The paradox of fossil fuel subsidies in emerging economies: Assessing their impact on environmental sustainability, energy equity, and energy security with a structural break

The three pillars of the energy trilemma (ET) framework are frequently at odds when fossil fuel subsidies (FFSs) remain intact in emerging economies. Although intended to enhance energy availability, these subsidies can lead to a paradoxical relationship with environmental sustainability, energy equity, and energy security. However, empirical evidence that examines these trade-offs remains limited. To comprehend this, the present study investigates the impact of FFSs on the ET—environmental sustainability, energy equity, and energy security indicators—across 12 emerging economies from 2011 to 2021 using robust econometric methods such as Panel Corrected Standard Errors (PCSE), Feasible Generalized Least Squares (FGLS), and Method of Moments Quantile Regression (MMQR). The empirical results show that FFSs contribute to higher greenhouse gas emissions and carbon intensity, undermining environmental sustainability. Results also reveal that FFSs enhance access to electricity at lower quantiles. However, the estimates become insignificant at higher quantiles. Additionally, FFSs negatively influence energy security by reducing the overall share of electricity from low-carbon and hydropower energy sources. This is attributed to market distortion, geographical differences, technological challenges, financial constraints, and inefficient policy frameworks, which further exacerbate the negative impacts of FFSs. Moreover, higher amounts of FFSs encourage overconsumption of conventional energy sources. On the contrary, solar and wind energy sectors exhibit resilience, emphasizing the significance of sector-specific incentives, targeted policies, and technological advancements. Thus, there is an urgent need for phased and strategic subsidy reform, combined with targeted social protection and technology-specific incentives to ensure equitable energy transition and boost sustainability. • Fossil fuel subsidies (FFSs) increase GHG emissions, harming sustainability. • Lower levels of FFSs are associated with improvements in electricity access. • FFSs reduce low-carbon and hydropower shares, weakening energy security. • Solar and wind energy remain resilient despite FFS-related market distortions. • Phased and targeted subsidy reforms support equitable, sustainable transition.