ABSTRACT
Several G20 economies have since 2009 committed to phasing out inefficient fossil fuel – coal, oil and gas – subsidies that limit the potential attainment of the sustainable development goals (SDGs). Dealing with climate change means embracing a global decarbonisation agenda. Moreover, for some, this is regardless of the distributional consequences, mainly fossil fuel-producing economies, developed or developing. This chapter analyses how fiscal (tax) arrangements, including producer subsidies, work in the upstream oil and gas industry and the main reasons for their set-up, which include encouraging foreign and domestic investments (fiscal stability). We also discuss the implementation pathways of these systems, like accelerated tax deductions and cost recovery, among others. Lastly, we also discuss the alignments and misalignments of these tax systems vis-à-vis advancing the attainment of the SDGs: particularly SDG 7 (affordable and clean energy), SDG 9 (industry, innovation and infrastructure), SDG 12 (responsible consumption and production), and SDG 13 (climate action). Overall, we find that there is an opportunity to review and better align some of these upstream oil and gas producer subsidies to the attainment of the SDGs, especially in meeting climate goals. However, this is easier said than done as many countries are likely to continue prioritising meeting their energy security needs and thus offer some of these producer subsidies, especially in the wake of exogenous shocks such as the Russian-Ukraine conflict.
