The removal of environmentally harmful subsidies offers the tantalising prospect of a win-win” situation for both the economy and the environment. Yet, despite growing environmental awareness and pressures on government budgets, governments around the world have been reluctant to dismantle perverse subsidies. This chapter therefore attempts to identify the political and economic impediments to subsidy reform in developed economies. Since government policies are ultimately a consequence of political choices, it is necessary to examine the political incentives and motives of policy makers. Accordingly, three main issues are addressed here. First, the reasons as to why otherwise responsible governments support policies that are both economically and environmentally harmful are identified. Second, the tactics used by various groups to influence policy decisions are discussed, providing insights into the reasons why governments shelter some sectors to the detriment of society at large, but not others. Finally, in the light of these political realities, the discussion examines ways of tackling some of these obstacles and impediments to reform.