Measuring Fossil Fuel Subsidies in the Context of the Sustainable Development Goals

06 June 2019

The importance of measuring fossil fuel subsidies has been recognized in the SDG process which created a dedicated indicator of measuring fossil fuel subsidies, 12.c.1 – ‘Amount of fossil fuel subsidies per unit of GDP (production and consumption’). As custodian agency for the SDG indicator 12.c.1, UN Environment has developed a methodology to measure fossil fuel subsidies so as to provide guidance to UN member countries reporting on this indicator.

In order to measure fossil fuel subsidies at the national, regional and global level, three sub-indicators are recommended for reporting on this indicator: 1) direct transfer of government funds; 2) induced transfers (price support); and as an optional sub-indicator 3) tax expenditure, other revenue foregone, and under-pricing of goods and services (as summarized in the table below).The definitions of the IEA Statistical Manual (IEA, 2005) and the Agreement on Subsidies and Countervailing Measures (ASCM) under the World Trade Organization (WTO) (WTO, 1994) are used to define fossil fuel subsidies. Standardised descriptions from the United Nations Statistical Office’s Central Product Classification should be used to classify individual energy products. It is proposed to drop the wording “as a proportion of total national expenditure on fossil fuels”.

It is recommended to follow a phased approach, moving gradually from global to national datasets, and to build up better datasets on the categories outlined in Table 1. This should build as much as possible on existing statistical systems. To facilitate the reporting by national governments and the harmonisation with and integration into existing statistical systems, it is recommended to develop practical guidance notes on how to measure and monitor specific types of subsidies in the existing statistical frameworks. The justification for the scope of reporting against the indicator is also included in the below table. Care should be given if a country chooses to aggregate across the three sub-indicators in order to avoid double counting and all three sub-indicators should be publicly available to ensure transparency.

The report has been prepared by the United Nations Environment Programme (UN Environment) in close collaboration with the International Institute for Sustainable Development's (IISD) Global Subsidies Initiative (GSI) and experts from the Organisation for Economic Co-operation and Development (OECD). The process also involved the establishment and convening of an international expert group that provided advice on the methodology and on the operationalization of the methodology.