The devil lies in the definition: competing approaches to fossil fuel subsidies at the IMF and the OECD

Abstract

Fossil fuel subsidy reform has in recent years been addressed by international economic organizations including the International Monetary Fund (IMF) and the Organisation for Economic Co-operation and Development (OECD). The two organizations have differed significantly in how they define fossil fuel subsidies. The IMF's definition constitutes a radical break with previous definitions by including environmental externalities, while the OECD's is more conventional. The article explores the factors that explain why these international economic organizations have approached fossil fuel subsidies so differently. The exact definition of fossil fuel subsidies is contested. Furthermore, fossil fuels subsidies can be framed in ways that emphasize, respectively, their macroeconomic, fiscal, environmental, and distributive consequences. The article finds that institutional interaction lifted OECD involvement in fossil fuel subsidies to a new level, whereas the impetus to address fossil fuel subsidies within the IMF came largely from the IMF staff. In both cases, the organization's bureaucracy constituted the most important factor shaping how the organizations addressed such subsidies and hence the main reason why they differ in how they approach fossil fuel subsidies.

The Politics of Fossil Fuel Subsidies and Their Reform

“…Other studies have focused on the interplay between international institutions addressing fossil fuel subsidies. In this regard, Skovgaard (2017) reveals how competing definitions of fossil fuel subsidies within the IMF and the Organisation for Economic Co-operation and Development (OECD) came about. A further question that has been addressed is why some international institutions have not addressed fossil fuel subsidies.…”

“…We identify four broad and interdependent political factors that help explain whether and how international institutions address fossil fuel subsidies. The first factor concerns the role of individual actors within the institutions, be they individual employees or member states seeking to influence the institution's stance on fossil fuel subsidies (see also Skovgaard 2017). Such actors includebut are not limited topolicy entrepreneurs that invest financial, material and reputational resources to bring about policy change (Kingdon 2003: 122-24), as well as norm entrepreneurs articulating and promoting new norms (Finnemore and Sikkink 1998: 896-99), including the norm of fossil fuel subsidy reform.…”

Introduction to the special issue: energy subsidies at the intersection of climate, energy, and trade governance

“…As both Skovgaard (2017b) and Smith and Urpelainen (2017) underscore, other IGOs can play an important complementary role in the governance of energy subsidies, by building a knowledge base on the size and consequences of energy subsidies that is necessary for reform proposal to work, by enhancing transparency around the subsidies adopted by different governments, and by working with those governments as well as other stakeholders to implement energy subsidy reform at the national level.…”

“…In sum, when actors define energy subsidies differently, they construct different policy problems according to their value stance. Skovgaard (2017b) provides an explanation for why the OECD and the IMF employ different definitions of fossil fuel subsidies. He finds that the approaches of both organizations towards the issue of fossil fuel subsidies are not shaped by the differences in membership and voting rules.…”

The politics of fossil fuel subsidies and their reform: Implications for climate change mitigation

“…A mix of domestic political, economic, and social factors underlies fossil fuel subsidies' persistence, as well as chances of their reform (Skovgaard & van Asselt, ). Existing studies on the politics of fossil fuel subsidies and their reform have provided insights into how fossil fuel subsidies are tied up with the domestic political economy of fossil fuel production and consumption (Cheon, Lackner, & Urpelainen, ; Cheon, Urpelainen, & Lackner, ; Inchauste & Victor, ; Overland, ; Victor, ), but also international norms and institutions can promote subsidy reform (Skovgaard, ; Smith & Urpelainen, ; Van de Graaf & Blondeel, ; Van de Graaf & van Asselt, ).…”