Do countries around the world subsidize fossil fuels?

Wednesday, August 3, 2022
By Jacob Alabab-Moser

Countries in every region of the world subsidize fossil fuels.

According to the International Monetary Fund, global spending on fossil fuel subsidies amounted to $5.9 trillion in 2020—equivalent to 6.8% of global GDP. Explicit subsidies such as subsidizing producers and undercharging for supply costs accounted for approximately $500 billion of this. The rest is attributed to implicit subsidies such as undercharging for environmental costs and general consumption taxes.

In dollar amount, the U.S. ranked second in fossil fuel subsidies ($662 billion) behind China ($2.2 trillion). Australia, Venezuela and many countries in the Middle East and North Africa that have large domestic fossil fuel industries also have high rates of fossil fuel subsidization.

Leading international fora like the G7 and G20 groups of nations have called for ending inefficient fossil-fuel subsidies. Globally, subsidies have been declining in recent years, though they remain in place in various countries as a result of several factors, including lobbying and concerns about the potential impacts of removing subsidies on consumers, especially the poor.

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