According to an IMF report, fossil fuel subsidies worldwide -- which total $1.9 trillion (post-tax including negative externalizes) or 8% of total government revenues -- have been proven to encourage excessive energy consumption and discourage use and investment of renewable energy. These consequences could be reduced by measure including: energy sector reform, increased transparency about subsidy budgets and sizes, price increases to compensate for externalities, increased efficiency within state-owned businesses, greater equity measures to help poor classes, and tools like automatic pricing that depoliticize energy pricing. If fossil fuel subsidies were removed, we could see a 13% drop in CO2 emissions coupled with a reduced world demand for energy.
"On a "pre-tax" basis, subsidies for petroleum products, electricity, natural gas, and coal reached $480 billion in 2011 (0.7 percent of global GDP or 2 percent of total government revenues). The cost of subsidies is especially acute in oil exporters, which account for about two-thirds of the total. On a 'post-tax' basis - which also factors in the negative externalities from energy consumption - subsidies are much higher at $1.9 trillion (2½ percent of global GDP or 8 percent of total government revenues). The advanced economies account for about 40 percent of the global post-tax total, while oil exporters account for about one-third. Removing these subsidies could lead to a 13 percent decline in CO2 emissions and generate positive spillover effects by reducing global energy demand."
International Monetary Fund. "Energy Subsidy Reform: Lessons and Implications". 28 January 2013. Web. 30 May 2013. http://www.imf.org/external/np/pp/eng/2013/012813.pdf