Global Fossil Energy Subsidies Remain High, According To Several Surveys

A series of recent surveys of global fossil fuel subsidies, including from world-class financial institutions such as the International Monetary Fund, climate agencies and independent think tanks, have found surprisingly consistent results: global subsidies to fossil fuels remain high, especially in developed countries.

According to the latest IMF analysis, coal, oil and gas were subsidized globally to the tune of $5.9 trillion in 2020, or $11 million per minute. Of this, only 8% are explicit subsidies, while the remaining 92% are implicit subsidies, mainly tax breaks.

The IMF found that five countries, including the US, India and Japan, account for two-thirds of fossil fuel subsidies. Underpricing has also led to overconsumption of fossil fuels, with data showing that 47% of natural gas and 99% of coal are priced at less than half their true cost.

According to the International Energy Agency (IEA), subsidies for fossil fuels are a way of "artificially lowering prices" and encourage excessive consumption of high-carbon fuels, with negative environmental and health impacts that cost the equivalent of $2.6tn - $8.1tn.

Between 2010 and 2020, electricity produced by fossil fuels collectively received nearly 75 per cent of all subsidies, according to the IEA. Fossil fuel subsidies fell to a 10-year low in 2020 as the COVID-19 pandemic reduced fuel demand and triggered a collapse in oil prices, but in 2021 the epidemic eased, demand picked up again and, combined with insufficient supply, fossil fuel subsidies rose 142% for the year from 2020.

Similarly, a study by the Business Nature Alliance and climate group B Team found that despite pledges to accelerate emissions reductions, subsidies supporting polluting industries such as coal, oil and gas are conservatively estimated at at least $1.8 trillion a year, or 2% of global GDP.

The alliance for Business Nature said the continued high subsidies for fossil fuels ran counter to the promise of mitigating the climate crisis.

Mike Coffin, a senior analyst at the Carbon Tracker Initiative, an international think-tank, stressed that developed countries should lead the way in subsidising fossil fuels.

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