People might be more positive to the removal of fuel subsidies if told where the money would be spent instead. This has been shown in a study from the University of Gothenburg, which investigated attitudes towards removing fossil fuel subsidies in five developing countries.
The countries of the world have agreed to take joint responsibility for reducing greenhouse gas emissions and an increasing number have introduced, or are considering introducing, a carbon tax. Figures from the OECD for example also show that in 2021 alone, 51 countries provided tax relief in the form of fossil fuel subsidies – at a cost of USD 697 billion. This was double that of the previous year and three times the amount needed to fight extreme poverty globally each year.
“One of the most important measures by far to reduce carbon emissions is the removal of fossil fuel subsidies. They encourage increased production and consumption of fossil fuels and are counter-productive for effective carbon pricing. Removing fossil fuel subsidies would also free up public funds for investment in social and economic development, especially in developing countries,” says Niklas Harring, docent in political science.
Highest subsidies in developing countries
Many of the countries that subsidise the consumption of fossil fuels are in fact developing countries. Removing subsidies on coal, gas and oil, for example, would result in significantly higher costs for both business and private consumers.
“Transitioning to a fossil-free society is a huge challenge in many developing countries, and increased fuel prices risk hitting the most vulnerable the hardest. The political feasibility of removing fossil fuel subsidies very much depends on the extent to which the public accept (or reject) such a change, and our study is the first to investigate this,” says Sverker C. Jagers, Professor of Political Science.
Niklas Harring and Sverker C. Jagers, together with colleagues at the University of Gothenburg, Luleå Technical University and the University of Delaware, compared people’s attitudes to climate policy instruments in Ecuador, Egypt, India, Indonesia and Mexico. These are some of the countries that currently subsidise their production and consumption of fossil fuels the most. In the study involving close to 7,000 respondents, the researchers looked at differences in attitudes to the introduction of a domestic carbon tax and to a proposal to remove subsidies on fossil fuels.
“The respondents were as opposed to a carbon tax as they were to removing fossil fuel subsidies,” says Niklas Harring.
Importance of policy design
The researchers investigated whether the respondents’ attitudes to removing subsidies on fossil fuels for private consumption would change if told where the revenue would be used instead – termed revenue recycling. They formulated a policy proposal for the removal of fossil fuel subsidies that was combined with examples of various investments that could be made with the money instead: investments in welfare systems, income tax reductions, investments in climate adaptation measures, and cash transfers to the poorest and most affected households.
“The respondents who were told where the money would go instead turned out to be more positive towards the proposal than those who were not given any information about alternative revenue use. Climate adaptation measures were most likely to increase support for the removal of fuel subsidies in Mexico and Ecuador, although this proposal did not increase this support in Egypt, for example.
The results indicate that decision-makers should take country-specific circumstances into account when designing policy proposals.
“For us, it’s important to understand why some policy proposals encounter public resistance and not others, but also to better understand how policy design can help to influence people’s attitudes towards climate policy. Our study shows that policy design can also play a role,” says Sverker C. Jagers.