The evidence is crystal clear that fossil fuel subsidies are environmentally harmful and undermine global efforts to tackle climate change. Despite this, support for fossil fuels costs governments USD 300–600 billion every year—depending on fuel prices on the world markets—a huge sum that could otherwise be spent on global priorities such as health, education, social protection, and a just transition to a clean energy future.

As countries struggle to support their economies in the aftermath of the COVID-19 crisis, it’s more important than ever to align climate ambitions with economic priorities. Governments have the opportunity to look closely at fossil fuel subsidy reform and fuel taxation as effective tools for a green recovery as they work to maintain climate commitments while generating revenue to support pressing social needs.

The recent drop in global oil prices provides an exceptional chance for countries to reform their fossil fuel subsidies without burdening consumers, as fuel prices would remain low without government support. The drop in oil prices also opens a window of opportunity to improve fuel taxation: IISD experts have shown that a small tax on fossil fuels could generate much-needed funds to react to and recover from the COVID-19 crisis, while being fair toward—and having a moderated effect on—consumers.

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