— Ch. 1 · Defining The Subsidy Scope —
Fossil fuel subsidies.
~3 min read · Ch. 1 of 6
In 2022, the International Monetary Fund calculated that fossil fuel subsidies reached $1.5 trillion under a narrow definition. A broader calculation including negative externalities like air pollution and climate change pushed that figure to $7 trillion. These numbers represent government actions that lower production costs or reduce prices paid by consumers. Some support comes as tax breaks on natural gas for residential heating. Others appear as tax incentives for oil exploration companies. The scope changes depending on whether analysts count only direct payments or include the cost of burning gasoline and diesel.
Measuring Global Fiscal Costs
The fiscal cost of government support for fossil fuels hit $1.1 trillion in 2023 according to OECD data. Most of this amount relates to consumption rather than production. Residential users received $189 billion in support while manufacturing industries received $103.8 billion. The International Energy Agency estimated global consumption subsidies at $1 trillion in 2022. In 2020, total global subsidies reached $5.9 trillion, which equaled 6.8% of global GDP. Experts project this share will rise to 7.4% by 2025 if current trends continue. Setting prices to reflect true costs could cut global CO2 emissions by 10% by 2030.