Do Fossil Fuel Subsidies Delay the Low-Carbon Transition? Evidence from the OECD

Since the 1970s, fossil fuel subsidies (FFS) have been widely adopted to stabilize economies and protect consumers from energy price volatility. However, these subsidies have contributed to increased greenhouse emissions, resource depletion, and air pollution. This study investigates the relationship between fossil fuel subsidies and greenhouse emissions in OECD countries from 2010 to 2022 using a fixed-effects panel model. Results indicate that a 1 percentage point increase in fossil fuel subsidies (as a share of GDP) raise emissions per capita by 0.69 tons. Among the various subsidy types, those directed at oil products have the most significant impact on emissions. These outcomes suggest that FFS hinder climate goals, emphasizing the need for targeted policy reforms.