From fossil fuel subsidies to a just transition: reflections from Santa Marta for Latin America

A new blog by Valeria Urbina and Miguel Lévano, Oxfam in Peru

The urgent need to accelerate the energy transition and reduce global dependence on fossil fuels returned to the forefront of international debate in April 2026. The First International Conference on the Transition Beyond Fossil Fuels was held in Santa Marta, Colombia, bringing together representatives from over 50 countries — including governments, civil society, indigenous peoples, social organisations, Afro-descendant communities, climate activists, academia and the private sector — with a common goal: to define concrete pathways towards sustainable economies.

Far from limiting itself to general statements, the conference sought to identify practical solutions that contribute to the roadmap towards COP30. The discussions were structured around three key pillars: overcoming economic dependence on fossil fuels; transforming both energy supply and demand; and strengthening international cooperation to close gaps in the multilateral system. Together, these pillars reflect a growing conviction: the transition is not only environmental, but also economic, social and political.

One of the most significant—and at the same time most sensitive—issues was the reform of subsidies and tax incentives for fossil fuels. Far from being neutral, these mechanisms continue to play a decisive role in the expansion of the oil and gas industry. Furthermore, they distort energy markets by reducing the competitiveness of renewable energy and delaying the diversification of the energy mix.

Despite the climate commitments made in forums such as the G20 and the Conferences of the Parties, public support for the fossil fuel sector remains significant. The figures are striking: in 2022, subsidies—including externalised costs such as pollution—reached nearly USD 7 trillion (7.1% of global GDP).

Although there has been a reduction in recent years, direct funding to the sector remains high, highlighting the gap between climate commitments and fiscal decisions; whilst 2024 saw a partial reduction, direct fiscal support for the sector still stands at around USD 916 billion.

In Peru, this discussion takes on a particularly critical dimension. Despite the commitment to achieve carbon neutrality by 2050, the country maintains various support mechanisms for the oil sector. Between 2003 and 2025, the State is estimated to have allocated more than S/ 32 billion (approximately USD 9.5 billion) in tax incentives and explicit subsidies to this sector. This level of support not only reinforces dependence on fossil fuels but also limits the availability of public resources for investment in energy transition and sustainable development.

Against this backdrop, Oxfam in Peru, together with Oxfam Colombia and the Working Group on the Impacts of Hydrocarbons, organised the event ‘Fiscal incentives in the oil sector: subsidies, impacts and reforms for a just transition’. The event brought together a diverse range of voices—from indigenous communities to representatives of the business sector and international organisations—to analyse the fiscal, social and environmental costs of the current energy model.

The dialogue highlighted the complexity of the challenge. Indigenous communities emphasized the urgent need to prioritize public investment that promotes well-being and redress for the impacts of extractivism. From an international perspective, it was highlighted how incentives—both direct and indirect—continue to extend even to related sectors, such as certain agricultural inputs derived from hydrocarbons. For its part, the business sector outlined the challenges of transitioning to cleaner energy models. Finally, the Peruvian case highlighted the high fiscal costs associated with this model and the need to rethink its sustainability.

Beyond the analyses, the main value of this meeting lies in the fact that it has opened up a space for dialogue that must continue. Reforming tax incentives for fossil fuels is not merely a technical measure: it is a key policy decision to redirect the use of public resources. Moving towards their phasing out, accompanied by social protection and productive restructuring policies, represents an opportunity to reduce inequalities, strengthen climate resilience and build fairer economies.

The energy transition will not happen automatically. It requires deliberate decisions, consistency between commitments and public policies, and—above all—the ability to align fiscal resources with a sustainable future. The discussions in Santa Marta send a clear message: the path towards phasing out fossil fuels necessarily involves transforming the incentives that still underpin them today.