Question:
You are given the full text of a scientific research paper.

    Your task is to generate a structured **policy brief** that includes the following components:

    - A concise, descriptive **title** that captures the central theme or policy issue addressed in the paper (do not label it with “Title:”).
    - **Policy Problem** - What societal or strategic challenge is the paper addressing?
    - **Scientific Research Findings** - What are the key results relevant to this issue?
    - **Scientific Research Study Methods** - What methodology or data supports these findings?
    - **Policy Implications** - How might the findings guide or influence policy?

    Write each section in a clear, accessible style suitable for policymakers. Avoid overly technical language, but use essential terms when necessary. Structure the output as a labeled five-part policy brief document.

    Scientific Research Paper:
    Analysis
https://doi.org/10.1038/s41560-018-0256-3
1Laboratory for Energy and Nanoscience, Khalifa University of Science and Technology, Abu Dhabi, United Arab Emirates. 2Dubai Electricity and Water
Authority, Dubai, United Arab Emirates. 3Arctic Renewable Energy Center (ARC), Department of Physics and Technology, University of Tromsø,
Tromsø, Norway. *e-mail: matteo.chiesa@ku.ac.ae
A
fter decades on the fringes, solar energy has arrived as a
major player in the electricity generation sector. While just
five years ago, conventional wisdom grouped solar with the
impractical and subsidy-dependent ‘alternative’ energy technolo-
gies, today every few months there are announcements of new large-
scale solar projects around the globe promising electricity prices
equal to or lower than what can be achieved with fossil fuels1,2, as
shown in Fig. 1a. While the well-publicized steep learning curve of
photovoltaic (PV) modules3 has played a large role in bringing us to
this point, other factors are now beginning to drive price reductions
as modules have dropped to just over a third of total system prices,
with the remainder represented by inverters, sun trackers (if used)
and other components for balance of system, as well as the cost of
labour and various ‘soft costs’ related to regulation, taxes, developer
expenses and grid connection, accounted for in Fig. 1b based on data
from the United States4,5. Particularly noteworthy and illustrative of
this trend have been a number of announcements of low-priced
utility-scale PV projects from the Middle East, especially the United
Arab Emirates and Saudi Arabia6–9, where power purchase agree-
ment (PPA) auction bids below 3¢ kWh−1 have become the norm.
If sustainable, these cheap projects would represent the achieve-
ment of the US SunShot pricing goals for 203010 more than a decade
ahead of schedule. As these targets represent the expectation that
unsubsidized solar overtakes fossil fuels on cost, this development
would have significant implications for the world’s energy systems. It
would make solar the economic favourite for new-generation capac-
ity, accelerating the transition to a renewable-based energy future.
However, the speed at which prices have fallen has prompted
suspicion that these prices are attained only via hidden government
subsidies; that they are not intended to make money at all but are
a consequence of a ‘race to the bottom’ driven by the PPA auction
model; or are ‘loss leaders’, strategic moves by large forward-look-
ing companies seeking to establish a foothold in a young industry
poised to grow11–13. Despite these concerns, low-priced PV projects
have spread across the world in the intervening two years14–16.
Understanding the extent to which these prices are real, sus-
tainable and reproducible is critical for setting energy strategies to
encourage the continued rapid PV deployment that will be needed
over the next decade and beyond to achieve energy system decar-
bonization at the rate required by climate agreement targets17. In this
analysis, we draw on a range of publicly available data on PV system
costs and performance, along with local knowledge of the region,
with the aim of answering the questions: how did electricity from
PV get so cheap so fast? Can these ultralow prices be sustained and
extended to other markets? And how much lower could they get?
Reasons for the decline in PV electricity prices
The recent trend in solar electricity prices has been much more
aggressive than that of hardware prices due to a number of factors.
One part of the answer is better exploitation of the solar resource—
the world’s sunniest areas are increasingly being developed as PV
projects become less dependent on state subsidies. Other plant opti-
mizations to maximize energy yield have become widely adopted,
including single-axis tracking and high inverter-loading ratios (d.c.
array capacity to a.c. inverter capacity) of ~1.3 for both tracking and
non-tracking systems. These implementations, coupled with fall-
ing hardware prices and tax incentives, were credited with bringing
the levelized cost of solar electricity in sunny regions of the United
States to around 5¢ kWh−1 in 201518.
Even in this context of rapid pricing declines, the arrival of the
United Arab Emirates, and Saudi Arabia soon afterwards, as leaders
in cheap solar electricity surprised observers with the sheer scale of
the price decrease in a region with little historical interest in renew-
able energy. A closer look at the details of these projects begins to
reveal the interplay of global and local conditions that lead to the
observed prices. The projects appear to have realized large reduc-
tions in both capital and operating expenses by leveraging on a
number of factors. These include forward-bidding of expected lower
future hardware prices, which up to this point have been borne
out; low construction and operation and maintenance (O&M)
labour costs that are typical of the Gulf region; scaling up the plants
from the 10–100 MW level that was prevalent until recently to the
gigawatt scale; extended PPA term to 25 years (relative to the then-
standard 20 years18); and favourable financial terms. Moreover,
Evaluating the factors that led to low-priced solar
electricity projects in the Middle East
Harry Apostoleris1, Sgouris Sgouridis   1, Marco Stefancich2 and Matteo Chiesa1,3*
The past few years have seen the rise of large-scale, low-priced solar energy projects around the world. Oil-producing coun-
tries in the Middle East, in particularly the United Arab Emirates and Saudi Arabia, have become unexpected leaders in this
movement with record-low power purchase agreement prices, below 3¢ kWh−1, for a number of new photovoltaic installations,
beating the cost of fossil fuel generation. In this Analysis, we bring together technical, economic and financial information from
global and local sources to study whether these prices can be replicated elsewhere and further reduced. We find that hardware
costs, cost of labour, favourable cost of capital, low taxes and low, but positive, profit margins contribute to the reduction in
costs. Reduced hardware prices contributed the most and also led to further reduction in cost of capital. We demonstrate how
similar costs can be and have been achieved in other markets.
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it appears that developers did not have to account for land costs that
could be around US$5,000 per acre in the United States19. The verti-
cally integrated state-owned utilities are also involved as partners,
expected to take majority ownership of the venture on completion.
As such, they are believed to take on the costs for grid interconnec-
tion and access roads as infrastructure development projects13,20,21.
Project financing packages can be fairly complex but can be
outlined as featuring high debt-to-equity ratios (70–80%), low
interest rates (reported starting values for interest range between
120 and 180 basis points over the London Interbank rate (LIBOR))
and significant opportunities for refinancing over the project life-
time21. The establishment of these terms by the consortium of local
banks that financed Dubai’s 200 MW project in 2015 certainly
provided encouragement for international consortia to offer com-
parable packages for the subsequent, larger projects. In contrast,
utility-scale PV projects being developed at the same time in the
United States could expect debt ratios in the range of 40–60%, with
interest rates of 4–5%, and return on equity expectations around
10%22,23. In Table 1 we list the key financial parameters for the four
record-setting projects in the United Arab Emirates and Saudi
Arabia, as thoroughly as they can be reconstructed from a collec-
tion of public announcements.
The path to 3¢ kWh−1
To investigate the system configurations and cost structures
required to reach 3¢ kWh−1, we first establish a baseline system price
and LCOE breakdown for 2016, just before Dubai’s Mohammed bin
Rashid Al Maktoum (MBR) phase III announcement, based on a
number of sources5,23–26, shown in Fig. 2.
CapEx depends heavily on the price of hardware, which accounts
for the majority of the total installed cost, with construction labour
being the second-largest contributor. CapEx represents about 50%
of the LCOE in the baseline model, with operation and maintenance
(O&M) and financing costs representing the balance. The baseline
financial model assumes a debt fraction of 60% with an interest
rate of 5% and a return on equity of 10%, for a total weighted aver-
age cost of capital of 7%. The CapEx includes a profit margin for
the project developer, while the construction contractor’s profit is
implicitly included in the contractor markup. The LCOE represents
the cost to the project developer of building and operating the sys-
tem, and of satisfying the debt and equity financers of the project
with their required returns, and hence represents a minimum sus-
tainable price for the sale of electricity. The baseline assumptions
are listed in the first column of Table 2.
We subsequently chart a reasonable path to a sub-3¢ kWh−1
LCOE by applying a series of successive cost reductions, each
justified on the basis of a collection of publicly available industry
statistics and local knowledge. The full set of model inputs is listed
in Table 2. The key assumptions are listed below.
Continued future declines in the cost of hardware
Since in this analysis we are actually looking backwards to projec-
tions that were made in 2016, we consider what the project’s hard-
ware cost would be, assuming that the developers guessed future
pricing trends more or less correctly. At the time of the current
writing, both the Dubai and Abu Dhabi projects are in the middle
of their construction timeline, with hardware procurement under-
way. Therefore, we use current prices as a reasonable proxy for the
average cost of hardware for the systems. Additional discussion of
hardware pricing projects can be found in Supplementary Note 1,
Supplementary Table 1 and Supplementary Fig. 1.
Cost of labour is very low due to the connection between labour
markets in the Gulf and the low-cost Indian subcontinent. With
local contractors assuming most construction duties, and reported
wages for construction work and even some skilled trades reported
as less than US$5 h−1 by local sources27,28, we believe that a reduction
in labour costs of 50% relative to the US benchmark in refs 4,25 is a
reasonable and perhaps even a conservative estimate (further details
provided in the Supplementary Note 2 and Supplementary Table 2).
This low cost of labour is also the primary driver of reductions in
a
b
2.5
0
0.5
1.0
1.5
3.5
4.5
2.0
3.0
4.0
5.0
2010
2011
2012
2013
Year
Date
2014
2015
2016
2017
System or component price
(US$ Wdc–1)
Installed system price
Hard cost
Module
South Africa
France
Peru
India
Jordan
Zambia
Brazil
USA
Dubai
Germany
Mexico
Chile
Argentina
Morocco
200
China
Jan. 2010
50
100
150
250
300
350
Jan. 2011
Jan. 2012
Jan. 2013
Jan. 2014
Jan. 2015
Jan. 2016
Jan. 2017
Electricity price (US$ MWh–1)
0
Jan. 2018
Saudi Arabia
Abu Dhabi
Fig. 1 | The reduction of PV system and electricity prices around the world. a, Solar auction history of PPA prices (source: International Renewable Energy
Agency1). b, Module price evolution, hardware price and utility-scale system price—as a bar chart based on ref. 4; numbers for components and total
system price are from ref. 5 (except 2017).
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operation and maintenance costs, which we reduce to US$10,000
MW−1 yr−1, based on local assessments by industry insiders29, esca-
lating over the plant lifetime to US$15,000 to account for increased
service requirements and component replacements.
Financial parameters are based on the public reports summa-
rized in Table 1 and include a debt fraction of 80% and an inter-
est rate of 3.5%, with a return on equity of 10%. Some observers
have speculated that money was essentially given out for free to
the project developers, to achieve headline-grabbing pricing mile-
stones13. Our analysis shows that such extreme assumptions are not
necessary to achieve the reported prices under today’s conditions.
Furthermore, while early projects were financed principally by local
banks, encouraging some doubt as to the model’s global sustainabil-
ity, the growing role of international financial institutions suggests
that confidence in solar energy in the broader financial sector may
be growing to the point where similarly favourable financial terms
may be reached in other markets. In addition, the return on equity
can be maintained at a globally competitive 10%.
Tax treatment
While the baseline includes a 5% sales tax on hardware, the low-
cost model removes this in keeping with the tax-free conditions of
the United Arab Emirates at the time these bids were offered. The
2018 introduction of a 5% value-added tax may add this cost com-
ponent back in future projects. The LCOE model does not include
income taxes, which often will primarily be felt (due to the narrow
profit margins of these projects) through the effective reduction of
the cost of debt, in countries where debt interest payments are tax-
deductible. Hence, the net impact of income taxes is often to reduce
the effective cost of the project.
Overhead and profit margins
The CapEx includes two profit margins: one for the developers,
and one included in the contractor overhead. To estimate the over-
head + profit component for the large plant in the low-cost model,
we extrapolate the assumption that contractor overhead can be
reduced to some degree (in percentage terms) with plant size25.
Table 1 | Financial parameters for low-priced PV projects
MBR phase II
MBR phase III
Sweihan
Sakaka
Developers
ACWA Power
(Saudi Arabia) + TSK (Spain)
Masdar (United Arab Emirates) +
ALJ (Saudi Arabia) + EDF (France)
Marubeni (Japan) + Jinko
Solar (China)
ACWA Power
Date of close
July 2015
June 2017
May 2017
February 2018
Total debt in US$ million
34433,a
65521
65035
260
Debt fraction
86%
70%
75%
80% (estimated)
Debt interest rate (basis
points over LIBOR)
180 (average)
175 (starting)
120 (starting)
Unknown
Debt interest rate
(calculated)
2.6%b
3.6%
2.9%
N/A
PPA price (¢ kWh−1)
5.84
2.99
2.94
2.34
From left: 200 MW phase 2 of Dubai’s MBR solar park; 800 MW phase 3; Abu Dhabi’s 1,177 MW Sweihan solar park; and the inaugural plant of the Sakaka solar park in northern Saudi Arabia. Values are
based on reporting by IJGlobal except where otherwise noted. aSources differ, giving a range of total project costs between US$326 million34 and US$400 million33, with some specifying a 4% debt
interest rate33. The tabulated parameters are those that we judge most likely to be accurate on the basis of some educated guesswork and back-calculation. bFinancing for MBR phase II was provided
by a consortium of local banks. Subsequent projects were funded by international consortia, dominated by institutions from the developing partners’ home countries but including institutions from
other countries.
EPC hard
Construction labour
Permitting
Sales tax
Land and prep.
Contingency
EPC soft
Grid tie
1.0
0
0.2
0.4
0.6
1.4
0.8
1.2
1.6
2.0
a
b
System price (US$ W–1)
LCOE (×10–2 US$ kWh–1)
1.8
Hardware (via EPC contractor)
Construction labour
(via EPC contractor)
Construction, developer-borne
Debt service
Sales tax
EPC (markup)
Operation
Return on equity
5
0
1
2
3
7
4
6
8
Developer profit
Fig. 2 | Bottom-up model for PV costs. a,b, Capital expenditures in
−
S
U $ Wa c. .
1  (a) and levelized cost of electricity in US$ kWh−1 (b) in the baseline model
of a 100 MW plant with a 20-year PPA, based on 2016 market data for component costs, free of income tax and incentives. Cost components are
summarized and attributed in Table 1.
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The developer profit margin is typically low4, and can be reduced
further for a large project. As a further justification of our scaling
assumptions, we note that in several of these projects, the developer
either scaled up the plant to achieve the target price, or offered to
build a larger plant at a lower PPA price, giving some indication of
the gains that developers see in economies of scale. The assumption
of fairly slim profit margins can be justified by their large size as
well as by the fact that these are ‘trophy’ projects in a hot emerging
market that will form a cornerstone of their developers’ reputation.
However it is worth noting that we assume profit margins that are
slim, not negative—we do not see a reason to consider these proj-
ects as ‘loss leaders’ that sell below cost purely for the sake of estab-
lishing their developer in the market.
Implementing the full set of assumptions laid out in the second
column of Table 2, we find that LCOE below 3¢ kWh−1 is achieved
naturally without further manipulation as shown in Fig. 3. This
reduction is driven by the combined impact of low cost of financ-
ing and reduced capital expenditures, shown in Fig. 4. We note that
there is the possibility of relaxing some of the assumptions while
still achieving the price target. For example, we could remove the
assumption that the utility bears the costs of interconnection, which
has never been publicly confirmed, and still reach the target price;
or, we could account for the fact that PV hardware may in general be
subjected to some form of import duties (say 5% applicable to half
of the CapEx, which would boost the LCOE to 2.91¢ kWh−1 in our
model). If, on the other hand, we are to tighten these assumptions,
the 2.34¢ kWh−1 price of the Sakaka project can be reproduced, as
described in Supplementary Note 3 and Supplementary Fig. 3.
Discussion, outlook and lessons
We have shown here that, at least up to the level of about 3¢ kWh−1,
recently observed low solar electricity prices can be profitably real-
ized under reasonable assumptions for the region. The key ques-
tions remaining are whether these conditions are sustainable, and
how these low prices may be replicated in other markets.
The contribution of declining hardware prices, while not
solely responsible for the record bids, is nonetheless important. It is
therefore worthwhile to comment briefly on how sustainable the
current situation of declining module prices specifically seems to
be, although a deep study is beyond the scope of this analysis. We
point, by way of reassurance, to the recent decision in China to roll
back some support for its solar industry, which appears to have actu-
ally caused module prices to decline further due to falling domestic
demand (see more in Supplementary Discussion). Therefore, fears
of a sudden spike in module prices that would threaten near-term
investment in PV capacity seem, for now, unlikely to materialize.
There seem to be two areas where direct actions by government
have made a significant difference. The first is in the removal of
some indirect costs, which may be criticized as not applicable to
other markets. As a counterargument, we note the recent spate of
sub-3¢ kWh−1 PPAs in the southwestern United States, which seem
to have achieved many of the same savings by building along the
transmission infrastructure of soon-to-be decommissioned coal-
fired plants. Solar projects in the United States do not claim to be
unsubsidized, as they benefit from the 30% income tax credit; how-
ever, at least one project, outside of Las Vegas, NV, appears to come
in just below the 3¢ kWh−1 line even when the impact of the tax
credit is removed16. It is also worth noting that these projects will
be subject to the recent 30% tariff on imported modules, suggest-
ing that this move (probably mitigated by the continually falling
module prices) is having limited impact on PV development in the
United States. The second area is in the encouragement of favourable
financing deals for developers, which involves both the involvement
of state-connected companies and banks in the projects, and (more
widely applicable) the clear commitment of the government to
long-term renewable energy development, which certainly creates
a sense of stability in the industry. The low PPAs in the United
States suggest that the financing environment in the United States
has reached a similar level of favourability to solar that is found in
the Gulf, since—as we have shown—low-cost financing with high
debt fractions is an essential ingredient of low PPA prices. However,
another hotspot for low PPA prices has been Chile14, where PV proj-
ects can benefit first of all from the world’s best solar resource in
the Atacama Desert30,31, but where the financial environment is seen
to be less stable. This may have been mitigated in the latest round
of bidding by the prominence of the Saudi project developer ALJ,
which has won a number of projects across South America, and
can reasonably be speculated to have eased the financial aspect via
access to more freely flowing Gulf capital.
Conclusions
The rapid pace of development of solar energy, especially with
regard to pricing, can make it difficult to keep up with the true state
of the industry. Separating reality from hype requires a hard look
at the most aggressive claims in terms of costs, risks and returns—
the factors that really matter to developers, banks, and providers
and consumers of electricity. Solar costs vary widely by region,
and fully explaining this variation requires an understanding of
local conditions, which we have sought to provide as context for
the recent record-low solar electricity prices and bids in the United
Arab Emirates and Saudi Arabia, and their subsequent extensions to
Table 2 | Model inputs for low-cost PV project reconstruction
Baseline
3 ¢ kWh−1 in the
United Arab Emirates
Module cost (
−
S
W
U $
d c. .
1 )
0.6424
0.28a
Inverter cost (
−
S
U $ Wa c. .
1 )
0.12
0.084
Tracker + BOS cost
(
−
S
W
U $
d c. .
1 )
0.26
0.22 (−15% from
201836)
Sales tax (%)
5
0
Construction labour cost
(
−
S
W
U $
d c. .
1 )
0.16
0.07 (50% of
benchmark 20174)
EPC markup (%)
825
5b
Land (US$ per acre)
5,00019
0
Land prep. (US$ per acre)
10,00019
10,000
Environmental permitting
(US$)
250,00025
0
Interconnection cost
(
−
S
W
U $
d c. .
1 )
0.0325
0
Transmission line (US$)
6,000,00025
0 (borne by utility)
Contingency (%)
3
3
Developer margin (%)
1
0.5
Operation cost
(US$ MW−1 yr−1)
20,000, linear
escalation to 25,000
over 20 years18
10,000−15,000 over
25 years
Debt fraction (%)
6023
80
Debt interest (%)
523
3.5
Return on equity (%)
1023
10
PPA term (years)
2018,37
25
Y1 yield (
−
Wh MW
G
a c. .
1 )
2.836
2.836
CapEx (
−
S
W
U $
a c. .
1 )
1.93
0.95
LCOE (¢ kWh−1)
7.38
2.85
Cost figures from ref. 24 unless otherwise noted. BoS, balance of system. EPC, engineering–
procurement–construction. aPVInsights module spot price, 25 June 2018. bMarked down by
extrapolating the model of ref. 25.
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Analysis
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other regions. We have demonstrated here that unsubsidized prices
below 3¢ kWh−1 are attainable when the right combination of local
conditions is realized, and that the minimum for solar prices should
be expected to continue dropping (with some slowing expected as
interest rates rise) with hardware costs, barring some significant
change in the financial sector’s perception of solar’s profitability.
While certain costs do seem to have been mitigated in the case of the
Gulf projects, which could be argued to be a subsidy, the success of
projects in other regions at achieving comparable savings indicates
that these costs can be significantly reduced by skilful engineer-
ing, without state intervention. We wish to emphasize that govern-
ment policy remains an important element to remove barriers to
PV deployment, chief among which is the need for access to cheap
financing. As global interest rates are expected to rise, it becomes
more critical for solar projects to be able to prove themselves as low
risk to achieve favourable financing packages. The clear commit-
ment to renewable energy as state policy (as well as the involvement
of large public or semi-public companies in the development of PV
projects) was certainly a factor in providing the necessary degree
of confidence that allowed banks to overcome their historical aver-
sion to renewable energy projects32 and begin lending at low rates
in the Gulf. Such a mentality of strategic energy planning, whereby
governments intervene not to subsidize but merely to enable and
encourage investment in technologies that are believed to be of
value to the society, is an essential element of low electricity prices
and may provide guidance regarding how to continue the spread of
low solar prices into other markets.
Methods
Bottom-up cost and performance modelling. In the investigation of recent low-
priced PV bids and PPAs, public announcements regarding, for example, financing
terms, provide a window into some of the mechanisms by which these projects
probably achieved their low prices. However, significant uncertainty remains, not
the least of which surrounds the actual costs of these projects, for which there
are conflicting reports21,33,34. Furthermore this ‘top-down’ look gives little insight
into the relative impact of different cost-cutting mechanisms, and therefore
provides little grounding for assessing whether these prices can be transferred to
other markets; and as many of the details are proprietary, it would in fact not be
feasible to attempt an exact reconstruction of any particular project. To circumvent
this challenge, we adopted a bottom-up modelling approach, quantifying cost
components based on a range of industry reports and analysis to build up a model
of how these prices could be achieved under realistic global and local conditions.
5
0
1
2
3
7
4
LCOE (×10–2 US$ kWh–1)
6
8
Hardware
(via EPC contractor)
Construction labor
(via EPC contractor)
Construction,
developer-borne
Debt service
Sales tax
EPC (markup)
Operation
Return on equity
Baseline
7.38 ¢ kWh–1
Scale up
7.02 ¢ kWh–1
Extend PPA
term 6.51 ¢ kWh–1
Reduce hardware
prices 4.50 ¢ kWh–1
Reduce construction
labour cost 4.10 ¢ kWh–1
Reduce O&M
3.72 ¢ kWh–1
Lower cost of
financing 3.12 ¢ kWh–1
Land, tax, fees
2.85 ¢ kWh–1
Fig. 3 | Modelled LCOE for a sample plant under Abu Dhabi’s weather conditions. Sales tax of 5% applies to hardware cost; EPC markup covers overhead
and profit for the construction firm; developer-borne construction expenses include permitting and land costs.
1.0
0
0.2
0.4
0.6
1.4
0.8
1.2
1.6
2.0
1.8
Baseline
US$1.93 W
a.c.–1
100-->800MW
US$1.82 W
a.c.–1
Reduce
hardware cost
US$1.18 W
a.c.–1
Construction labour
cost reduction
US$1.05 W
a.c.–1
Remove
sales tax
US$1.01 W
a.c.–1
Free land
US$0.99 W
a.c.–1
Permitting fees
US$0.94 W
a.c.–1
EPC hard
Permitting
Construction labour
Contingency
Land and prep.
EPC soft
Sales tax
Grid tie
Developer profit
Module tariff
System price (US$ W–1)
Fig. 4 | Modelled CapEx for a sample plant based on assumed costs for UAE large-scale solar. For large-scale projects, hardware represents the bulk of
CapEx, followed by labour.
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Analysis
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This allows us to look at the relative impact of the many factors that contribute to
the ultimate cost of producing electricity. Performance modelling was performed
in System Advisor Model (SAM) for a plant designed to match the known
specifications of Dubai’s MBR solar park, phase 3, the first of the sub-3¢ kWh−1
projects. The ‘baseline’ model scaled down the MBR model to 100MWac while
retaining the same assumptions about hardware costs. LCOE was calculated in a
spreadsheet (available on request) as:
 =
+ ∑
∑
=
+
=
+
C
LCOE
i
N
O
r
i
N
E
r
1 (1
)
1 (1
)
i
i
i
i
using the annual energy yield calculated by SAM and discounting by the weighted
average cost of capital. Performance modelling of the UAE plant (3¢ kWh−1)
uses International Weather for Energy Calculations weather data for Abu Dhabi;
modelling for Sakaka (see Supplementary Note 1) used Photovoltaic Geographical
Information System weather data (http://re.jrc.ec.europa.eu/pvgis/, retrieved June
2018) for Al Jouf airport (coordinates 23.694° N, 40.088° E, a few kilometres from
the solar park site). The model was implemented in SAM 2014.1.14, based on
the known or presumed specifications of Dubai’s MBR phase 3, including large
(310 Wp) CS6X modules from Canadian Solar, 5000 W inverters from GE, an
inverter loading ratio of 1.3 and single-axis tracking.
Data availability
The data that support the plots within this paper and other findings of this study
are available from the corresponding author upon reasonable request.
Received: 6 March 2018; Accepted: 29 August 2018;
Published online: 8 October 2018
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Acknowledgements
We note the valuable contribution of our colleagues with whom we have discussed this
work, in particular I. Almansouri and A. Tuomiranta. We thank M. Kissamitaki for
designing the figures.
Author contributions
M.C. conceived and proposed this analysis, which was further elaborated in collaboration
with S.S. and H.A. H.A. carried out the analysis and drafted the manuscript in consultation
with M.C. and M.S. S.S. provided insights into the financial aspects of the projects and
M.S. provided a utility company perspective on the project development process.
Competing interests
The authors declare no competing interests.
Additional information
Supplementary information is available for this paper at https://doi.org/10.1038/
s41560-018-0256-3.
Reprints and permissions information is available at www.nature.com/reprints.
Correspondence and requests for materials should be addressed to M.C.
Publisher’s note: Springer Nature remains neutral with regard to jurisdictional claims in
published maps and institutional affiliations.
© The Author(s), under exclusive licence to Springer Nature Limited 2018
Nature Energy | VOL 3 | DECEMBER 2018 | 1109–1114 | www.nature.com/natureenergy
1114

    Policy Brief:

Answer:
**Utility solar prices will continue to drop all over the world even without subsidies**

**Policy Problem**Many countries have adopted incentive policies to encourage solar energy development. Examples include solar feed-in tariffs common in Europe and the 30% income tax credit for solar installations in the US. In recent years, however, Middle Eastern countries with no official solar incentive programmes have become world leaders in developing low-priced photovoltaic power plants. For example, the United Arab Emirates became the first country to realize unsubsidized solar electricity for less than 3¢ kWh–1. The sudden appearance of ultra-cheap solar energy in these countries led to speculation whether these prices are real, resulting from sustainable market developments, or the result of hidden subsidies or a speculative bubble. Resolving this speculation is critical for developing future utility solar power policy.

**Scientific Research Findings**We performed a detailed cost breakdown of large-scale solar energy projects in the United Arab Emirates. Many factors contributed to the low price, but two stand out as having the most impact: the plummeting cost of solar panels and the reduced costs of financing. Solar panel prices have fallen by a factor of 6 since the beginning of this decade. The cost of building a solar power plant is now similar to the cost of other technologies. The cost of solar panels represents only one-third of the total construction costs. We found that solar power projects were financed by large loans covering 70–80% of the project costs, with low interest rates. The project developers were often large, state-connected companies, meaning that the projects were implicitly underwritten by the national government. It seems that these companies may have been willing to accept a somewhat lower return on their investment than purely private developers. However, we showed that these projects are still profitable when all of the costs are accounted for. It is important to note that our work attempts to reconstruct these projects based on publicly available information, and does not utilize proprietary information from the project developers themselves; the study should not be considered the authoritative opinion on exactly how any particular project achieved its results, but rather a general and transparent analysis on how a project could achieve a particular electricity price, given a set of local conditions that are more or less known.

**Scientific Research Study Methods**We developed a model to break down the levelized cost of electricity (that is, the total cost to the plant operator of producing one kilowatthour of electricity) into many different contributions related to hardware costs, installation labour, financing, site preparation and maintenance. This allowed us to estimate costs from the bottom up and evaluate the impact of different assumptions about cost components. We considered specific trends independently, such as recent reductions in the price of solar panels, or regional variations in labour costs and debt interest rates. We compiled data from various public sources, including annual analyses by the US National Renewable Energy Laboratory and other national laboratories, industry reports, local studies of installation, operation and maintenance costs and practices in the region, and press releases describing the financial packages offered to several low-priced photovoltaic projects in the United Arab Emirates and Saudi Arabia.

**Policy Implications**• Electricity from photovoltaics is cheaper than electricity from fossil fuels in sunny regions, when the right financial conditions are met.
• Reducing the cost of financing is the key to the widespread implementation of low-cost, large-scale solar energy projects.
• When financial costs are low, well-designed solar energy projects will pay for themselves: the revenues from selling electricity at market price are enough to pay off the initial investment.
• Governments can support renewable energy development without subsidies, through direct investments, risk mitigation or low-interest loans to solar energy projects.
• Local authorities should identify ways to reduce soft costs for project developers, and allow construction of solar projects close to existing access roads and electrical transmission infrastructure.


Question:
You are given the full text of a scientific research paper.

    Your task is to generate a structured **policy brief** that includes the following components:

    - A concise, descriptive **title** that captures the central theme or policy issue addressed in the paper (do not label it with “Title:”).
    - **Policy Problem** - What societal or strategic challenge is the paper addressing?
    - **Scientific Research Findings** - What are the key results relevant to this issue?
    - **Scientific Research Study Methods** - What methodology or data supports these findings?
    - **Policy Implications** - How might the findings guide or influence policy?

    Write each section in a clear, accessible style suitable for policymakers. Avoid overly technical language, but use essential terms when necessary. Structure the output as a labeled five-part policy brief document.

    Scientific Research Paper:
    Nature Climate Change
nature climate change
https://doi.org/10.1038/s41558-025-02283-4
Analysis
Fossil fuel subsidy reforms have become
more fragile

Paasha Mahdavi
  1
, Michael L. Ross
  2
 & Evelyn Simoni2
Since the mid-2010s, many governments have pledged to reduce their
subsidies for fossil fuels. Yet, it is unclear whether these reforms have been
implemented, with prior studies showing conflicting results. Here we collect
original monthly data on the 21 countries with the largest gasoline subsidies
in the 2003–2015 period and evaluate their reform efforts from 2016 to
2023. Since 2016, there has been an increase in the frequency and ambition
of subsidy reforms but a drop in their durability: just 30% of the reforms
survived for 12 months, and only 9% survived for 36 months. Subsidies rose
for 12 countries in our sample and were virtually unchanged in the other
9. This pattern calls into question the effectiveness of recent strategies for
reducing fossil fuel subsidies.
One of the most cost-effective ways to reduce carbon emissions is by
eliminating fossil fuel subsidies1,2. These subsidies boost the consump-
tion of fossil fuels and, hence, slow the transition to renewable energy3;
increase road traffic, air pollution and road fatalities, all of which dam-
age public health4,5; and can have a crippling impact on government
revenues6.
Yet, they are also difficult to abolish. Many intergovernmental
organizations—including the World Bank, the International Monetary
Fund (IMF) and the International Energy Agency—have urged gov-
ernments to eliminate these subsidies. At the 2021 United Nations
Climate Change Conference (COP26) in Glasgow, Scotland, govern-
ments pledged to phase down ‘inefficient fossil fuel subsidies’. But
political leaders are often wary of reform, realizing that higher fuel
prices are unpopular and could lead to protests that could threaten
their government7,8.
In the early 2010s, international organizations stepped up their
advocacy work for fossil fuel subsidy reform, sponsoring new initia-
tives, reports and conferences9. The IMF began to emphasize subsidy
reform in its policy recommendations10. Subsidy reforms were directly
incorporated into the Sustainable Development Goals (SDG 12.c) in
September 2015, and 15 countries included fossil fuel subsidy reforms
in their Intended Nationally Determined Contributions for the Decem-
ber 2015 Paris conference11. It is unclear whether these initiatives led
to a reduction in subsidies. One study found that, from 2015 to 2020,
41 countries reformed consumer fossil fuel subsidies12; yet, according
to the International Energy Agency, from 2015 to 2022 these subsidies
rose from US$183 billion to US$343 billion (ref. 13).
The reform of fossil fuel subsidies is difficult to study in part
because they are hard to measure. In many countries, subsidies rise
and fall over time owing to a mixture of market forces and government
policies that can be hard to disentangle. Governments often provide
unreliable information about their own policies: they may announce
reforms but fail to implement them or, conversely, adopt reforms
quietly in an effort to avoid protests.
To better measure government policy reforms, we adopt a novel
approach. Like other scholars, we focus on consumer subsidies for
gasoline, which can be calculated using the widely accepted price gap
method14. We begin by calculating the average implicit gasoline tax or
subsidy for all countries from 2003 to 2015, using the Ross–Hazlett–
Mahdavi dataset15. We then take as our sample those countries that,
on average, were net subsidizers during this 13-year period. These 21
countries account for 97% of all gasoline subsidies in the 2003–2015
period. They constitute a ‘most likely’ sample: if progress has been
made since 2016 in subsidy reform, we are most likely to find sub-
stantial reforms in these 21 countries. Although they are all fossil fuel
exporters, they vary widely in economic and social development.
They also represent many locations across the Global South, including
Sub-Saharan Africa, Latin America, the Middle East, Southeast Asia
and the Caspian Basin (Table 1).
We then leverage a valuable feature common to these 21 countries.
All of them used government mandates to set fuel prices and kept them
fixed for months or years at a time. Hence, whenever the government
raised the nominal per-litre price by at least 10%—effectively reducing
the subsidy for their citizens—we code it as a reform. We also measure a
Received: 24 September 2024
Accepted: 18 February 2025
Published online: xx xx xxxx
 Check for updates
1Department of Political Science, Bren School of Environmental Science and Management (by courtesy), University of California, Santa Barbara, CA, USA.
2Department of Political Science, University of California, Los Angeles, CA, USA.
 e-mail: paasha@ucsb.edu; mlross@polisci.ucla.edu

Nature Climate Change
Analysis
https://doi.org/10.1038/s41558-025-02283-4
Our study makes three contributions to research on climate policy
and politics.
First, it documents the remarkable frequency with which fossil fuel
subsidy reforms have failed. The 21 countries in our sample enacted
132 reforms during the 2000–2023 period. All but nine of them (6.8%)
eventually failed. We disaggregated these failures by type and period
to better understand the obstacles to reform.
Second, our study helps to resolve conflicting interpretations of
the recent trend in fossil fuel subsidies. Some studies describe pro-
gress in rolling back fossil fuel subsidies18, while others show that the
total value of these subsidies has increased over the same period5,13.
Our analysis resolves this paradox by demonstrating that the rising
frequency of reforms after 2015 was offset by a commensurate decline
in reform duration.
Finally, our study sheds light on the disappointing record of sub-
sidy reforms, especially since 2016. By December 2023, no country
in our sample had considerably lower subsidies than in January 2016.
We are cautious about extrapolating our finding that there has been
little net progress to other types of climate policy: fuel subsidies are
exceptionally hard for governments to change, especially in oil- and
gas-producing countries. We believe that our findings should cause
policy advocates to look for new strategies that could make fossil fuel
subsidy reform more durable and, hence, more effective.
Results
We track two varieties of subsidy reform. The most common type is
price reform, which we define as an increase in the nominal price of
gasoline by 10% or more in local currency units in a single month. For
robustness, we also track an alternative measure that indicates a nomi-
nal increase of 25% or more over 3 months (Extended Data Fig. 5). Price
reform ends (or ‘fails’) if the subsidy returns to its pre-reform level,
which can happen through two mechanisms: the government may
explicitly reverse the price increase, a process we call backtracking;
or the government may maintain the post-reform price, but its value
disappears through inflation, a falling exchange rate or rising global
oil prices. We refer to the latter process as erosion.
The second type is fixity reform, which occurs when a government
stops using fixed prices and subsidies altogether, allowing gasoline
prices to fluctuate in response to changing oil prices for at least three
consecutive months. A fixity reform can fail in two ways: if the govern-
ment reimposes fixed prices for three or more consecutive months; or if
the government interferes with the market price to restore a substantial
subsidy (which we define as a subsidy exceeding 20 cents per litre in
constant 2015 US dollars) for three consecutive months.
Incidence of reform
From 2000 to 2015, the countries in our sample adopted an average of
0.24 reforms per year per country; from 2016 to 2023, the reform rate
rose to 0.38 per year, an increase of more than 50% (Table 2). There were
more reforms in 2015 and in 2016 than in any other year.
second type of reform, when a government transitions from fixed prices
to floating, unsubsidized, market-based prices. We refer to increases in
the fixed price as price reforms and shifts from fixed to floating prices
as fixity reforms. Because earlier studies suggest that many reforms are
transitory16, we measure both the initiation of reforms and their dura-
tion. To measure changes, we compare the frequency and duration of
reforms from the January 2000 to December 2015 period, leading up
to the 2015 Paris conference, with the January 2016 to December 2023
period following the end of the conference. While the final text of the
Paris Agreement did not mention subsidy reform, the December 2015
conference was a landmark in the global effort to promote climate
policies17 and provides a useful cut point for our analysis. Our core
results are similar if we use December 2014 instead (Extended Data
Fig. 6). They are also unchanged if we drop any country in our sample
(Extended Data Figs. 7 and 8).
We have three broad findings.
First, since 2016 there has been a notable increase in the frequency
of reforms. From 2000 to 2015, the countries in our sample collectively
initiated an average of 0.24 price reforms per country year; from 2016
to 2023, they initiated about 0.38 reforms per country year, a 58%
increase. There was also a sharp rise in fixity reforms, which we regard
as more ambitious than price reforms.
Second, reforms were already fragile in the pre-2016 period, and
grew even more fragile after 2015. From 2000 to 2015, only 45% of all
subsidy reforms survived at least 12 months and only 22% survived for
36 months; from 2016 to 2023, 30% survived for 12 months and only 9%
lasted 36 months. Ambitious reforms were especially fragile.
Finally, subsidies per litre of gasoline rose substantially in 12 coun-
tries in our sample and changed little in the other 9. On average, the
value of the per-litre subsidy in our sample rose 65.1% over these 8 years,
equivalent to an annual increase of 6.5%.
Table 1 | Changes in net taxes from 2016 to 2023
Taxes Q1–2016
Taxes Q4–2023
Difference
Angola
0.52
−0.30
0.82
Iran
−0.07
−0.55
0.48
Indonesia
0.13
−0.24
0.37
Sudan
0.42
0.07
0.36
Iraq
−0.02
−0.31
0.30
Libya
−0.29
−0.56
0.27
Malaysia
0.01
−0.24
0.26
Egypt
−0.07
−0.30
0.23
Algeria
−0.13
−0.33
0.20
Bahrain
−0.11
−0.29
0.19
Azerbaijan
0.04
−0.13
0.17
Kuwait
−0.20
−0.37
0.17
Qatar
−0.04
−0.13
0.09
Oman
−0.06
−0.12
0.06
Nigeria
0.06
0.01
0.05
Ecuador
−0.05
−0.09
0.04
Trinidad and Tobago
0.08
0.10
−0.02
United Arab Emirates
0.03
0.06
−0.03
Myanmar
0.05
0.10
−0.05
Saudi Arabia
−0.16
−0.10
−0.06
Average level of tax for the first quarter of 2016 and the final quarter of 2023, in real US
dollars per litre. Negative values reflect subsidies; positive values reflect taxes. The difference
shows the increase in the subsidy over this period (conversely, the decline in the tax). Note:
Venezuela is excluded due to the unavailability of reliable exchange rate data in IMF records
from 2018 onwards.
Table 2 | Summary statistics of reform onset and durability
2000–2015
2016–2023
Rate of price reform onset (per country per year)
0.22
0.25
Rate of fixity reform onset (per country per year)
0.02
0.13
Reforms lasting at least 12 months (% of total
reforms in the period)
44.74
30.36
Reforms lasting at least 36 months (% of total
reforms in the period)
22.37
8.93
Failure rate from backsliding (% of total reforms
in the period)
0.09
0.34
Failure rate from erosion (% of total reforms in
the period)
0.87
0.55

Nature Climate Change
Analysis
https://doi.org/10.1038/s41558-025-02283-4
Duration of reform
Subsidy reforms tend to be short-lived, and reforms failed more
quickly after 2016. From 2000 to 2015, 45% of all reforms survived
for 12 months, and 22% survived for at least 36 months; from 2016 to
2023, only 30% survived for 12 months, and 9% survived for at least
36 months (Fig. 1).
Depth of reform
Over the full 2000–2023 period, 80% of all reforms were price reforms
and 20% were fixity reforms. This ratio changed over time. From 2000 to
2015, we found an average of just 0.024 new fixity reforms per country
year. From 2016 to 2023, however, they occurred at a rate of 0.13 new
reforms per country year, a fivefold increase. Fixity reforms accounted
for most of the overall rise in the frequency of reforms after Paris.
The advantages of fixity reforms are self-evident: floating prices are
not automatically eroded by inflation, currency depreciation or global
oil shocks. In theory, fixity reforms should be more durable than price
reforms. In practice, governments found it politically difficult to allow
prices to float, especially when world oil prices rose too far. As a result, fix-
ity reforms were no more durable than price reforms. While fixity reforms
were more likely than price reforms to survive in their first year, they were
less likely to survive after 12 months. The mean duration of price reforms
was 1.8 years, while the mean duration of fixity reforms was 1.5 years.
By December 2023, when our data end, three countries still had
floating prices in place: Myanmar, which is the poorest country in our
sample; United Arab Emirates, which is the second wealthiest; and
Nigeria, which falls near the middle. We discuss these cases below.
Sources of failure
Erosion was the most common source of failure during the 2000–2023
period, bringing about the end of 47% of reforms within the first year
and 61% within 3 years. Backtracking brought about the end of 14% of
all reforms in the first year and 19% within 3 years.
0
5
10
0
01 02 03 04 05 06 07 08 09 10
11
12 13 14 15 16
17
18 19 20 21 22 23
Pre-2016 − fixity
Pre-2016 − price
Post-2016 − fixity
Post-2016 − price
a   Reform onsets, 2000–2023
0
5
10
15
0
01 02 03 04 05 06 07 08 09 10
11
12 13 14 15 16
17
18 19 20 21 22 23
Pre-2016 − fixity
Pre-2016 − price
Post-2016 − fixity
Post-2016 − price
b    Reform failures, 2000–2023
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
0
1
2
3
4
5
Years since reform onset
Survival probability
Pre-2016
Post-2016
c    Duration of reforms, pre/post-2016
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
0
1
2
3
4
5
Years since reform onset
Survival probability
Price reform
Fixity reform
d    Duration of price and fixity reforms
Fig. 1 | Incidence and duration of fuel subsidy reforms, 2000–2023. a, Change
over time in the onset of price and fixity subsidy reforms, summed across all
countries in a given year. b, Change over time in the failure of price and fixity
reforms, summed across all countries in a given year. c, Kaplan–Meier survival
rate of all subsidy reforms before (dashed orange) and after (solid blue)
December 2015. d, Kaplan–Meier survival rate of fixity (solid blue) and price
(dashed orange) subsidy reforms.
0
0.0001
0.0002
0.0003
2003 2005 2007 2009 2011
2013
2015
2017
2019
2021 2023
Backsliding
Erosion
Fig. 2 | Reform failure due to backsliding or erosion. Overlapping density plots
for backsliding and erosion over the 2000–2023 period, with the y axis showing
kernel density estimates. Backsliding refers to reversions of the nominal price to
the pre-reform nominal price. Erosion refers to reversions of the real price to pre-
reform real prices due to inflation, currency depreciation or global oil price change.

Nature Climate Change
Analysis
https://doi.org/10.1038/s41558-025-02283-4
After 2016, backtracking became more common. In the 2000–2015
period, just 9.6% of all reform failures were caused by backtracking;
after 2016, it rose to 38% of all failures (Fig. 2).
Subsidy level trends
Per-litre gasoline subsidies rose (or taxes fell) in 12 of the 21 countries
from the beginning of 2016 to December 2023. In the remaining nine,
there was little change (Table 1).
Figure 3 shows the trajectories of each country’s gasoline tax
or subsidy per litre for the full 2000–2023 period, along with the
unweighted mean. The distance above or below the horizontal line at
0.0 represents the size of the tax or subsidy. The parallel fluctuations
across the sample reflect the prevalence of price fixity, such that move-
ments are primarily due to global oil price shifts. Subsidies increased
gradually in almost all countries from 2000 to 2008. Since then, they
have fluctuated but generally remained large, except for brief periods
in 2008–2009, 2014–2015 and 2020.
Discussion
Our study finds that since 2016 there has been a rise in number of gaso-
line subsidy reforms but a decline in their durability. As a result, from
the beginning of 2016 to the end of 2023, per-litre subsidies grew for
12 countries in our sample and changed little in the other 9.
We also document a sharp rise around 2015 in fixity reforms, which
have the potential to be more far reaching and sustainable. These fixity
reforms, however, have been just as fragile as price reforms.
Despite their ambition, when push came to shove—sometimes
quite literally in the form of protests—leaders chose to restore subsi-
dies. This occurred most often through the erosion of price reforms
by devaluation or inflation, but also through backsliding that returned
prices to pre-reform levels in the face of public opposition. The price
shock that followed the Russian invasion of Ukraine was particularly
damaging, causing the reversal of fixity reforms in all but one case.
For advocates of fossil fuel subsidy reform, our results are sober-
ing. Several studies report a broad campaign to encourage fossil fuel
subsidy reforms in the mid-2010s, thanks to initiatives backed by
the Organisation for Economic Co-operation and Development, the
International Energy Agency, the World Bank, the IMF and the United
National Environmental Programme, and ultimately articulated in
section 12.c of the Sustainable Development Goals10,11. Yet, our findings
suggest that these initiatives generated little progress towards remov-
ing gasoline subsidies in the countries where reforms were needed.
The poor reform records of these 21 countries should not be entirely
surprising when taking politics into account. Recent research suggests
that fuel subsidies remain popular in many countries, where citizens
generally want to see them raised, not reduced19; that when citizens learn
that their government is providing them with large gasoline subsidies,
they tend to view the government more favourably20; that when subsidies
are removed, citizens often rise in protest7; and that successful reforms
tend to be idiosyncratic and largely driven by local, country-specific
factors16,21,22. Citizens are less likely to oppose subsidy reform if they are
given credible promises of increased public spending on health, labour
and other social outcomes23,24, yet this credibility can itself be fragile.
Although fiscally irresponsible and economically damaging, fuel
subsidies continue to have political advantages for leaders. According
to the theory of the ‘rentier state’, when undemocratic governments are
equipped with revenue derived from oil wealth-constituting ‘rents’ for
state coffers, they distribute these rents in exchange for public support
for the regime25,26. This stands in contrast with governments that lack
resource wealth and are compelled to recognize the democratic rights
of citizens in order to collect revenues from taxes.
In the early 2000s, fossil fuel subsidies became a common way for
governments to distribute oil wealth, especially when governments
lacked the administrative capacity to effectively deliver public goods
such as schools, health care and public infrastructure27. Subsidies tend
to benefit middle- and upper-class car-owning urbanites who are often a
critical source of government support28,29. Experimental evidence finds
support for tenets of this theory, demonstrating that wealthy citizens
perceive higher levels of government performance when they receive
larger fuel subsidies20.
We see two possible explanations for the simultaneous increase
in the frequency and drop in the durability of reforms since 2016. The
first is the volatility of oil prices, which can drive cycles of reform and
backsliding: falling prices can lower the barriers to reform, while rising
prices, if passed on to consumers, can ignite protests. But this expla-
nation does not fit with the evidence: oil prices were more volatile in
the 2000–2015 period than in 2016–2023 (Extended Data Fig. 9 and
Extended Data Table 1).
The other explanation is political: an increase in global pressure
for price reform may have caused governments in the Global South to
reluctantly initiate reform, even when domestic support was lacking.
This could bring about a rise in the incidence of short-lived reforms,
ended by government backsliding2. This explanation is consistent with
our finding that backsliding became much more common after 2015.
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Fig. 3 | Gasoline taxes and subsidies, 2000–2023. The grey lines represent
a given country’s per-litre tax or subsidy on regular unleaded gasoline in
constant 2015 dollars. The red line represents the unweighted mean value across
countries. The sample includes all countries that maintained net subsidies from
January 2003 to December 2015. The vertical green line shows the timing of the
Paris meeting in December 2015.

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There were only three exceptions to the overall pattern of reform
failure. None of them, however, offers a straightforward model for other
countries: the United Arab Emirates has maintained fixity reforms, but
the burden of higher gasoline prices largely falls on non-citizens, who
outnumber citizens 9 to 1; Myanmar has maintained fixity reforms dur-
ing a crippling civil war and trade sanctions, while offering subsidized
gasoline to military-aligned companies30; and since May 2023, Nigeria
has adopted a mixed system of reforms and subsidies that has created
nationwide fuel shortages31,32.
Our findings underscore the extraordinary challenge of fossil fuel
subsidy reform. We see two plausible policy responses.
The first would be for advocates to redouble their efforts, look-
ing for novel strategies to build public support and guard reforms
against pressures created by inflation, currency devaluation and oil
price fluctuations.
The second would be to look for less unpopular ways to reduce
the cost of subsidies. Market pricing may be the first-best solution,
but it is often politically out of reach. Alternatively, governments
could adopt policies that reduce the demand for subsidized fuel,
for example, with regulatory measures to improve fuel efficiency,
promote electric vehicles and invest in public transit. If successful,
pro-renewables policy mixes could reduce emissions33 while foster-
ing new coalitions of political support that could ward off future
political setbacks34,35.
Online content
Any methods, additional references, Nature Portfolio reporting sum-
maries, source data, extended data, supplementary information,
acknowledgements, peer review information; details of author contri-
butions and competing interests; and statements of data and code avail-
ability are available at https://doi.org/10.1038/s41558-025-02283-4.
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Methods
Measurement of fuel subsidies
Most research on fossil fuel subsidies is concerned with estimating the
damages they cause and the benefits of subsidy reform1,2,36. Our study
builds on two smaller bodies of positive research.
The first is made up of cross-national quantitative studies of gaso-
line taxes and subsidies—the most readily measured type of fossil fuel
subsidy. In general, these studies demonstrate that gasoline taxes
and subsidies are closely associated with slowly changing economic
factors, especially income per capita and fossil fuel wealth. The role of
politics is more uncertain: some studies find a link between fuel taxes
and political institutions29,37,38, whereas others do not39.
These studies have important limitations: they only cover the
period until 2015 or 2016; they look simultaneously at taxes and subsi-
dies, and generally make no distinction between the political challenges
of raising taxes and the political challenges of removing subsidies; and
they cannot make strong claims about causal effects.
The second set consists of qualitative case studies, which offer
in-depth analyses of specific instances of reform12,21,22,40. While their
emphases vary, in general they suggest that success is more likely to
follow a well-designed communications strategy, targeted compen-
sation for affected communities and a gradual, phased approach to
implementation2. One advantage of these studies is their capacity to
cover many types of fossil fuel subsidies and describe more subtle,
context-specific influences. Their disadvantages include a tendency to
focus on cases of success (that is, selection on the dependent variable)
and less attention to the durability of reforms.
Our analysis has several innovations. It is the first quantitative
analysis to cover the post-Paris period, allowing us to provide an
upper-bound estimate of Paris’s effects; it measures both the inci-
dence of reforms and their duration; it distinguishes between price
reforms and fixity reforms, charting the growing popularity (but lim-
ited success) of the latter; and it offers a more detailed analysis of how
reforms fail.
Measurement approach
Most countries tax the consumption of fossil fuels rather than sub-
sidize it. Among those that subsidize, some target their subsidies
towards low-income, vulnerable populations and use them for rela-
tively brief periods; others subsidize most or all of their citizens over
many years. Our study is concerned with the latter group of countries,
which are typically the focus of international efforts to reduce fossil
fuel subsidies.
We follow convention and define a subsidy as the difference
between the price paid by consumers and the cost of bringing the fuel
to market14. To measure the size of these subsidies, we use the price
gap method, which compares the observed retail price of a fuel in each
country with a global benchmark price, which represents the supply
cost. Anytime the retail price falls below the benchmark price (for exam-
ple, the cost of supplying the fuel), it denotes a subsidy for that period.
To identify the countries that were net subsidizers in the pre Paris
era, we use the ref. 15 dataset of monthly gasoline taxes and subsidies,
which covers 157 countries. We include in the sample all countries
whose median gasoline price for the 2003–2015 period was below
the median benchmark for the same period, meaning they were net
subsidizers during this initial period. This yields 22 countries, one of
which (Yemen) we drop due to missing data in the period after its civil
war began.
Data and sample
We used a combination of government documents, oil and gas industry
reporting, and media reports to extend the original 2000–2015 data to
December 2023 for our sample. Data are missing for 173 of the 8,568
country-months owing to periods of political disruption for Myanmar
and Venezuela.
The countries in our sample are located in different regions—Latin
America, the Middle East, North Africa, Central Asia, Sub-Saharan Africa
and Southeast Asia—yet share two important characteristics: they are
exporters of oil or fossil gas; and they tend to set fuel prices by govern-
ment fiat, protecting them from global price fluctuations. The use of
fixed gasoline prices creates a link between the global oil price and the
size of the subsidy: when global prices rise, so do the benefits accruing
to local consumers who continue to enjoy the fixed price and, hence,
are receiving a larger per-unit subsidy.
Subsidy reforms
We analyse two varieties of subsidy reform. The most common type is
price reform, when a country raises the nominal price by 10% or more in
local currency units in a single month. For robustness, we use an alter-
native measure of price reform, when governments raise the nominal
price by 25% or more over a 3-month period. Among the 21 countries
in our sample, all but one (Oman) initiated at least one episode of price
reform between 2000 and 2023. Three countries (Iran, Sudan and
Angola) had ten or more price reforms (Extended Data Fig. 3 and 4).
Price reform ends (or fails) if the subsidy returns to its pre-
reform level, which can happen through two mechanisms: the gov-
ernment may lower the nominal price to its pre-reform level, the
process we call backtracking; or the government may maintain the
post-reform price, but its value disappears through inflation, a fall-
ing exchange rate or rising global oil prices. We refer to the latter
process as erosion.
The second type is fixity reform, which occurs when a government
stops using fixed prices and subsidies altogether, allowing gasoline
prices to fluctuate in response to changing oil prices for at least three
consecutive months. A fixity reform can fail in two ways: the ‘fixity’
component can fail if the government reimposes fixed prices for three
or more consecutive months; or the ‘no subsidies’ component can
fail if the government interferes with the market price to restore a
substantial subsidy (which we define as a subsidy exceeding 20 cents
per litre in constant 2015 US dollars for three consecutive months).
All 21 countries had government-fixed gasoline prices for most of the
2000–2023 period, but ten of them shifted one or more times to float-
ing prices (Extended Data Fig. 2).
In Extended Data Fig. 1, we illustrate our measures using the case
of Nigeria.
Data availability
The fossil fuel subsidy data supporting the findings of this study are
available via the Harvard DataVerse at https://dataverse.harvard.edu/
dataset.xhtml?persistentId=doi:10.7910/DVN/80JO6T.
Code availability
The code to replicate all findings of this study is available via Code
Ocean at https://doi.org/10.24433/CO.8539725.v1.
References
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Implications (International Monetary Fund, 2013).

Nature Climate Change
Analysis
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Acknowledgements
We thank J. Cameron for her valuable research assistance.
We received helpful feedback following presentations at
the University of California Santa Barbara, the University of
California Berkeley, the University of Notre Dame, the US Agency
for International Development, the 2023 annual meeting
of the American Political Science Association and the 2023
meeting of the International Political Science Association in
Buenos Aires.
Author contributions
P.M. and M.L.R. conceptualized the study and oversaw data
collection. E.S. performed the data analysis and interpretation of the
results. M.L.R. led the manuscript writing. All authors contributed
equally to reviewing and editing the manuscript and approved the
final version.
Competing interests
The authors declare no competing interests.
Additional information
Extended data is available for this paper at
https://doi.org/10.1038/s41558-025-02283-4.
Correspondence and requests for materials should be addressed to
Paasha Mahdavi or Michael L. Ross.
Peer review information Nature Climate Change thanks
Federica Genovese, Jakob Skovgaard and Thijs Van de Graaf for their
contribution to the peer review of this work.
Reprints and permissions information is available at
www.nature.com/reprints.

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Extended Data Fig. 1 | Combined figures of the case of Nigeria. Panels a, b, and
c show the price paid by consumers over time. a, The price in current Nigerian
Naira. b, The price denominated in current US dollars, which reveals the effects
of changes in the value of the currency. c, The price in constant 2015 US dollars,
which accounts for the additional effects of inflation. d, The value of the per-liter
implicit tax or subsidy measured with the price-gap method. e, The onset of
price reforms. f, The periods of fixity reform for which Nigeria implemented
floating prices.

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Extended Data Fig. 2 | Periods of Fixity Reform.

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Extended Data Fig. 3 | Increases of Monthly Prices Above 10 percent.

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Extended Data Fig. 4 | Increases of Quarterly Prices Above 25 percent.

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Extended Data Fig. 5 | Survival Estimates for Price Reform 25 percent, 2000-2015 vs 2016-2023.

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Extended Data Fig. 6 | Sensitivity Analysis: Kaplan-Meier survival rate of all subsidy reforms before (dashed orange) and after (solid blue) December 2014.

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Extended Data Fig. 7 | Leave Out Analysis. Pre and Post 2016.
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Years since Reform Onset
Survival Probability
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Post Paris
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Years since Reform Onset
Survival Probability
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Post Paris
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Years since Reform Onset
Survival Probability
Pre Paris
Post Paris

Nature Climate Change
Analysis
https://doi.org/10.1038/s41558-025-02283-4
Extended Data Fig. 8 | Leave Out Analysis. Fixity versus Price Reforms.
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Years since Reform Onset
Survival Probability
Price Reform
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Years since Reform Onset
Survival Probability
Price Reform
Fixity Reform
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Years since Reform Onset
Survival Probability
Price Reform
Fixity Reform
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Years since Reform Onset
Survival Probability
Price Reform
Fixity Reform
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Years since Reform Onset
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Price Reform
Fixity Reform
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Years since Reform Onset
Survival Probability
Price Reform
Fixity Reform
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Years since Reform Onset
Survival Probability
Price Reform
Fixity Reform
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Years since Reform Onset
Survival Probability
Price Reform
Fixity Reform
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Years since Reform Onset
Survival Probability
Price Reform
Fixity Reform
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Years since Reform Onset
Survival Probability
Price Reform
Fixity Reform
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Years since Reform Onset
Survival Probability
Price Reform
Fixity Reform
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Years since Reform Onset
Survival Probability
Price Reform
Fixity Reform
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Years since Reform Onset
Survival Probability
Price Reform
Fixity Reform
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Years since Reform Onset
Survival Probability
Price Reform
Fixity Reform
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Years since Reform Onset
Survival Probability
Price Reform
Fixity Reform
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Years since Reform Onset
Survival Probability
Price Reform
Fixity Reform
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Years since Reform Onset
Survival Probability
Price Reform
Fixity Reform
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Years since Reform Onset
Survival Probability
Price Reform
Fixity Reform
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Years since Reform Onset
Survival Probability
Price Reform
Fixity Reform
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Years since Reform Onset
Survival Probability
Price Reform
Fixity Reform
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1.0
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Years since Reform Onset
Survival Probability
Price Reform
Fixity Reform

Nature Climate Change
Analysis
https://doi.org/10.1038/s41558-025-02283-4
Extended Data Fig. 9 | Daily oil price volatility, 2000-2023. Data from the U.S. Energy Information Administration: ‘Europe Brent Spot Price FOB’.

Nature Climate Change
Analysis
https://doi.org/10.1038/s41558-025-02283-4
Extended Data Table 1 | Comparison of Oil Volatility in 2000-2015 versus 2016-2023

    Policy Brief:

Answer:
**Government efforts to reduce fossil fuel subsidies have failed at a very high rate**

**Policy Problem**Many governments subsidize the consumption of fossil fuels, a practice that drains government funds, boosts road traffic and air pollution, and damages public health. Most importantly, it slows the transition to renewable energy and increases carbon emissions. International organizations have long encouraged governments to eliminate these subsidies, leading to the incorporation of subsidy reform in the United Nations Sustainable Development Goals and proposed commitments in the Paris Agreement of 2015. Many governments have heeded the call and adopted reforms since the mid-2010s. While questions have been raised about the effectiveness of these reforms, they have not been comprehensively evaluated.

**Scientific Research Findings**We find that since 2016, and in comparison to the 2000–2015 period, there has been a rise in the frequency and ambition of subsidy reforms but a drop in their durability: 70% of all reforms failed in the first year, and 91% failed within 3 years. The size of subsidies rose for 12 countries in our sample and were virtually unchanged for the other 9. One-third of all failures were caused by explicit policy reversals, often in response to popular protests; for the other two-thirds, the reforms were erased by inflation, currency depreciation and rising oil prices. The most ambitious reforms were the most likely to fail. We do not know if other types of climate policy are also failing, but note that fuel subsidies are highly visible to citizens and their removal is often unpopular. Our findings imply that efforts to trim gasoline subsidies have largely been unsuccessful.

**Scientific Research Study Methods**Our sample consists of monthly gasoline prices from 2000 to 2023 of the 21 countries that maintained substantial gasoline subsidies during the pre-2015 period. Together, they accounted for 97% of all gasoline subsidies between 2003 and 2015. All were oil and gas producers. We collected new data on their gasoline prices by using government documents, industry records and media reports. We then applied the price-gap method to calculate monthly subsidies from January 2016 to December 2023. This enabled us to identify both price reforms, meaning one-time increases in the local gasoline price, and fixity reforms, meaning a shift from fixed prices set by the government to floating, market-based prices. We tabulated both the incidence of reforms in each country and how long each reform lasted. If it failed, we recorded the reasons why.

**Policy Implications**• While fossil fuel subsidies are harmful, efforts to remove them fail more than 90% of the time. Low-cost fuel is popular and hard to change.
• Reforms are only beneficial if they endure. While price reforms are fragile, other kinds of policies — such as investments in clean transportation and support for electric vehicles — are more durable.
• Since subsidies are politically difficult to remove, governments should concentrate their efforts on the most damaging types of fuel, especially coal.
• Governments should look for alternative ways to reduce the demand for subsidized fuel, for example, by using regulatory measures to enhance fuel efficiency, investing in public transit and promoting electric vehicles.