In our most recent discussion paper Climate Focus proposes to use climate finance mechanisms to support the removal of fossil fuel subsidies in developing countries. Globally, countries spent USD 523 billion on fossil fuel consumption subsidies in 2011, presenting a major barrier for a paradigm shift away from fossil fuels.

Experience has shown that fossil fuel subsides are often economically inefficient, encourage wasteful consumption of resources and fail to meet their intended goal of protecting the poor. They may also act as a major barrier to the effectiveness of climate finance-supported programmes to reduce emissions in the energy sector As momentum for reform increases, climate finance can support the removal of fossil fuel subsidies through a range of policies and programmes that target the least effective subsidies, limit negative effects, provide co-benefits and help consumers adjust their fuel consumption to the new price levels.