Switching subsides from kerosene to off-grid solar would benefit the millions of Indian households that suffer frequent blackouts or that cannot afford grid electricity. A range of off-grid solar products is now cheaper than kerosene over the lifespan of the technology.

This issue brief takes a detailed look at why such a large share of coal power is struggling today and the drivers—including subsidies—that may cause similar crises to rear their heads in future.

The Goods and Services Tax (GST) has increased the cost of solar photovoltaic (PV) power generation by almost 6 per cent and reduced the cost of coal thermal power generation by 1.6 per cent. The absolute size of the subsidy to coal power generation remains INR 7,685 crore (USD 1.1 billion) higher than for solar PV in 2018.

Energy subsidies and tax revenues, investments by state-owned enterprises (SOEs) and credit support can either undermine or encourage sustainable development and decarbonisation. In 2009, G20 governments committed to end government support to fossil fuels through a number of reform pledges.

In 2015, under the United Nations Framework Convention on Climate Change’s Paris Agreement, governments committed to keeping global temperature increases to 2°C and to pursue efforts towards a more ambitious 1.5°C target.

Often people assume that fossil fuel subsidies help the poor by making energy more affordable. In fact, most fossil fuel subsidies are not working well for energy access and poverty goals. The annual fossil fuel subsidy expenditure of USD 425 billion could be better invested by governments towards SDG outcomes.

The United Nations Conference on Sustainable Development (UNCSD) in June 2012—commonly referred to as Rio+20—left many perplexed. If a number of advances were made, the results fell well short of what is needed to redirect the global economy onto a sustainable course.

The debate on the costs and benefits of governments’ support to biofuels development has gained considerable momentum, especially in light of fiscal austerity measures and the “food versus fuel” debate associated with the impacts of biofuels expansion on agricultural markets.