Reallocating fossil-fuel subsidies via social assistance reduces poverty and preserves emissions cuts

Reallocating fossil-fuel subsidies via social assistance reduces poverty and preserves emissions cuts | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Article Reallocating fossil-fuel subsidies via social assistance reduces poverty and preserves emissions cuts Kuishuang Feng, Xiangjie Chen, Laixiang Sun, Daniele Malerba, and 2 more This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-8120375/v1 This work is licensed under a CC BY 4.0 License Status: Posted Version 1 posted You are reading this latest preprint version Abstract Fossil-fuel subsidies are widespread, regressive and environmentally costly, yet abrupt removal can raise poverty. We develop a global social accounting matrix covering 124 countries, 65 sectors and 201 expenditure bins to quantify how phasing out explicit and implicit subsidies affects poverty, inequality, and CO₂ emissions—and how redirecting the fiscal space through existing social protection systems changes these outcomes. Absent compensation, reform lowers emissions but increases poverty, especially for low-income households in emerging economies. Redirecting funds via social assistance shifts benefits to the bottom half and reduces national poverty, particularly under targeted cash transfers or expanded programs where savings are large. However, fully recycling savings can trigger an emissions-rebound that erodes climate gains. We show that retaining roughly 20% of savings and routing the rest through social protection removes the emissions rebound while preserving poverty reduction, resolving the trade-off under both explicit subsidy removal and producer-side phase-out of implicit subsidies. For implicit subsidies, producer-side taxation cuts emissions more than consumer-side measures but at higher distributional cost, underscoring the importance of design. Overall, reallocating subsidies to people rather than to energy prices offers a practical, feasible pathway to decarbonization with social protection, provided energy and social agencies coordinate implementation. Social science/Environmental studies Scientific community and society/Energy and society/Energy policy Social science/Social policy Fossil fuel subsidies Social assistance Poverty alleviation Carbon emissions Income inequality Full Text Additional Declarations There is NO Competing Interest. Supplementary Files Supplementaryinformation.pdf SUPPLEMENTARY INFORMATION Cite Share Download PDF Status: Posted Version 1 posted You are reading this latest preprint version Research Square lets you share your work early, gain feedback from the community, and start making changes to your manuscript prior to peer review in a journal. As a division of Research Square Company, we’re committed to making research communication faster, fairer, and more useful. We do this by developing innovative software and high quality services for the global research community. Our growing team is made up of researchers and industry professionals working together to solve the most critical problems facing scientific publishing. Also discoverable on Platform About Our Team In Review Editorial Policies Advisory Board Help Center Resources Author Services Accessibility API Access RSS feed Manage Cookie Preferences © Research Square 2026 | ISSN 2693-5015 (online) Privacy Policy Terms of Service Do Not Sell My Personal Information {"props":{"pageProps":{"initialData":{"identity":"rs-8120375","acceptedTermsAndConditions":true,"allowDirectSubmit":true,"archivedVersions":[],"articleType":"Article","associatedPublications":[],"authors":[{"id":546759406,"identity":"d8336b03-adbb-45a2-8d75-12d8b05ea12d","order_by":0,"name":"Kuishuang 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