leading to global emissions reduction of between 1.8-3.2% in 2030 depending on the oil price scenario. Out of 17 countries with binding unconditional NDC targets, nine overreach their 2030 commitments under high oil price scenario and six under low global oil prices. Furthermore, eleven countries reach at least 50% of their NDC reduction targets following subsidies elimination under low global oil price path.

Keywords: Fossil-Fuel Subsidy Reform; Paris Agreement; Nationally Determined Contributions; Greenhouse Gas Emissions; Computable General Equilibrium Model

JEL Classification: C68, H23, Q2, Q4

Suggested Citation

Chepeliev, Maksym and van der Mensbrugghe, Dominique, Global Fossil-fuel Subsidy Reform and Paris Agreement (January 16, 2019). Available at SSRN: or

Maksym Chepeliev (Contact Author)

Purdue University, Department of Agricultural Economics ( email )

1145 Krannert Building
West Lafayette, IN 47907
United States

Dominique Van der Mensbrugghe

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States
202-473-0052 (Phone)
202-522-1159 (Fax)


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