Implications of Switching Fossil Fuel Subsidies to Solar: A Case Study for the European Union

Fossil fuel subsidies (FFS) constitute one of the most obvious barriers to tackling climate change, as they encourage inefficient energy consumption and divert investment away from clean energy sources. According to the International Monetary Fund, FFS amounted globally to $233 billion in 2014, over four times the value of subsidies awarded to promote renewable energy. In this study an integrated assessment model is used to analyse the CO2 implications in the European Union of eliminating FFS and recycling the revenues to promote rooftop PV. It is found that eliminating FFS would give rise to a small reduction in CO2 due to fuel-switching from coal to gas. If the revenues were recycled to promote solar, then the CO2 reduction would increase from 1.8% to 2.2% by 2030. Eliminating FFS is not a panacea from the mitigation point of view, even if the revenues are recycled, but other important objectives, such as those related to renewable energy promotion and the reduction of air pollution, are advanced at zero cost for the government.