Comparing Korea’s fossil fuel subsidies through diverse estimates and reform paths

Abstract Despite the international consensus to phase out Fossil Fuel Subsidies (FFS) that hinder energy transition, there is no consensus on how to estimate FFS. By applying different FFS estimation methods used by international organizations (IOs) in Korea, this study confirms that different definitions of FFS and estimation methods can lead to different FFS statuses and reform proposals. It also quantitatively identifies gaps in the current reporting system by comparing re-estimated values based on the definitions of IOs with their own aggregated values. In 2020, the IMF’s estimate of implicit subsidies, including pollution costs, was the largest at approximately $80,710 million, whereas the OECD and UNEP estimates were only approximately 2% of the IMF. The IMF definition is the only one that includes externalities in its subsidy talliles, although all IOs support pollution pricing. The study re-estimated Korea’s FFS in 2020 according to the five organizations’ definitions. The study’s estimates were more than double the estimates from the OECD and UNEP. The OECD inventory omitted the largest estimate, subsidies to fuel consumers, while UNEP didn’t disclose its estimate details, making it difficult to identify the cause of the differences with the study’s estimates. The study’s estimates were calculated in the following order: OECD, WTO, UNEP, and IEA, excluding the IMF, not calculated due to data limitations on Korea’s pollution costs. Firstly, countries should identify their FFS, as defined by the WTO, in preparation for their subsidy notification obligations. For UNEP’s comparable database by 2025, they should also prioritize identifying direct and indirect subsidies and tax subsidies over risk transfers, as defined by UNEP. This review identified coal price stabilization and anthracite power generation subsidies as reform priorities.