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This brief, co-authored by SEI researchers, gives the Colombian government recommendations on how to fairly wind down its diesel subsidy.
The Colombian government views phasing out its diesel subsidy as part of its energy transition strategy, proposing investments in carbon-neutral technologies as a replacement. However, the transport sector – the country’s main consumer of diesel – largely considers these plans inadequate and is skeptical about their feasibility.
Subsidies for diesel and gasoline burden the Colombian budget with a significant deficit and threaten Colombia’s fiscal sustainability. In 2022, subsides represented 2.5% of the national GDP. A failed subsidy phase-out could undermine the country’s energy transition efforts, potentially leading to national strikes by the transport sector and eroding trust in the government’s transformation plan.
This brief examines the hurdles for the diesel subsidy phase-out process, with a particular focus on the necessary reforms within the transport sector, skepticism about the government’s energy transition plans and the potential negative effects for state-owned enterprise Ecopetrol.
Researchers offer both short- and medium-term actions the government can take to facilitate a smooth end to the diesel subsidy on the path to a wider and more sustainable energy transformation.
Initiative / The Carbon Lock-In Initiative seeks to uncover and address the barriers that uphold the fossil fuel-based economy.
SEI working paper / Researchers review the power dynamics and distributional politics that shape resistance to phasing out coal and to opportunities for change in Colombia.
SEI report / What diversification strategies do NOGCs use to engage in an energy transition? A view of four South American companies.
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