Political constraints are frustrating fossil fuel tax and subsidy reforms
Based on Paasha Mahdavi, Cesar B. Martinez-Alvarez, and Michael L. Ross. 2022. “Why Do Governments Tax or Subsidize Fossil Fuels?” Journal of Politics.
Long-touted as a climate and fiscal solution, efforts to increase fossil fuel taxes and reduce subsidies are failing - because of the same political constraints that complicate income tax reforms.
The Policy Problem
Governments have long faced pressure to address the climate crisis by increasing taxes on fossil fuels. However, it is difficult to keep track of whether governments have responded to this pressure. Fossil fuel taxes and subsidies are hard to measure and often hidden in complex policy instruments. We overcome this by collecting and analyzing a new measure of gasoline taxes and subsidies in 157 countries.
Key Findings and Proposed Solutions
From 2003 to 2015, taxes and subsidies for transportation fuels showed little change at a global level.
Fuel tax and subsidy reforms are not associated with democratic accountability, elections, leadership turnover, or bureaucratic effectiveness. Reforms instead reflect idiosyncratic, country-specific conditions.
Carbon taxes and fuel pricing policies are taxes first and foremost, with changes driven by fiscal pressures, not environmental policy considerations
Instead of making gasoline and diesel more expensive, it may be easier politically for governments to make green alternatives cheaper.