Fossil Fuel Subsidies Explained: Concepts and trends
Amounting to more than USD 900 billion at last count, fossil fuel subsidies have a significant impact on the global energy landscape, but what exactly are they, and what do the latest trends tell us?
What Are Fossil Fuel Subsidies?
Fossil fuel subsidies can take many forms, including direct budget transfers, tax breaks, retail prices held artificially below cost, and preferential finance or regulated tariffs for enterprises that do not reflect full production costs. While each measure differs in design, the effect is the same: fossil fuels are mostly priced below their real costs.
Most fossil fuel subsidies globally are directed at consumers, usually in the form of price support, including efforts to shield citizens from price shocks. Fossil fuel producers also receive subsidies, typically to encourage exploration and development of fossil fuels, while fostering more private investment in the sector. General services refer to a third type of subsidies that cannot be categorized solely under consumer or producer support. These represent the cost of policy measures that create enabling conditions for the fossil fuel sector through the development of private or public services, institutions, and infrastructure.
How Do Fossil Fuel Subsidies Impact Global Energy Systems?
Fossil fuel subsidies can distort markets, encourage overconsumption, and lock countries into fossil fuel dependence. By artificially lowering the price of fossil fuels and diverting public money away from other renewable investment opportunities, these measures can make it more difficult for clean energy to compete.
Many consumption subsidies, while often well intentioned, are untargeted, meaning that every household—wealthy and low-income—receives the same benefit. In practice, this means that wealthier households, who tend to consume the highest levels of energy, disproportionately benefit, exacerbating socio-economic inequalities.
While producer subsidies and subsidies for general infrastructure comprise a smaller portion of total expenditure, they lock in higher production and emissions and divert critical public and private resources away from cleaner sources of energy.
These measures divert much-needed public money away from other priorities, such as clean energy investment, and expose economies to global fuel price volatility, undermining the energy security they are often meant to protect.
What Are the Latest Global Trends in Subsidizing Fossil Fuels?
The 2026 energy crisis is causing massive supply disruptions for gas and oil, pushing up global prices. Countries have responded by putting in place new support measures, including price caps and tax concessions for consumption. Official data for 2026 will not be available for some time, but some organizations are tracking government commitments in real time.
Fossil fuel subsidies tend to follow oil prices. With costs hitting an average of USD 95.6 per barrel in March 2026, caused by geopolitical escalation in the Middle East, subsidies for fossil fuels are at a real risk of rising again as governments impose new measures to shield consumers from price shocks.
The previous energy crisis in 2022 resulted in record-high subsidies of USD 1.76 trillion. The latest official data from 2024 shows fossil fuel subsidies declined across all fuels to USD 921 billion, experiencing an overall decrease of 48% from this peak.
Petroleum overtook natural gas to become the largest recipient of subsidies in 2024, valued at USD 403.5 billion. Subsidies for petroleum and natural gas are likely to increase in 2026 due to the conflict between the United States and Iran. End-use electricity subsidies dropped by around 20% to USD 216 billion in 2024. Meanwhile, subsidies for coal, while decreasing, stayed above USD 40 billion. For a detailed data set, visit the Fossil Fuel Subsidy Tracker.
How Do We Collect Global Fossil Fuel Subsidy Data?
The Fossil Fuel Subsidy Tracker (FFST) incorporates estimates of fossil fuel subsidies and other support measures for 192 economies. It is updated once a year as the latest data from source organizations becomes available. The estimates are gathered from three international databases: the Organisation for Economic Co-operation and Development (OECD) Inventory of Support Measures for Fossil Fuels, the International Energy Agency (IEA) Energy Subsidies Database, and the International Monetary Fund (IMF) Fossil Fuel Subsidies Database. Estimates from the three organizations are based on different and complementary methodological approaches: the OECD uses a "bottom up" inventory of policy measures, while the IEA and IMF use a "top down" price gap approach.
Due to the omission of the United States’ fossil fuel subsidy data from OECD records, the FFST utilizes IMF estimates to complete the global estimate.
Learn more about how the Fossil Fuel Subsidy Tracker, as well as how the OECD, IEA, and IMF collect fossil fuel subsidy data here: Methodology - Fossil Fuel Subsidies.
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