The Influence of International Economic Institutions on Fossil Fuel Subsidy Reform

Abstract

International economic institutions, particularly the G20, the OECD and the IMF, have been vocal in advocating reform of fossil fuel subsidies. The question that the paper seeks to answer is how influential the institutions have been in inducing countries to reform their fossil fuel subsidies? Although studies of individual fossil fuel subsidy reforms point to the role of international economic institutions as one factor among many, no overarching study has studied their influence across countries. This gap deserves to be addressed, particularly given the power of these institutions. More specifically, the paper focuses on pathways of influence which go beyond legally binding multilateral agreements. Such influences include learning, ideational change such as socialisation, and commitments which have to be adhered to. Concerning fossil subsidy reform, these pathways may consist of adherence to the (non-binding) G20 commitment, learning about fossil fuel subsidies and the possibilities to reform them, or socialisation into the norm that such subsidies should be reformed. Case studies of the US, India, the UK, Indonesia, Sweden and Denmark showed that ideational change stemming from the G20 and the OECD helped move fossil fuel subsidies up the agenda in industrialised countries, IMF was decisive in one case of Indonesian fossil fuel reform, and that learning processes mattered in terms of workshops organised by the OECD and the World Bank.