Fossil fuel subsidies and government support in 24 OECD countries

7/31/2019 Fossil fuel subsidies and government support in 24 OECD countries

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Fossil uel subsidies

and government supportin 24 OECD countries

Summary for decision-makers

31 May 2012


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C O N T E N T

S V L U M A

, F O T O L I A

. C O M

Fossil uel subsidiesand government supportin 24 OECD countries

Summary for decision-makers


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The benefts o re orming ossil uel subsidies Re orming ossil uel subsidies would lead to a signi cantcut in greenhouse-gas emissions, while reeing up money to beinvested in a clean and sa e energy uture, in green jobs aswell as other public goods.

According to a review by the Global Subsidies Initiative o theIISDo six studies, ossil uel subsidy re orm would result inaggregate increases in gross domestic product ( GDP) in bothOECDand non- OECDcountries, up to 0.7 per cent per yearuntil 2050. In a world rocked by the scal and economic cri-sis, ossil uel subsidy re orm would be a smart strategy. Fossil

uel subsidy removal would also reduce greenhouse-gas emis-sions that lead to global warming. The IEA ound that i ossil

uel consumption subsidies in developing countries only werephased out by 2020, global primary energy demand would becut by nearly 5 percent and carbon-dioxide emissions by 5.8percent. Reducing ossil uel subsidies would also reduce thepollution associated with the use o ossil energy, and there-

ore improve air and water quality at the local level. Lastbut not least, it would unlock additional resources to investin clean energy access or the poor.

Political commitments have already been madePrompted by the scarcity o public unds which was aggravatedby the nancial crisis, the leaders o the G 20 countries, represen-ting the largest economies in the world, committed to ratio-nalize and phase out over the medium term ine cient ossil

uel subsidies that encourage waste ul consumption at the G 20 summit in Pittsburgh in 2009, ollowed by a similar agreementat APEC. In total, some 53 countries have committed to remo-

ving ossil uel subsidies over the medium term. However, sincethat, progress has been slow, even i the G 20 countries haverepeatedly rea rmed their commitment, including at the latestG 20 summit in Cannes in 2011. G 20 countries still need to deve-lop e ective action plans including clear targets and timelines,as well as a transparent and independent system o reporting.

2012 political momentum or actionat the G 20 and Rio + 20 summitsThe year 2012 represents an unprecedented opportunityto make urther progress on ossil uel subsidy re orm. In June,G 20 leaders will meet under the Presidency o Mexico, acountry which holds the legacy o the climate agreements

Rationale

Scale o Fossil Fuel Subsidies While governments are struggling to ul ll their promise omobilizing US $100 billion a year by 2020 or climate mitigationand adaptation a pledge that was made at the Copenhagensummit in 2009 recent studies estimate that around US $750billions o public unds are being spent every year to supportthe consumption and production o ossil uels.

Introduction

1

1 First-Ever OECD Inventory o Support to Fossil uelProduction or Use, October 2011, at http://www.oecd.org/ dataoecd/41/44/48802877.pd .

2 Estimate made by Fatih Birol, Chie Economist at the IEA,and included on IEA website at http://www.iea.org/weo/ quotes.asp.

Wealthy Country Subsidies Developing Country Internationa l Financial( Annex 2 and OECD) Subsidies Institutions ( IFIs) and

( Non-Annex 1 and Non- OECD) Export Credit AgencySubsidies ( ECAs)

OECD 1 and IEA $ 45 -75 billion per year $ 409 billion in 2 010 OECDand IEAstudies exclude

about $110 billion up on 2009. IFIsand ECAs.Expected to reach $ 630 billionin 2 012 2.

Estimates rom NGOs

Not s

Recent Global Fossil FuelSubsidy Estimates

As the box below demonstrates, there have been various attempts to quanti yglobal ossil uel consumption and production subsidies but there are large gapsin these numbers, highlighting the need or transparency and an agreedinternational reporting process.

F i g u r e 1

3 Oil Change International analysis inhttp://shi tthesubsidies.org database.

4 These are loans, not subsidies. Conversion actorswill apply in case loans are provided below market rates,otherwise there is no subsidy.

For both developed anddeveloping countries : $ 409 billionin 2010 and up to $ 630 billionin 2012, excluding IFIsand ECAs.

Th OeCD st mat s p ta n to both p od c and cons m s ppo t,cov n 24 nd st al z d co nt s,and s s a conc pt of s ppo t that

s b oad and d ff nt f om that of s bs d s.

For both developed anddeveloping countries : $ 409 billionin 2010 and up to $ 630 billionin 2012, excluding IFIsand ECAs.

est mat cov s only cons mpt on s bs d s v al d th o h p c

aps, o n to d c n y costs.P od c s bs d s n th d v lop nwo ld a not w ll catalo d.

For IFIs, only, more than$15 billion in 2010. 3 The US Export Import Bankalone o ered $ 4.9 billion in

ossil uel nance in 2011. 4

Th s n mb s va y ann ally b ca s th y a bas d on loansand p oj ct f nd n .


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adopted in Cancun and still shares with the USa vivid memoryo oil spills in the Gul o Mexico. The issue o the greeneconomy will be at the top o the agenda, as the G20 summitwill take place in Los Cabos on 18-19 June, just be ore theRio + 20 High-Level segment ( 20-22 June ).

The issue o ossil uel subsidy re orm is also already includedin the Rio + 20 negotiation documents and is likely to get publicand political attention rom government leaders attendingthe summit in Rio.

Objectives o this report

EU & G 20 country pro les o existing ossil uel subsidiesIn October 2011, the OECDpublished a comprehensive reporton the estimated budgetary support and tax expenditures or

ossil uels in 24OECDcountries, including key EU and G 20 countries. Un ortunately, this report did not get much publicityoutside the sphere o experts specialized in this issue, andit did not command enough attention rom decision-makersto trigger the necessary change in energy policies.

The rst objective o this report is to synthesize the existingknowledge on ossil uel subsidies by presenting short pro leso these subsidies in selected EU and G 20 countries. The goalis to simply highlight how much money could be saved bygovernments rom ossil uel subsidy re orm, without applyingany subjective judgment to the available data.

The report does not go any urther into prescribing speci cpolicy measures about how the re orms should be imple-mented at the national level. These decisions need to be takenby policy-makers to best t the national context and theeconomic and social speci cities o each country.

However, in the lead up to Rio + 20 and the G 20 summit,we present here some suggestions o policy language that couldbe adopted by the international community to create anenabling environment or policy re orms at the national level.

Decisions to be adopted at Rio + 20and the G 20 summit

This year, the Rio + 20 UN Con erence on Sustainable Deve-lopment presents a clear opportunity to solidi y the currentconsensus and turn talk into action.

The UN Secretary Generals High Level Panel on Global Sustai-nability ( GSP) unequivocally called or the removal o ossil uelsubsidies in their consensus report, Resilient People ResilientPlanet: A Future Worth Choosing. Co-chaired by the presi-dents o Finland and South A rica, the panel was comprised omajor policy makers rom 20 nations, including the EuropeanUnion, the United States, Brazil, India, China, the RussianFederation and 14 others. 5 The report recommends that thenations o the world phase out ossil uel subsidies andreduce other perverse or trade-distorting subsidies by 2020. 6

The rst round o talks on the negotiating text or Rio + 20The Future We Want saw important advances or ossil uelsubsidy phase out.

We are including below a statement signed by many largeorganizations including Oil Change International, ClimateAction Network, IISD, Greenpeace and Earth Track, outlining the

our key steps that governments should take at Rio + 20and and the G20 summit to translate these commitments intoconcrete action to eliminate ossil uel subsidies.

2

3

Four steps or governments to re ormossil uel subsidies 7

1 De ne Plans to Phase out Fossil Fuel Subsidies by 2015In Pittsburgh in September 2009, G 20 leaders pledged tophase out and rationalize over the medium term ine cient

ossil uel subsidies while providing targeted support orthe poorest. Progress however has been slow. In order to

ul ll this historic commitment, leaders should immediatelyestablish a timeline or this process. Countries shouldagree to eliminate ossil uel subsidies by 2015.

2 Increase Transparency and Consistency5Resilient People Resilient Planet :A Future Worth Choosing,Recommendation 27 ., page 18, available athttp://www.un.org / gsp / The GSP.

6Ibid, recommendation 27 ., page 18. 7http://priceo oil.org/wp-content/uploads/2012/05/

FossilFuelSubsidiesNGOstatement.pd


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Fossil fuel support in AustraliaData Summary ( in Millions of Euros )*

Fossil fuel support in BelgiumData Summary ( in Millions of Euros )*

Productionof oil,

600.82Productionof coal36.8

Consumptionof natural gas

17.48

Productionof natural gas34.35

Consumptionof oil6542.48

Australia

Consumption

of natural gas71 Consumptionof oil1640

Belgium

Total5.6 billion in 2010


Energy outlookAustralia holds the th largest coalreserve in the world and exports threequarters o its coal production. Its produc-tion o natural gas has been increasingin recent years with the discovery o largereserves o unconventional gas. In total,hal o the energy production is exported.Coal accounts or 42 % o its energyuse ( mainly or power generation ) ; oil or31 %, natural gas or 22 %, a verysmall minority being covered by biomass,hydropower and renewables.

Australia liberalized its energy marketin the 1990s.

90 % o coal production is rom blackcoal ( anthracite and bituminous ), whichis being extracted mainly in New SouthWales and Queensland. Rio Tinto, BHP,Billiton, Xstrata and Anglo American arethe our largest coal-mining companies.Lignite or brown coal is being extrac-ted in the state o Victoria.

The oil industry is privately owned ;BP, Shell, Caltex and Mobil are the mainre ners. The natural-gas sector hasbeen recently privatized.

There is a mix o state-owned andprivate companies in the power genera-tion sector.

Energy outlookBelgium has very limited domesticresources and imports almost threequarters o its energy needs. The last coalmine closed in 1992. Oil makes up 40 %o the countrys energy supply, naturalgas 25 %, coal 7 %, renewables 5 %.Nuclear power accounts or the remai-ning one f th o the energy supply andcovers hal the electricity generation.

The priorities o Belgian energy policyare the diversi cation o energy sources,competitive energy pricing driven byEU regulation, energy e ciency, environ-mental protection and the phase out

o nuclear power. Three o the countrysseven nuclear power plants will beshut down by 2015.

The energy sector is mostly privatelyowned but GDF Suez and Electrabelcontinue to hold dominant positions inthe market.

Prices, taxes and supportmechanismsEnergy prices are not regulated apart

rom electricity and natural-gas prices.

There are ederal taxes and state royaltieson the production o petroleum.A general 10 % Goods and Services Tax(GST) is charged on energy products.A ederal excise tax is applied to all motor

uels. Lique ed Petroleum Gas andbio uels bene t rom exemptions andrebates.

The principal support measure at theederal level is the Fuel Tax Creditsor Heavy Vehicles, or businesses using

heavy trucks in some sectors, supportto households switching to LPGcars,support to on-road trucks and specialprograms or low-income households.

In total, the government could saveat least 7.2 billion Australian Dollars ayear ( or 5.6 billion ) by phasing outmeasures supporting the production andconsumption o ossil uels.

The data below include support atthe ederal level and in a sample o threeprovinces ( Western Australia, Queens-land, Victoria ) and there ore is notcomplete.

Prices, taxes and supportmechanismsThe Electricity and Gas RegulatoryCommission ( CREG) monitors energy pricesat the national level, with the threeregions having their regulatory body.

The government maintains a systemo price ceilings on oil products.

A 21 % VAT is applied to energy productsexcept or the domestic consumptiono coal. Excise duties are levied on oilproducts.

There is also a levy on householdsconsumption o oil, natural gas, LPGandelectricity, and a special tax on nuclearpower generators.

Some businesses, o -road vehiclesand engines bene t rom an excise-taxreduction on petroleum products. Thereare also some measures that supportenergy use or low-income households( the Heating Social Fund, a social tarion electricity and gas, and a specialheating grant ).

In total, the government could saveat least 1.7 billion o Euros a yearby phasing out measures supportingthe production and consumptiono ossil uels in Belgium.

Production supportIn 2010, production support wasrather limited ; it included, or the mostimportant ones ( > 100 M $) :

Exemption rom Crude Oil Exciseor Condensates ( 580 M $).

Consumption supportIn 2010, consumption support wentmainly to the consumption o oil,including aviation uels and alternative

uels such as LPG.

These types o subsidies included :

Fuel Tax credits ( 4,996 M $) ;

Reduced Excise Rateon Aviation Fuel ( 1,000 M $ ) ;

Exemption rom Exciseor Alternative Fuels ( 536 M $).

Production supportIn 2010, there was no data available

or producer support, which was almostnon-existent.

Consumption supportIn 2010, consumer support was ratherlimited and centered on oil consumption

or companies using a large amounto oil and or certain types o o -roadvehicles and engines.

The types o support included,or the largest ones :

Fuel Tax Reduction or Certain

Pro essional Uses o oil ( 1,519 M ) ; Fuel Tax Reduction or Certain Industrial

Uses o oil ( 110 M ).

* Minimum estimates based on the OECD data* Minimum estimates based on the OECD data


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Chile

Energy outlookChile has signi cant hydroelectric andbiomass domestic resources but importsaround three quarters o its energysupply. Fossil uels make up about 80 %o total energy supply, oil being theleading uel ( 55 % ) ollowed by coal( 13 % ) and natural gas ( 10 % ).

In 2007 and 2008, Chile lost most oits gas imports rom Argentina, at a timewhen hydroelectric production wasseverely a ected by drought. As a result,Chile is now looking or alternativesto replace its power plants originally builtto run on natural gas imported rom

Argentina, and trying to boost its domesticexploration and production o oiland coal.

The national oil company, ENAP, domi-nates the oil extracting and re ningsectors. ENAPis also active in natural-gastransmission. Other private companiesoperate the major pipelines, includingthe one that connects Chile to Argentina.

The electricity sector was privatized inthe 1980s. 90 % o the capacity belongsto three large companies. The SIC,which supplies more than 90 % o thepopulation, is the main countryselectrical system. The northern system,SINGcovers 25 % o the Northern territo-ries and serves 6 % o the population.

Prices, taxes and supportmechanismsPrices or oil products are reely setby the market. A speci c excise tax ( IEC)is levied on transport uels. However,there is an explicit government policy toreduce price volatility or consumers otransport uels, through the ConsumersProtection System. A price bandis established around the uels averageo past and uture prices over a ve-month window. I the price exceeds theprice-band ceiling, a reduction otax is applied to bene t uel consumers.On the other hand, i the oil price isbelow this price-band foor, the rateo tax applied is increased, hence makingthis measure more revenue-neutral

or the government.

All electricity and uel products aresubject to a 19 % VAT, with an additional6 % duty tax on imported products,except or the imports rom the countriesthat have signed a trade agreementwith Chile.

The main support mechanisms goto oil consumption and oil-price stabili-zation. There was no data available

or consumption and production supportby the government o Chile or 2010.

Fossil fuel support in CanadaData Summary ( in Millions of Euros )*

Productionof oil,

990.56

Productionof coal5.45

Consumptionof natural gas35.16

Consumptionof coal4.72

Productionof natural gas

618.88


Canada


Energy outlookCanada has substantial energy sourcesand is exporting one third o its energyproduction, including oil, naturalgas, coal, and hydro-power. Canada isalso the worlds largest producer ouranium. Canada has the second largestoil reserves in the world, most owhich are oil sands. Oil and gas account

or two thirds o the countrys primaryenergy use, hydropower 12 %, andnuclear power 9 %.

Petro-Canada was privatized in 2004 butthe ederal and provincial governmentsare still involved in nuclear research

and development and in the productiono hydropower through Crowncorporations.

The provinces have jurisdictionalresponsibility or the resources within theirboundaries. There are hundred o oiland gas exploration companies. The gasindustry is owned by private companiesbut under the regulation o provincialauthorities. Transmission and distribu-tion services in the electricity sector aremostly provided by Crown corporationsowned by provincial governments.

Prices, taxes and supportmechanismsOil prices are regulated in some provinces ;natural gas and electricity prices are

regulated in most provinces by a boardor commission on a cost-o -service basis.

Income tax treatment or the oil, gasand mining sectors has been recentlyre ormed by the government to make itmore neutral compared to other sectorsthat didnt get the same advantages.But the exploration o oil and gas,including shale gas and oil sands is stillbene ting rom signi cant tax deduc-tions and exemptions, especially inAlberta. A ederal good and servicestax ( GST ) is levied on all uels. Some

provinces also provide some support toarmers and to households or energy

consumption in the northern territories,including First Nations communities.

In total, the government could saveat least 2 billion Canadian $ a year( or 1.5 billion ) by phasing out supportmechanisms to the production andconsumption o ossil uels in Canada.

The data below include ederalsupport and a sample or three provinces( Alberta, Saskatchewan and Nova Scotia )and there ore is not complete.

Production support In 2010, production support wassignifcant and benefted mostly theexploration and extraction o oiland natural gas, including unconventio-nal sources such as oil sands andshale gas ; they included, or the mostimportant ones( > 100 M $) :

Energy Industry Drilling Stimulusor oil in Alberta ( 386 M $) ;

Energy Industry Drilling Stimulusor natural gas in Alberta ( 346 M $) ;

Accelerated Capital Cost Allowanceor oil ( 300 M $) ;

Alberta Crown Royalty Reductionsor oil in Alberta ( 182 M $) ;

Alberta Crown Royalty Reductionsor natural gas in Alberta ( 164 M $) ;

Flow through Share Deductionsor oil ( 125 M $) ;

Flow through Share Deductionsor natural gas ( 112 M $).

Consumption support In 2010, consumption support was

mostly targeted to o -road vehicles,arming, heating and mining activities.

The types o subsidies included : Tax Exempt Fuel Use Program

or oil in Alberta ( 160 M $) ;

Fuel Tax Exemption or Farm ActivityHeating & Mining in Saskatchewan( 125 M $ ).

Minimum estimates based on the OECD data


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Productionof oil,105


262.57

Consumptionof coal

3

Production of natural gas2


France

Fossil fuel support in FranceData Summary ( in Millions of Euros )* Total

2.6 billion in 2010

Energy outlookFrance has very limited ossil-energysources and imports most o its oil andnatural gas and all o its coal. Since the1960s, France has made the politicalchoice to develop nuclear energy toreduce its dependence on ossil energyimports but imports almost all o theuranium needed to uel its nuclearpower plants. Nuclear power accounts

or 42 % o its total primary energyuse, oil or 29 %, natural gas or 15 %,the rest coming rom hydropower andrenewable energy sources.

Although historically the state was

strongly involved in the energy sector,France has progressively liberalizedits oil, electricity and gas sectorsto comply with EUdirectives. However,Total, EDFand GDFSuez are stilldominant actors in the energy market.

Prices, taxes and supportmechanismsThe prices o energy products are set

reely by the market, apart rom electri-city and gas, or which the CRE( Com-mission de Rgulation de lEnergie ) isresponsible or regulating the prices, inaccordance with the French government.Most energy products and services aresubject to 19.6 % o VAT.

There are di erent mechanisms orsupporting speci c uels or end users ;these mainly take the orm o partialor ull exemptions or re unds on VAT or excise duties on oil products.

In total, the government could save atleast 2.6 billion Euros a year by phasingout support mechanisms to the produc-tion and consumption o ossil uels inFrance.

Production supportFrance used to support the productiono coal through Charbonnage de France,(CdF) until 1994 when the governmentdecided to dismantle the remainingproduction site. The last mine was closedin 2004 and CdFwas liquidated in 2007and its debt trans erred to the Frenchstate, along with the responsibilityo all inherited social and environmentalliabilities.

In 2010, producer support was ratherlimited and benefted mostly petroleumrefners using petroleum products ortheir own energy process ; they included :

Tax exemption or petroleum re ners( 105 M ) ;

Tax exemption or natural-gas producers( 2 M ).

Consumption support In 2010, consumer support benefted

more largely the sectors o agriculture,fshing, road transportation, domesticaviation and to some households usingnatural gas as a source o heating.

The types o support mechanismsincluded, starting with the largest ones :

Reduced Rate or uel oil usedas diesel uel or armers and shermen( 1,100 M ) ;

Re und or diesel usedin road transport ( 308 M ) ;

Excise-Tax Exemptionor domestic aviation ( 300 M ) ;

Excise-Tax exemption or householdsusing natural gas or heating ( 245 M ) ;

Re und or uel oil usedin agriculture ( 150 M ) ;

Excise-Tax exemptionor certain boats ( 98 M ) ;

Overseas VATExemptions or Petroleumproducts Guadeloupe, Martinique,La Runion and VAT Reductions andreduced rates or Petroleum productsin Corsica ( 73 M ) ;

Reduced rate o Excise or Taxi Drivers ;

Re unds used or public transportation ; Aid to small gas stations ;

Reduced Rate or Natural Gas,Lique ed Petroleum Gas, butane andpropane used as transport uels ;

Reduced rates or certain typeso diesel- red engine or agricultureand construction ;

Excise-Tax exemptionor Co-generation ;

Excise-Tax exemptionor natural gas used as uel.


Germany

Productionof oil,

256.04

Productionof coal

2231.42


Consumption

of coal2665.47

Production of natural gas

13.51

Consumptionof oil1574

Germany

Fossil fuel support in GermanyData Summary ( in Millions of Euros )* Total

7.4 billion in 2010

Energy outlookGermany has limited reserves o oiland natural gas and imports 60 %o its energy supply. Oil makes up morethan one third o its energy supply,

ollowed by natural gas ( 22 % ), coal( 12 % ), lignite ( 11 % ) and nuclear power( 11 % ). Germany has a relatively highshare o renewable energy or about 9 % o primary supply, with more than 80 %coming rom combustible renewablesand waste.

The German energy industry is mainlyprivately owned. Hard-coal miningand production is carried out by RAG

Deutsche Steinkohle and is heavilysubsidized. Hard-coal mining has becomeuneconomic and the remaining mineswill close by 2018 as subsidies arephased out.

Despite the re orms and regulationsin line with the EU directives on reecompetition, E.ON and RWEare amongthe dominant actors in the gas andelectricity sectors.

A top priority or the German govern-ment is to phase out nuclear power. A terthe Fukushima accident, the nuclearlaw was changed and all nuclear-powerstations will be closed down by 2022.

Prices, taxes and supportmechanismsAll orms o energy are subject to value-added tax at 19 %. An ecological taxwas introduced in 1999 and is levied on oilproducts, natural gas and electricity.

By ar the most important subsidy is thenancial support to hard-coal industry.

Producing coal in Germany is much

expensive than importing coal and thedi erence is made up by a subsidyto RAG, which also receives nancialsupport or closing down its mines.

Tax exemptions and reductions areapplied in speci c sectors such as energycompanies using energy or their ownprocess, co-generation, agriculture,

orestry, aviation, waterways transport,public transportation and some chemicaland manu acturing industries.

In total, the government could saveup to 7.4 billion a year by phasingout subsidies and support mechanismsto the production and consumptiono ossil uels.

Production support In 2010, production support benefted

mostly hard-coal and lignite producersand some manu acturers or oil ; it included, or the most importantones ( > 100 M $) :

Combined Aidsor coal production ( 1,747 M $) ;

Mining Royalty Exemptionor hard coal ( 276 M $) ;

Manu acturer Privilegeor oil ( 256 M $) ;

Mining Royalty Exemptionor lignite ( 198 M $).

Consumption support In 2010, consumption support benefted

energy companies using energy or theirown process, co-generation, agriculture,

orestry, aviation, waterways transport,public transportation and some chemicaland manu acturing industries.

The types o support included, startingwith the largest ones :

Tax relie or uels usedin power generation ( 2,300 M $) ;

Fuel tax exemptionor commercial aviation ( 680 M $) ;

Re und or diesel used in agricultureand orestry ( 395 M $) ;

Energy tax breaks or agricultureand manu acturing ( 284 M $) ;

Tax-relie or energy-intensive processesor natural gas ( 224 M $) ;

Tax-relie or energy-intensive processesor coal ( 205 M $) ;

Tax relie or LPG andnatural gas ( 190 M $) ;

Fuel tax exemption or internalwaterway transportation ( 166 M $) ;

Early retirement payments ( 160 M $) ;

Peak equalization schemeor natural gas ( 155 M $) ;

Tax-relie or energy-intensive processesor oil ( 143 M $).

* Minimum estimates based on the OECD data


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Production

of coal8900


29133.94

Consumptionof coal

7445.34Consumptionof oil33327

Hungary

Fossil fuel support in Hungary Summary ( in Millions of Euros )* Total

274 million in 2010

Energy outlookHungary has modest resources o oiland gas and its energy production isdeclining. The country is importingaround 80 % o its natural gas and oil,mainly rom Russia. Natural gas accounts

or 37 % o the energy supply, ollowedby oil ( 27 % ), nuclear power ( 16 % ),coal ( 10 % ) and combustible renewables( 6 % ).

There is a mixture o public and privateownership in the energy sector. MOL,the ormer national oil company, whichwas privatized in 1990s, dominates theoil and gas upstream industry. E.On,

Gaz de France and Italgas dominate thenatural gas sales market. MVM is astate-owned company which controlsaround 80 % o the electricity market.

The government has opened up theelectricity and gas markets to competitionin line with the EU directives but didnttake measures to restrict the powero the largest energy actors.

Prices, taxes and supportmechanismsOil and coal prices are set by the market,while natural gas and electricity pricesare regulated by the Hungarian EnergyO ce. All energy products and servicesare subject to value-added tax ( VAT).Excises taxes are levied on transport

uels, as well as natural gas and electricityor industries. Natural gas and heat are

subsidized or households consumption,disregarding the level o income oeach household. The government is alsosupporting the production o coal.

In total, Hungary could save up to

78.8 billion o Hungarian orints a yearby phasing out subsidies and supportmechanisms to the production andconsumption o ossil uels.

Production support In 2010, the government provided some

price support to coal producers througha mechanism similar to Coal penniesin Germany ; levies are paid by nalelectricity consumers to nance purchaseso coal-generated power that is normallymore expensive by electricity companies :

Coal pennies( 8,900 M o Hungarian orints ).

Consumption support In 2010, consumption subsidies benefted

more largely natural gas and heatingor households, as well as the sectors o

agriculture and railways.

The types o subsidies included :

Fuel Tax Re und or agricultureusing oil ( 22,037 M orints ) ;

Household Natural gas andheat subsidies ( 17,342 M orints ) ;

Reduced Rate o VAT or District Heatingor natural gas ( 11,792 M orints ) ;

Fuel Tax Re und or railwaysusing oil ( 7,000 M orints ) ;

Households heat subsidiesor coal ( 4,432 M orin ts ) ;

Reduced Rate o VAT or District Heatingor coal ( 3,014 M orin ts ) ;

Household heat subsidiesusing petroleum ( 2,554 M orints ) ;

Reduced Rate o VAT or District Heatingor oil ( 1,737 M orints ).


Iceland

Energy outlookIceland has signi cant domestic sourceso renewable energy. Around 85 % o itsenergy supply and 100 % o its electricityis obtained rom hydropower or geo-thermal heat. The country imports all oits ossil uel needs or transportation.

Iceland converted rom oil to geothermalheating rom 1940 to 1975 and today87 % o space heating comes rom geo-thermal resources, with most o the restcoming rom other renewable sources.

Private companies supply Iceland withoil products ; state-owned companiesdominate the rest o Icelands energyeconomy. Landsvirkjun ( the NationalPower Company ) is the largest electricityproducer in Iceland and is owned bythe State and municipalities.

Iceland consumption o electricity percapita is by ar the highest in the world,with more than 85 % o this consumptioncoming rom industry and aluminumsmelting. But only one th o thepotential or electricity production romrenewable sources is being used. Thegovernment is aiming to phase out ossil

uels in the transport and shing sectorsby increasing the use o electric andhydrogen- ueled vehicles and feets.

Prices, taxes and supportmechanismsWith the exception o petroleum products,energy prices are set by government-owned utilities. Electricity or generalusers is sold by seven licensed tradersthat buy electricity rom the state through1 to 12 year xed-term contracts.

An excise tax is levied on motor vehiclesusing petroleum uels ; there are somereductions and exemptions or taxis,rental cars, large buses, trucks, o -roadvehicles, sport cars, rescue cars andelectric or hydrogen- ueled vehicles. Alltransportation uels are subject to a road

tax, except or o -road use and or LPG ( Liquid Petroleum Gas ). Aviation uelsand kerosene bene t rom a lowertaxation rate. Some items like oil orspace heating or hot water or swimmingpools are subject to a lower rate o VAT.

In 2010, no data was availableregarding government support to ossil

uel production or consumption.


10/19

1918

Productionof peat93.52

Ireland

Fossil fuel support in IrelandData Summary ( in Millions of Euros )* Total

93 million in 2010

Energy outlookIreland has ew energy resources and ishighly dependent on energy imports.Oil accounts or hal o the energy supply,natural gas or 31 %, coal or 9 % andindigenously produced peat or 6 %, therest coming rom renewables and com-bustible waste. The government plansto invest in renewable energy to reducedependence on imported oil and gas,and to lower greenhouse gas emissions.

The energy sector is owned by a mixtureo public and private actors.

The oil industry is entirely in private hands.The re nery o Cork, now owned byConoco-Phillips, produces 35 % o domesticdemand or petroleum products.

State-owned companies dominatethe electricity, gas and peat sectors. TheElectricity Supply Board ( ESB) holdstwo-thirds o generating capacity ; Eirgridis the main electricity distributor and

Bord Gais Eireann ( BGE) the main gasdistributor. Bord na Mona is the mainpeat producer and is partially ownedby the state.

Prices, taxes and supportmechanismsThe prices o all orms o energy arederegulated, with the exception o elec-tricity and gas. The electricity and gastari s are regulated by the Commission

or Energy Regulation ( CER) on a cost-o -service basis.

Fuel and energy products are subject

to a 13.5 % VAT, except or the gasolineand diesel or road use which are taxedat a 21 % rate. Excise taxes are leviedon oil products. The main governmentsupport is a subsidy to peat production

or power generation to compensateor higher costs o production compared

to other sources.

In total, the government could saveat least 93 million a year by phasingout ossil uel production support.

Production and consumptionsupportIn 2010, the only data available was

or the support to peat production :

Public Service Obligationor Peat ( 93.52 million o Euros ).



146


Isral

Fossil fuel support in IsraelData Summary ( in Millions of Euros )* Total

433 million in 2010

Energy outlook Fossil uels make up about 95 % o Israel

primary energy supply. Imported oilaccounts or around 50 % o its energysupply, imported coal or 35 %, naturalgas or 10 % and renewable energy 5 %.

Israels consumption o natural gas isexpected to triple by 2020. In 2004, Israelbegan producing natural gas rom depo-sits in the Yam Tethys eld and urtherintensi ed its exploration e orts. Twoother large elds ( Tamar and Leviathan )were discovered. According to theUSGeological Survey, the potential or

urther discoveries is considerable,

with around 3.5 trillion m3 o gas beinglocated in the Levant Basin.

Israel is also looking at exploiting consi-derable oil shale resources in the Rotembasin underground but mining theseresources would require tremendousamounts o water resources, which arevery limited in Israel.

Electricity production and distribution isdominated by the state-owned IsraelElectrici ty Corporation. D evelopment oo shore gas elds is being operated bya consortium o private companies headedby a USoil company ( Noble Energy ).

The transmission o gas is carried bythe government subsidiary Israel NaturalGas Lines Company ( INGL).

Prices, taxes and supportmechanismsOil prices are generally not regulated.High taxes on transportation uels meanthat prices are similar to the ones inEuropean countries. In 2009, a tax re ormwas conducted to equalize the pricesbetween gasoline and diesel. Howeversome sectors such as agriculture,

construction, shing, as well as taxis andbuses and other large businesses andindustries depending on diesel or theirincome, are entitled to diesel tax re unds.Excise duties are also imposed on oil,gas and coal used or power stations.

The purchase o polluting cars is heavilytaxed ( 83 % ), while lower emissioncars, hybrid and electric cars are chargeda lower 45 to 10 % tax.

The prices o electricity are regulatedby the Electricity Authority. Natural gasis likely to become the dominant uelused in new power plants.

A new scal regime was set up in 2011to increase taxation and royalties onhydrocarbon production and discoveries.

In total, the government could saveat least 2.1 billion o Israeli shekelsto a year ( or 433 million ) by phasingout subsidies and support mechanismsto the production and consumptiono ossil uels in Israel.

Production support In 2010, government support went

mainly to the exploration and productiono natural gas and oil ; it included :

Depletion deduction or natural gas( 118 Millions o Israeli shekels ) ;

Reduced Royalty Payments or natural gas( 27 Millions o Israeli shekels ) ;

Reduced Royalty Paymentsand Depletion deduction or oil( 0.14 Millions o Israel i shekels ).


buses, taxis, fshing boats, and workingvehicles such as tractors :

Excise-Tax Exemption on Diesel( 2,000 Millions o Israeli shekels ).



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60 Consumptionof oil1475.4

Italy

Fossil fuel support in ItalyData Summary ( in Millions of Euros )* Total

1.5 billion in 2010

Energy outlookItaly has limited energy sources andimports 84 % o its energy supply.Oil and gas each account or around 40 %o the countrys primary energy use( 80 % ), the rest coming rom coal ( 8 % ),hydropower and geothermal energy( 6 % ), combustible renew ables and waste( 4 % ), and imported electricity ( 2 % ).

The Italian energy sector has beenprivatized since the 1990s in con ormitywith EUdirectives. But ENIremains adominant actor in the oil and gas sectors,with 30 % o state-ownership. The statehas also retained a 31 % stake in the

ormer national electricity company, ENEL,which continues to play a dominantposition in the electricity market. ENEL distributes 86 % o the electricity distri-buted in Italy and is one o the largestpower generators in Europe.

Prices, taxes and supportmechanismsThe prices o all orms o energy otherthan electricity are set reely by the market.Italy applies di erent rates o excise taxand VAT ( ranging rom 10 to 20 % ) depen-ding on the level o consumption andwhether the consumer is a household ora business.

There are excise-tax exemptions andrebates or some sectors such as shipping,rail transport, agriculture, horticulture,aquaculture, orestry, road transport,public transportation and ambulancetransport. Support to energy production

includes cheap loans and grants tonatural gas and oil production.

In total, the government could saveat least 1.5 billion a year by phasing outsupport mechanisms to the productionand consumption o ossil uels.

Production supportIn 2010, production support was limited ;there was no data available.

Consumption supportIn 2010, consumption support wastargeted at specifc sectors and actorsusing oil. The types o subsidies included( or the larges t ones ) :

Energy tax Breaks or Agriculture( 817 M );

Fuel Tax Exemption or Shipping( 492 M ) ;

Tax Relie or Trucking Companies( 95 M ).


Productionof oil,33309

Consumption

of natural gas124.26Production of natural gas400

Japan

Fossil fuel support in Japan Data Summary ( in Millions of Euros )* Total

35 billion in 2010

Energy outlookJapan has almost no domestic resourcesand is importing 84 % o its energysupply. It is the third largest importerand consumer o oil behind the USand China. Oil accounts or nearly halo its energy supply, coal about 20 %,natural gas 15 %, nuclear power 15 %,renewables and combustible waste 3 %.

The energy sector is dominated byprivate companies with some public-sectorownership. Four major gas utilities Tokyo Gas, Osaka Gas, Toho Gas andSaibu Gas- supply about three quarterso the gas market. The largest electricity

suppliers include J-Power and TokyoElectric Power Company ( TEPCO). Around60 % o the gas and electricity marketshave been liberalized.

Prices, taxes and supportmechanismsThere are no price controls on oil andcoal but electricity and gas prices areregulated in the non-liberalized sectors.All uel and energy services are subjectto a consumption tax o 5 %, as well asexcise and other taxes according to the

uel. There are also road taxes, domesticaviation taxes and a tax on electricitysales to households to invest in Research& Development. In the OECD, Japanhas the largest percentage o GDP spenton energy research, the bulk o it goingto nuclear power. A ter the Fukushimaevents, Japan decided to phase out avast majority o its nuclear power plants.Data is not available or the subsidiesto the consumption o oil.

In total, the government could saveat least 3.637 billion o Japanese Yena year ( or 35 million ) by phasingout subsidies and support mechanismsto the production and consumptiono ossil uels.

Production and generalsupport

In 2010, production support wentmainly to research and development oradvanced oil-refning technologies ; other types o support included :

Oil-re ning Rationalisation Subsidy( 9,597 Millions o Japanese Yen ) ;

Oil Product Quality Assurance Subsidy( 1,650 MYen ) ;

Large-scale Oil-Disaster Prevention Subsidy( 710 MYen ) ;

Oil Prospecting Subsidy( 301MYen ) ;

Natural gas Exploration Subsidy( 400 MYen ).

General support included :

Subsidy or Oil Re ning TechnologyProgrammes ( 11,857 MYen ) ;

Subsidy or Structural Re orm Measures( 9,194 MYen ).

Consumption supportAvailable data regarding consumptionsupport is very limited. It includes aProgramme helping private rms convertcoal-burning acilities into natural gas-burning acili ties :

Promotion o Natural Gas Use Subsidy( 124 MYen ).



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Productionof oil,2

Productionof coal334


204


Consumptionof coal21

Korea

Fossil fuel support in KoreaData Summary ( in Millions of Euros )* Total

2 million in 2010

Energy outlookKorea has limited ossil uel resourcesand imports most o its energy supply.Oil makes up about 40 % o its primaryenergy supply, coal 28 %, nuclear power17 %, natural gas 13 % and renewablesaccounts or the rest. All uranium

uels or nuclear power plants are alsoimported.

The Korean State plays a signi cantrole in the energy sector. The state-owned Korea National Oil Corporation(KNOC) is responsible or Koreas strategicoil reserves and or the exploration andproduction o natural gas within and

outside the country. The state-ownedKorea Coal Corporation ( KCC) is a keyactor in anthracite coal mining anddistribution. The government is alsoinvolved in several bituminous coalprojects abroad. The state-owned KoreaGas Corporation ( KOGAS) holds a mono-poly on gas imports and distribution.Koreas electricity market is dominatedby the Korea Electric Power Corporation(KEPCO), a 50 % state-owned company.The production o hydropower, nuclearpower and heat are mainly managedby the State.

Prices, taxes and supportmechanismsThe retail prices o oil and bituminouscoal are deregulated, while the prices odomestically produced anthracite coal,electricity, natural gas and heat areregulated by the Ministry o Industryand Energy and the Korea ElectricityCommission.

A 10 % VAT is levied on all energyproducts and services, with an additionalduty on imported coal, oil and re nedproducts. Excises taxes apply to house-holds and businesses consumptiono oil and gas and to transport uels.

Government subsidies to ossil uels aremainly targeted at domestic coal produc-tion through price support. The Koreangovernment is also investing in R&D orclean coal technologies. Some sectorssuch as arming, shing and shippingbene t rom some tax exemptions.

In total, the government could saveat least 2,2 billions o Korean wona year ( or 2 million euros ) by phasing outsupport mechanisms to the productionand consumption o ossil uelsin Korea.

Production subsidies In 2010, the government supported

mainly the production o coal ; it included ( > 20,000 Millions o Koreanwon ) :

Support to Coal Briquette Production( 151,221 M o Korean wo n ) ;

Coal Mining Inherited Social Liabilities( 132,885 M o Korean wo n ) ;

Direct Support to Coal Production( 24,233 M o Korean won ).

Consumption subsidies In 2010, consumption support benefted

most largely the sectors o agricultureand fsheries.

The types o support included,or the largest ones :

Fuel Tax Exemptions or Agriculture( 1,120,779 Millions o Korean won ) ;

Fuel Tax Exemptions or Fisheries( 751,500 Millions o Korean won ).


Luxembourg

Energy outlookLuxembourg doesnt produce any ossil

uels and imports hal o its electricity.Oil accounts or more 61 % o its energysupply, ollowed by natural gas ( 28 % )and coal ( 2 % ). Net imports o electricitysupply 7 % o the countrys energyneeds, with the remaining 2 % coming

rom bio uels, hydropower and windpower.

Luxembourg has a speci city : as theprices o diesel and gasoline are lowerthan in other countries, many truckdrivers and commuters buy their uels inLuxembourg ; around our- ths o the

sales are or oreign drivers. Luxembourgalso has 85 % o its oil storage capacitylocated outside the country.

The natural gas market is dominated bya ew companies including Creos Luxem-bourg SA, which is 40 % owned by theState. The main electricity operator isthe Socit de Transport de lElectricit(SOTEL).

Prices, taxes and supportmechanismsLuxembourg sets maximum prices or oilproducts. Around two-thirds o uel issold at the maximum price. The naturalgas and electricity markets are regulatedby the Institut Luxembourgeois de Rgu-lation ( ILR). The government applies arelatively lower VAT ( 10.4 % ) to compen-sate or the act that electricity pricesbe ore tax are higher than in other OECD countries. A reduced VAT also appliesto mineral ue l and oil ( 12 % ) and an evenlower rate applies to natural gas ( 6 % ).The government raised its excise dutieson diesel in 2008 to comply with theEUdirective on minimum levels o taxationon energy, but it is still signi cantlylower than in France and Germany.Agricultural use o oil is exempted romexcise tax.

The State could increase its incomeby raising the level o taxation on ossil

uels to a level that would be closerto other EU countries. It could also reducesubsidies and tax exemptions.

Un ortunately no data is availableregarding ossil uel support in Luxem-bourg and there is a great need

or better transparency.


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Mexico

Fossil fuel support in MexicoData Summary ( in Millions of Euros )*

Energy outlookMexico has substantial oil and gasresources. It is exporting one th o itstotal energy production and one third oits oil production, although it has allenin the last ew years with the depletiono Cantarell, the main oil eld in thecountry. On the other hand, natural gasproduction has been rising but Mexicois still importing gas rom the US to meetits domestic demand. Oil accounts or56 % o energy supply, natural gas 28 %,with the rest coming rom coal, combus-tible renewables and waste, geothermalenergy and a nuclear power plant.

The energy sector is run by state-ownedcompanies. The national oil and gascompany Petroleos Mexicanos ( Pemex ) isthe largest company in Mexico and oneo the largest oil companies in the world.In 2008, Mexico passed a new legislationaimed at boosting oil production by

regulating the sector and creating incen-tives or new exploration and produc-tion e orts. Pemex is also the dominantoperating company in the gas sector.The coal sector has been opened up to

oreign companies since 1975 and themajor players in the sector are now a mixo Mexican and oreign companies. Inthe sector o electricity, the state-ownedComision Federal de Electricidad ( CFE)is the dominant player, controlling abouttwo thirds o installed capacity.

Prices, taxes and supportmechanisms

All energy prices are controlled andusually set below import prices with sup-port rom the government. VAT islevied on all energy products and excisetaxes are levied on transport uels.All electricity tari s are approved by theMinistry o Finance, the Ministry oEnergy, the Water Commission and otherregulatory bodies. Tari s or householdsand small businesses are usually belowaverage costs resulting in large subsidies,which have been increasing in thelast ew years. Moreover, uel-tax creditsare available or agriculture, sheries,commercial vessels, commuters and sometypes o diesel uels.

In total, the government could saveat least 8.8 billions o Mexican Pesosa year ( or 510 million ) by phasing outsupport mechanisms to the productionand consumption o ossil uelsin Mexico.

Production supportIn 2010, no data was available orproduction support.

Consumption supportIn 2010, consumption support wasmainly targeted towards oil consumption.

It included : Diesel Tax Credit or Commuters

( 3,048 M o Mexican Pesos ) ;

Petroleum Revenue Stabilisation Fund( 5,649 M o Mexican Pesos ) ;

Tax Credit or Marine Diesel( 85 M o Mex ican Pesos ) ;

Fuel Tax Credit or Agricultureand Fisheries ( 51 M o Mexican Pesos ).


Productionof oil,8.16

Production of natural gas

8.16 Consumptionof oil38.31

New Zealand

Fossil fuel support in New ZealandData Summary ( in Millions of Euros )* Total

32 million in 2010

Energy outlookNew Zealand has substantial ossil-energyresources and imports only 14 % o itstotal energy supply. It is a net exportero coal. Oil accounts or about 25 %o its energy supply, ollowed by naturalgas ( 20 % ), geothermal energy ( 17 % ),hydropower ( 12 % ), coal ( 9 % ) andbiomass ( 8 % ).

The energy sector was partly liberalizedin the 1980s and 90s but the state retainssigni cant ownership, especially in theelectricity sector.

Upstream oil and gas production isdominated by Shell, which operates theMaui eld, the main production eld

or natural gas. BP, Caltex, Mobil and Z-Energy own about three-quartero re nery. The state-owned companiesGenesis Energy and Mighty RiverPower are key players in the gas market.Meridian and Transpower, two state-owned companies, are responsiblerespectively or power generation andtransmission.

Prices, taxes and supportmechanismsThere are no price controls on any energyservices and products in New Zealand.

A Goods & Services Tax ( GST ) is levied onall uels and energy services. There arevarious taxes on transportation uel,with some exemptions and re unds orcommercial users and o -road vehicles.An Energy Resources Levy is appliedto some natural gas and coal production

elds, with tax breaks or new oil andgas exploration projects. There arealso some levies on electricity and gas to

und sa ety regulatory activities. New-

Zealand is also located in a seismicregion, which means that the governmenthas to invest in speci c activities relatedto the monitoring o seismic activityin oil and gas exploration and productionsites.

In total, the government could savemore than 52 millions o New Zealanddollars a year ( or 32 million )by phasing out support mechanismsto the production and consumptiono ossil uels in New Zealand.

Production supportIn 2010, there were no specifc dataavailable on production support, butthe government provided some generalsupport to oil and gas explorationand development, including or Research& Development, Acquisition o PetroleumExploration Data, and Managemento Oil Stocks ( in total 14.24 Millions oNew Zealand dollars ).

Consumption support In 2010, government support included

a re und on motor-spirit excise dutycharged on certain types o uels

or o -road vehicles, commercial vesselsand agricultural vehicles :

Motor Excise Duty Re und( 38.31 M o NZ dollars ).



Total510 million in 2010


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Norway

Fossil fuel support in NorwayData Summary ( in Millions of Euros )* Total

733 million in 2010

Energy outlookNorway is the third exporter o oil andnatural gas in the world, a ter Russia andSaudi Arabia. Production volumes weremultiplied by 4 between 1980 and 1997 ;since then the oil production decreasewas o set by a gas production increase.Most o the natural gas is being exportedto the UKand continental Europe.Hydropower is the single largest energysource in Norway ( 41 % ). Oil and gasaccount together or 55 % o the totalenergy supply. Norway is also producingand exporting coal, mostly to Germany.

Petroleum is the backbone o the

Norwegian economy and the state playsa major role in the sector. The stateholds around one-third o Norways oiland gas reserves, through the DirectFinancial Interest ( SDFI) shares managedby the state-owned company Petoro.Statoil ASA, an international company,67 % o which is owned by the state, ope-rates 80 % o total oil production. Gasscois the state-owned operator o gas

transportation rom Norway to conti-nental Europe. The Norwegian statealso owns 99.9 % o the shares in NorskeSpitsbergen Kulkompani AS (SNSK),which carries out coal mining operations.

Norway deregulated its electricitymarket in 1991. The Norwegian legisla-tion is harmonized with EU legislation.There are many local and nationalactors operating in the electricity market,but 90 % o generating capacity isin public ownership either through thestate or local authorities.

Prices, taxes and supportmechanismsAll energy prices are determinedby the market. A 25 % VAT is applied toall orms o energy consumption.Excise taxes are levied on oil productsand electricity, with some exemptions orseveral industries. Energy is subjectto environmental tax measures, includingan SO2 tax on mineral oil, taxes on

ertilisers, pesticides and lubricant oils,a CO2 tax on the consumption o petrol,diesel and mineral oil and on o shorepetroleum production, as well asNOx taxes on oil production. Fisheries areexempted rom the CO2 tax. Moreover,Norway joined the EU European Trading

Scheme market in 2008. Income derivedrom oil and gas production is subject

to a special tax o 50 % in addition tothe ordinary corporate tax o 28 %. Butthe government also reimburses up to78 % o all the exploration expenses.This means that the government sharesboth pro ts and losses rom explorationand production o petroleum products.Hydropower excess returns are taxed at30 % in addition to the 28 % corporatetax.

In total, the government could saveat least 5.6 billion o Norwegian kronera year ( or 733 million ) by phasing out

subsidies and support mechanisms tothe production and consumptiono ossil uels.

Production supportNorway stopped subsidizing coalproduction in 2002. In 2010, the maingovernment support went to R&D and tax exemptions to the oil and gasexploration and extraction ; it included( > 100 Millions o Norwegian kroner ) :

NOx Tax Exemption or natural gas( 703 M o Norwegian kroner ) ;

R&D unding in the oil sector( 142 M o Norwegian kroner ) ;

R&D unding in the natural gas sector( 106 M o Norwegian kroner ).

Consumption supportIn 2010, the government supported theconsumption o diesel instead o petroland to some sectors such as fsheries,shipping, aviation and some industries. It included :

Lower Tax Rate on Diesel comparedto Petrol ( 3,510 M o Norwegian kroner ) ;

NOx exemption or shipping( 540 M o Norwegian kroner ) ;

CO2 exemption or sheries( 235 M o Norwegian kroner ) ;

NOx exemptions or sheries( 130 M o Norwegian kroner ).


Production

of coal2231.42

Consumptionof coal22.56


Poland

Fossil fuel support in Poland Data Summary ( in Millions of Euros )* Total

332 million in 2010

Energy outlookPoland relies heavily on ossil uels( especially coal ) or meeting its energydemand. Indigenous bituminous coalaccounts or 55 % o its energy supplyand more than 90 % o electricitygeneration. Oil provides around 26 %o the total energy supply, natural gas13 % and biomass 6 %. Poland importsalmost all o its oil and gas rom Russia.The polish government is planningto diversi y its energy mix away romcoal and expanding nuclear powerand renewable energy.

The energy market changed dramatically

a ter the all o communism. Someassets were privatized but the state stillowns two o the three largest coalproducers ( Katowicki Holding WeglowySA, Kompania Weglowa SA). The PolishOil and Gas Company ( PGNiG), a majoritystate-owned company accounts or98 % o oil and gas production romon-shore wells and controls most o thenatural gas market. Oil storage,distribution and re nery are undertakenby a ew companies that are also

largely owned by the government. Fourcompanies that were ormed out othe state monopoly in 2007 control mosto the electricity market ( Polskie SieciEnergetyczne, Tauron Polska Energia,Energa and Enea ),

Prices, taxes and supportmechanismsOil and coal products are not regulated,while the prices o natural gas are regula-ted by the Energy Regulatory Authority(ERO). Electricity prices are not regulatedexcept or household tari s. All uels aresubject to a 23 % VAT. Oil products andelectricity are subject to excise taxes.Road taxes on gasoline are higher thanon diesel and LPG. The sheries andaviation sector are exempt rom oil taxes.The polish government is paying orthe heavy costs o restructuring the coalindustry and or the social and environ-mental liabilities inherited rom theclosure o the mines. The total cost othese liabilities rom 1999 to 2009is estimated to be above PLN 20 billion.

In total, Poland could save up to3.5 billion o Polish zloty a year ( or 332million ) by phasing out subsidies andsupport mechanisms to the productionand consumption o ossil uels.

Production supportIn 2010, government support wentmainly to the production and mining ocoal ; it included ( > 100 M Polish zloty ) :

Exemption o De erral o Taxes andFines or coal production ( 2,128 M oPolish zloty ) ;

Initial Investment Aid or Hard CoalMining ( 400 M o Polish zloty ) ;

Aid or Coal Mining Decommissioning( 195 M o Polish zloty ).

Consumption supportIn 2010, consumption support went

mainly to the arming sector : Rebates on Diesel Fuel Tax in Farming( 720 M o Polish zloty ).


Productionof oil,2.28

Consumptionof coal

2665.47


109.12Consumptionof oil169.4


15/19

2928

Productionof coal684.6

Consumptionof coal

12.5


Spain

Fossil fuel support in SpainData Summary ( in Millions of Euros )* Total

2.6 billion in 2010

Energy outlookSpain is importing most o its energysources apart rom a declining domesticproduction o coal. Oil is the most impor-tant uel, meeting 47 % o the energysupply, ollowed by natural gas ( 24 % ),nuclear power ( 12 % ), renewable energyand biomass ( 11 % ), and coal ( 6 % ). The production o wind and solar poweris growing and contributes to 17 %o electricity production thanks to largesubsidies.

Coal production has become largelyuneconomic and is declining and beingregulated by the State through price

control and production quotas. The oilsector was deregulated and is entirelyprivately owned. The gas sector isalso privately owned, with Natural Gas,Ibredrola and Enagas playing dominantroles in the market. Spain was oneo the rst EU countries to liberalise theelectricity market in the 1990s. Today,

three quarters o electricity is generatedby three companies : Iberdrola, Endesa( owned by the Italian ENEL) and UnionFenosa ( owned by Gas Natural ).

Prices, taxes and supportmechanismsAll energy prices are deregulated except

orLPG. The government levies excisetaxes on oil products and electricity. Allenergy products are subject to a 18 %VAT. There are tax exemptions or re unds

or bio uels and uels used in aviation,navigation, rail transport and arming.Spain recently raised its gasoline and

diesel taxes to comply with the EUdirec-tive on minimum levels o taxation.

The main support to energy productiongoes to coal mining. The governmentis also providing assistance to coal minesto cover inherited liabilities and socialcosts induced by mine closures. I t alsosupports power plants or the purchasingo domestic coal and R&D projects

or developing clean coal technologiesand carbon capture and storage.

In total, the government could saveat least 2.6 billion a year by phasingout subsidies and support mechanismsto the production and consumptiono ossil uels in Spain.

Production support In 2010, production support benefted

more largely the sector o coal miningand production ; it included ( > 100 M ) :

Inherited Liabilities Due to Coal Mining( 335 M ) ;

Operating Aid to Coal Producers( 250 M ).

Consumption support In 2010, government support benefted

mainly the sectors o agriculture,mining, aviation, navigation and railwaytransport. It included :

Fuel Tax Reductions ( 1,368 M ) ; Fuel Tax Exemptions ( 589.58 M ).


Sweden

Fossil fuel support in SwedenData Summary ( in Millions of Euros )* Total

2.5 billion in 2010

Energy outlookSweden has minimum ossil-energysources but important supplies o biomassand hydropower. Fossil uels ( oil, coaland gas together ) account or only onethird o the t otal energy supply ; nuclearpower or 30 %, and biomass rom the

orest industry or 22 %. Peat uel is alsoused or heating. Electricity generationis almost CO2- ree with a large partcoming rom hydropower. However theenergy intensity per GDP is relativelyhigh because o the cold climate and theenergy needs rom the pulp, paper,iron and steel industries.

The Swedish government supports thedevelopment o renewable energy and alargely decentralized energy market withmany di erent operators. The Swedishoil market is privately owned and opento competition. Oil re neries are ownedby oreign companies, including Preem( a Saudi company ), QK- Q 8, Statoil, Hydro,Neste Oil and Petroleos de Venezuela.E.ON Gas Sverige and Swedegas are thelargest companies in the natural gas

market. Vatten all, Fortum ( a majoritystate-owned company ) and E.ON Sverigegenerate the bulk o power, whiledistribution is done by many suppliers.

Prices, taxes and supportmechanismsAll energy prices are set reely bythe market except or electricity and gastari s which are regulated by theregulating agency ( EMI).

Energy is subject to an energy tax,a CO2 tax, a sulphur tax and a levy on NOx emissions. Taxation rates on uels varydepending on their use ( industry orhouseholds, transportation or heating )and their location ( North, South ).

There are some tax exemptions or peat,natural gas, LPGand bioenergy. Howeverusers o energy peat are obliged to buyEU ETScredits or CO2. Most tax revenuescome rom oil. There is also a tax onnuclear power.

In total, the government could saveat least 22.4 billions o Swedish kronora year ( or 2.5 billion ) by phasingout subsidies and support mechanismsto consumption o ossil uels. In 2010,there was no support to the productiono ossil uels.

Consumption support In 2010, the main support rom the

government to the consumption o ossiluels went to the sectors o transport,

aviation, shipping, agriculture, orestry,heating and some industrial consumers. That included ( or the largest ones,above 300 M o Swedish kronor ) :

Reduced Energy Tax Rate or Dieselused in Transport( 12,030 M o Swedish kronor ) ;

CO2 Tax Exemption or Peat( 1,840 M o Swedish kronor ) ;

CO2 Tax Reduction or dieselused in Agriculture and Forestry( 1,360 M o Swedish kronor ) ;

Energy Tax Exemption or DomesticAviation ( 1,050 M o Swedish kronor ) ;

CO2 Tax Exemption or DomesticCommercial Aviation( 970 M o Swedish kronor ) ;

Energy Tax Exemption or DomesticShipping ( 690 M o Swedish kronor ) ;

CO2 Tax Exemption or Domestic Shipping( 620 M o Swedish kronor ) ;

Reduced CO2 Tax Rate or industrialconsumers outside EU ETS or natural gasconsumption ( 465 M o Swedish kronor ) ;

Reduced CO2 Tax Rate or industrialconsumers outside EU ETS or coalconsumption ( 448 M o Swedish kronor ) ;

Reduced Energy Tax Rate or industrialconsumers outside EU ETS or natural gasconsumption ( 437 M o Swedish kronor ) ;

Reduced CO2 Tax Rate or industrialconsumers outside EU ETS or oilconsumption ( 437 M o Swedish kronor ) ;

General CO2 reduction or oil usein agric ulture ( 383 M ) ;

Energy Tax Exemption or IndustrialConsumers o natural gas ( 320 M ) ;

Energy Tax Exemption or IndustrialConsumers o coal ( 309 M ) ;

Energy Tax Exemption or IndustrialConsumers o oil ( 301 M ).


Consumption

of coal2599.17Consumptionof natural gas

1603



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The Netherlands

Fossil fuel support in the NetherlandsData Summary ( in Millions of Euros )* Total

352 million in 2010

Energy outlookThe Netherlands used to be a majorproducer o natural gas, but its majorproduction eld ( Groningen ) is gettingclose to exhaustion. Oil resources aresmaller, meeting about two thirds odomestic demand. Natural gas is thelargest source o energy, accounting or40 % o energy supply, ollowed by oil( 38 % ), coal ( 10 % ), with the rest coming

rom nuclear power, wind power andbiomass.

The energy sector is mostly in privatehands. NAM, which is owned jointly byShell and ExxonMobil, operates Gronin-

gen and is the largest gas producer.Gasunie, GasTerra, Essent, Eneco, Nuonand Delta are companies that are atleast partly owned by the state and are

dominant actors in the gas transporta-tion and distribution market. Themajor electricity companies are partlyowned by the state and partly by

oreign companies, with the ve largestgenerators being Electrabel, Essent,Nuo, E.ON Benelux and Delta.

Prices, taxes and supportmechanismsThere are no prices controls on energyservices and products, but sa ety-netson electricity and gas prices chargesto consumers. The O ce o EnergyRegulation is responsible or ensuring

that these prices are reasonable. VAT, excises taxes and a storage ee are

levied on oil products, and an energytax is levied on electricity and gas. Thereare some tax breaks, deductions andexemptions on aviation uel and oil andgas exploration and development.

In total, the government could saveat least 352 million a year by phasingout subsidies and support mechanismsto the production and consumptiono ossil uels.

Production supportIn 2010, government support was mainlytargeted at oil and gas exploration anddevelopment e orts.There is no data available.

Consumption supportIn 2010, oil consumption supportbenefted the horticulture sector, as wellas NGOs and religious groups, and theconsumption o some uels used or heatand o -road machinery :

Di erentiated Tax Rate on theconsumption o Gas Oil ( 241 M ) ;

Reduced Energy Tax Rate orHorticulture ( 92 M ) ;

Energy Tax Rebate or NGOs (15 M ) ;

Energy tax Rebate or ReligiousInstitutions ( 4.61 M ).


Turkey

Fossil fuel support in Turkey Data Summary ( in Millions of Euros )* Total

502 million in 2010

Energy outlookTurkey has limited ossil uel resourcesand imports about three quarters oits energy supply, mainly rom easterncountries. Turkey is a major energy tran-sit route due to its proximity to oil andgas reserves. Fossil uels make up about90 % o the countrys energy supply,natural gas being the leading uel ( 31 % )

ollowed by oil ( 30 % ) and coal ( 29 % ). Hydropower accounts or 19 % o powergeneration and Turkey is planning tobuild a second nuclear power plant tomeet its growing electricity demand.Turkey produces hard coal and lignite

or its own consumption.

Turkey has undergone privatizationand de-concentration re orms since 2000.The government-owned PetroleumPipeline Corporation ( BOTAS) remainsa major player in the natural gas market.Turkeys oil and gas network is operatedby BOTAS. Well located between Europe,the Middle East and the Caspianregion, Turkey is major hub or inter-national pipeline connections. TheNabucco pipeline project would enable

new suppliers rom the Middle Eastand the Caspian region to access theEuropean gas market.

Prices, taxes and supportmechanismsThe Energy Market Regulatory Authority( EMRA ) plays a strong regulatoryrole by applying a uni orm national tarito gas and electricity products, but ismoving towards a more cost-based taristructure to better refect the increasein generation costs.

Turkey levies a n 18 % VATon energyproducts. Gasoline and diesel prices areamongst the highest n the OECDcountriesdue to a high excise rate.

The most important measure supportingenergy production goes to hard-coalproduction industry, R&Dand consumption

or poor households. Some sectors suchas aviation, maritime shipping and agri-culture also bene t rom tax exemptionsand rebates.

In total, the government could saveat least 1,2 billion o Turkish lira a year( or 502 million ) by phasing out sup-port mechanisms to the production andconsumption o ossil uels in Turkey.

Production supportIn 2010, production support went mainlyto the production o hard coal :

Support to Hard Coal Industry( 398 M Turkish lira ).

Consumption supportIn 2010, consumption support wentmainly to agriculture and coal consump-tion or poor amilies :

Rebate or diesel used in Agriculture( 512 M Turkis h lir a ) ;

Aid or Coal consumption or pooramilies ( 252 M Turkish lira ).



111.99

Consumptionof oil241 Productionof coal

398

Consumption

of coal252



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Production supportIn 2010, production support measuresrather limited, the main ones goingto the development o small oil and gasnatural gas felds ; they included( > 100 M ) :

PRT Oil Allowance or the developmento petroleum sites ( 201 M ) ;

PRT Oil Allowance or the developmento natural gas sites ( 169 M ).

Consumption supportIn 2010, the main support rom thegovernment to the consumption o ossil

uels was the VAT reduction or thedomestic use o heating uel and power. That incl uded :

Reduced Rate o VAT or uel and powerrom natural gas ( 2840 M ) ;

Reduced Rate o VAT or uel and powerrom oil ( 286 M ).

Productionof oil,

233.68

Productionof coal71.2Production of

natural gas206.32


United Kingdom

Fossil fuel support in the United Kingdom Data Summary ( in Millions of Euros )* Total

4.5 million in 2010

Energy outlookThe UKused to be a major producer ooil and gas but production has beendeclining in recent years with the deple-tion o reserves in the North Sea. Naturalgas is the dominant uel and accounts

or 39 % o total energy supply, ollowedby oil ( 33 % ), coal ( 13 % ), nuclear power( 9 % ) and biomass ( 9 % ). Although UK import dependence has risen in recentyears, especially or oil, gas and coal,the country is still only importing aboutone th o its energy supplies.

The UKwas one o the rst countriesto deregulate and liberalize its energy

market. With the phasing out o statesupport to ine cient coal mines, produc-tion o coal declined sharply a ter 1980.The main producer o natural gas,British Gas, was privatized. Oil and gasproduction and exploration are now

carried out by a large number o privatecompanies. The UKelectricity marketwas also privatized in the 1990s, creatinga ragmented and competitive marketstructure.

Prices, taxes and supportmechanismsOil and gas production is subject toa Petroleum Revenue Tax ( or PRT, 50 %tax on pro ts made on new extraction

elds ), a ring- ence corporation tax( 30 % ) and a supplementary charge( 32 % ). Energy sales are subject to a 20 %VAT, excise taxes and a Climate Change

Levy. Some reduced rates are appliedto domestic use o uel and power,to elderly people, in case o cold winter,or or the consumption o low carbonvehicles.

There are very ew measures osupport other than tax exemptionsand reductions.

In total, the government could saveat least 3.6 billion a year ( or 4.5 million )by phasing out subsidies and supportmechanisms to the production andconsumption o ossil uels.


Productionof oil,

1613.03

Productionof coal

673


Consumption

of coal4292.12Production of

natural gas3284.13


United States

Fossil fuel support in the USAData Summary ( in Millions of Euros )* Total

11.8 billion in 2010

Energy outlookThe United States is a leading producerand consumer o energy in the world. Inrecent years, the USexpanded the explo-ration and extraction o hydrocarbon inthe Gul o Mexico and the use o uncon-ventional gas such as shale gas. The US ismostly sel -su cient in coal and naturalgas, but importing 58 % o its oil supply.Fossil uels make up about 85 % o US primary energy supply, oil being theleading uel ( 37 % ) ollowed by naturalgas ( 25 % ) and coal ( 22 % ). Renewables( mainly biomass ) account or 5 % andnuclear power 1 %.

The UShas a tradition o privateownership in the energy sector and wasone o the rst countries to deregulateits energy market. The coal industry isprivately owned and dominated by threelarge producers accounting or 40 % othe production. Coal is mainly used orpower generation. The oil market is ullyprivatized, but our ths o the resourcesare located in ederal land or waters.There are more than 15,000 companiesoperating in oil and gas exploration andproduction and 148 re neries, the largestnumber in the world. The natural gasmarket is competitive and integratedwith the markets o Canada and Mexico.There are roughly 1,400 local gas distri-bution companies. The electricity and gas

industries are subject to regulation atthe local, state and ederal levels. Elec-tricity market liberalization was sloweddown a ter the electricity power crisisin Cali ornia, which raised concerns aboutthe reliability o energy systems in acompetitive environment.

Prices, taxes and support me-chanismsElectricity and gas are regulated by thestate. Other energy products are notregulated, apart rom price ceilings oroil products in some states. Comparedto other developed countries, energy is

taxed at a relatively low rate. Federaltax breaks are available or some typeso o shore oil and gas production andexploration, or re neries and or theconstruction o power plants. The LowIncome Home Energy Assistance Programprovides grants to poor households tohelp pay their energy bills. The arming,

shing, orestry and mining sectors areexempted rom ederal and excise taxeson uel. A number o states providesupport to the production and consump-tion o oil, coal and gas mainly throughthe tax system. The cost o the StrategicPetroleum Reserve, which was createdin 1975 to provide a secure reserve opetroleum in case o a major disruptionis also covered by the government.

In total, the government could saveat least 15.4 billion US Dollars a year( or 11.8 billion ) by phasing out subsidiesand support mechanisms to the produc-tion and consumption o ossil uels.

The data below are including ederalsupport and some targeted supportmechanisms rom a sample o three states( West Virginia, Texas, Alaska ) ; there orethe data is not complete.

Production support In 2010, ederal production support was

signifcant and benefted the explorationand extraction o oil, coal and gasproduction, the refning o oil, and theproduction o unconventional uels ( eg :

rom shale and tar sands ) ; it included,or the most important ones ( > 100 M $) :

Temporary Expensing o Equipment

or Re ning o oil ( 760 M $ ) ; Excess o Percentage over Cost depletion

or coal production ( 416 M $ ) ; Quali ed Capital Expenditure in Alaska

or natural gas ( 352 M $) ; Excess o Percentage over Cost depletion

or gas production ( 339 M $) ; Expensing o Exploration and Development

Costs or gas ( 241 M $) ; Quali ed Capital Expenditure in Alaska

or oil ( 232.74 M $) ;

Excess o Percentage over Cost depletionor oil production ( 224 M $) ;

Alternative Fuels Production Credit or coalproduction ( 170 M $) ;

Expensing o Exploration and DevelopmentCosts or oil ( 159 M $) ;

Accelerated Depreciation o Distributionpipelines ( 120 M $).


more largely R&D, arming and consump-tion o natural gas and oil or low-incomehouseholds.

It included :

Fossil Energy Research & Developmentor consumption o coal ( 3,905 M $) ;

Low-Income Home Energy AssistanceProgram or natural gas( 2,879 M $) ;

Strategic Petroleum Reserve ( 1,077 M $) ;

Fuel Tax Exemptions to armers ( 923 M $) ; Low-Income Home Energy Assistance

Program or oil ( 570 M $) ;

Sales Tax Expenditure in Texas ( 256 M $) ;

Credit or Investment in Clean Coal ( 240 M $) ; Fossil Energy Research & Development or

the consumption o natural gas ( 126 M $) ; Amortisation o certain Pollution Control

Facilities or coal ( 100 M $).* Minimum estimates based on the OECD data



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Yves Cochet, Green Member o theEuropean ParliamentThe report has been commissioned byYves Cochet, who is a Green Member othe European Parliament. Be ore that,he was member o the French NationalAssembly during 14 years (1997-2011)and was also Minister o environment orone year (2001-2002). His main interestis Energy and the uture o mankind.He published several books includingSauver la Terre ( with Agns Sina,Fayard, 2003 ), Ptrole Apocalypse( Fayard, 2005 ), Anti-manuel dcologie( Bral, 2009- ), O va le monde?( Mille et une nuits, 2012 ).www.yvescochet.netwww.greens-e a.eu

The International Instituteor Sustainable Development

Global Subsidies InitiativeThe International Institute or Sustai-nable Development ( IISD) GlobalSubsidies Initiative ( GSI) is a leadingorganization working in the eldo ossil uel subsidies re orm and theauthor was working in very closepartnership with the GSIteam.

For more in ormation on ossil uelsubsidies re orm in countries that couldnot be covered in this report, as wellas more detailed policy analysis andresearch, you can nd resources on line at:www.iisd.org / gsi / resources

Data sourcesWhile the report is based on OECDdata,the views expressed by the author shouldnot be attributed to the OECDSecretariator to any o the member countries othe OECD.

The ull OECD report and the latest dataon ossil uel subsidies and other supportcan be ound at:www.oecd.org/iea-oecd- ss

Peer reviewThe author would like to thankthe ollowing individuals or their use ul

eedback and advice on this report:Peter Wooders, Kerry Land andIvetta Gerasimchuk Global Subsidies Initiative, IISD

Traci Romine International Energy Finance CampaignDirector, Oil Change International

Kim Carstensen Co- ounder o FairGreenSolutions

Doug Koplow Head o Earth Track

DisclaimerThe content o the nal report is thesole responsibility o the author andshould not be attributed to any othe organizations that provided data,support or guidance during the prepara-tion o the report.

About the author

Elise Buckle has been working in theeld o sustainable development or

ten years. Most recently, she worked orWWF France and WWF International asEnergy and Climate Manager leading thepolicy and communications strategiesleading to the UNFCCC COP15in Copen-hagen and to the G20 summit in Cannesin 2011. Her specialized areas o expertiseinclude ossil subsidies re orm, innova-tive nance or climate and developmentand green economy.

Be ore that, she was based at theInternational Union or Conservation o

Nature Headquarters, as a Global Pro-

gramme Coordinator working togetherwith the Regional Programmes based inA rica, Asia and Latin America.

She also worked or the Green Membersat the European Parliament, ocusing onclimate and energy, chemicals legislationand GMOs.

She gained some experience and use ulinsight rom private-sector multinationalcompanies specialized in the energysector while working as a consultant orErnst&Young. She also worked overseason disaster risk reduction or the UnitedNations in Latin America and or ACTED,a development NGObased in Central Asia.

Overview in 24 OECD countries

Government support and subsidies to the productionand consumption of fossil fuels in 2010

OECD Data 2010 (No data was available for Luxembourg,Iceland and Chile)


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It is time to move beyond oiland invest in renewable energy andclean energy access or all.

C O N T A C T S

1 De ne Plans to Phase outFossil Fuel Subsidies by 2015

2 Increase Transparency and Consistencyin Reporting o Subsidies

3 Incorporate assistance and sa eguardsto developing countries, as well as poorand vulnerable groups

4 Establish or identi y an internationalbody to acilitate and support Fossil FuelSubsidy Re orm

Four key steps to translate commitments intoconcrete action to eliminate ossil uel subsidies:

Elise BuckleSustainability Services Managerwww.sustainenergy.co

Yves CochetMember o the European Parliamentwww.yvescochet.net

Fossil fuel subsidies and government support in 24 OECD countries

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