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Development Co-operation Report 2024

Tackling Poverty and Inequalities through the Green Transition

image of Development Co-operation Report 2024

Faced with multiple priorities, including the imperative of accelerating the global green transition, development co-operation providers are at risk of losing sight of a silent, yet devastating crisis that has been unfolding even before the COVID-19 pandemic: the alarming increase of poverty and inequalities in low and middle-income countries. And yet, not only are ending poverty and reducing inequalities at the core of their mandates, both are also essential to meeting their broader ambitions in terms of sustainable development worldwide. What opportunities – and risks – is the climate priority posing for the fight against poverty and inequality? Can just, green transitions reinvigorate development agendas? How can international development co-operation policy and finance help? Bringing together the latest evidence, data and insights from governments, academia, international organisations and civil society, the OECD Development Co-operation Report 2024 provides policy makers with concrete ways of delivering on their commitments to improve the lives of billions while fostering green, just transitions around the world.

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Pro-poor fossil fuel subsidy reform

Subsidies and other types of public financial support for fossil fuels are often defended as necessary to ensuring an affordable supply of energy. However, they are a costly and inefficient way to help the poor given that the wealthy who consume the most energy benefit most. This chapter discusses how reforming or eliminating fossil fuel subsidies could free up revenues that could be redirected to poverty reduction and investments in clean energy. It includes examples of successful reforms in countries, including of Argentina, Bangladesh, Sri Lanka and Zambia. Indonesia’s reform compensated households with a cash transfer programme that cost less than the subsidies, and India’s phased reduction of fuel subsidies paralleled a tripling of its public investment in renewable energy. The chapter then examines how to reform fossil fuel subsidies effectively to contribute to a just transition. It concludes with a set of recommendations for development co-operation actors.

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