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Paris/Nairobi, May 2002 - Subsidies that encourage the production and use of fossil fuels are usually bad for the environment. They can also be very costly, placing heavy burdens on government finances, undermining investment in the energy sector and reducing incentives to use energy efficiently. What's more, they often bring few benefits to the people for whom they are intended. Reforming energy subsidies must, therefore, be a central plank of government efforts to promote sustainable energy systems.

This important new report from United Nations Environment Programme (UNEP), produced in collaboration with the International Energy Agency (IEA), summarises in non-technical language the central issues related to energy subsidies and key messages for policymakers looking to reform subsidy programmes. In most cases, the main goal should by to eliminate or, at least, cut back subsidies. But they may make sense in some cases, especially where they are aimed at encouraging more sustainable energy use. Examples include temporary support for new renewable and energy-efficient technologies to overcome market barriers, and measures to improve poor or rural households' access to modern, commercial forms of energy. The report considers how to go about reforming subsidies and sets out guiding principles for designing subsidy programmes where they are justified.

Many countries have already taken great strides in abolishing the most ineffective and costly subsidies. Much more needs to be done, especially in developing countries where subsidies on electricity and other forms of energy are still pervasive and where hostility to subsidy reform from special interest groups often deters politicians from taking action. This report, by raising awareness among all stakeholders of the potential benefits of reform and by highlighting best-practice approaches, should contribute to a better understanding of the public policy challenges that lie ahead.

For further information and to obtain copies of the report contact:

Martina Otto

Energy Programme

United Nations Environment Programme

Division of Technology, Industry and Economics / Energy & OzonAction Unit

Tour Mirabeau, 39-43, quai André Citroen, 75739 Paris Cedex 15, France

Tel: (33.1) / Fax: (33.1) / E-mail:

UNEP Information Note: 2002/14