The Biggest Fossil Fuel Subsidies Are Indirect, and Bigger Than Ever
Implicit subsidies for fossil fuels — the underpriced costs of their environmental effects — come to 5% of global GDP yet are difficult to rein in.
Workers sort rocks near a coal mine in Datong, China.
Photographer: Noel Celis/AFP/Getty ImagesThe world is headed for a record year of investment in the energy transition. Every new clean electron generated by wind turbines and solar arrays, and each new battery-powered car and hydrogen electrolyzer, will reduce some measure of the fossil fuels consumed on the planet’s roads and grids. More than $1 trillion was spent on the transition last year, and almost certainly will be spent again in 2023.
Big as that figure is, it pales in comparison to another energy-related outlay: subsidies for fossil fuels and electricity. The International Monetary Fund calculated that just over $7 trillion in subsidies went to fossil fuels last year. That is a record for at least the past decade. Since the IMF’s report expresses all figures in 2021 dollars, inflation cannot explain away the increase. In short, the world has never spent this much to subsidize fossil fuels.