If we want to tackle climate change, we need to move away from fossil fuels to low-carbon energy sources. This transition is a lot easier if these cleaner sources are cheaper than fossil fuels.

However, fossil fuels are often subsidized, reducing the short-term economic incentives to switch.

In this article, I explain the scale of fossil fuel subsidies and where these numbers come from.

Because subsidies can be defined in different ways — production, consumption, explicit, implicit — people can quote very different numbers to this question, ranging from hundreds of billions of US dollars to as much as $7 trillion (ten times as much).

How much does the world give to support fossil fuel production and consumption?

Let’s start with explicit subsidies. These follow the classic definition of a subsidy, which is “money that is paid by a government or an organization to reduce the costs of services or of producing goods so that their prices can be kept low.”

In other words, payments to make fossil fuels cheaper.

These payments can either go towards fossil fuel producers so that the extraction and refining cost is lower (called “production subsidies”) or to consumers so they can buy fossil fuels cheaper than the market price (called “consumption subsidies”). Consumption subsidies can include governments selling electricity or gas at more affordable rates, subsidizing gasoline so consumers pay less for gas at the pump, or supporting fuels like kerosene for cooking and heating, which is common in lower-income countries.

Here, I’m going to focus on data for 2022. These are the numbers that are often quoted in discussions because subsidies increased significantly in that year for reasons I’ll explain soon.

Global explicit subsidies for fossil fuels amounted to around $1.5 trillion in 2022. This is a vast sum. For context, that’s equivalent to around 1.5% of the global gross domestic product (GDP) or the entire GDP of countries like Russia or Australia.¹

Most of these explicit subsidies — around 80% — went to consumers. The rest went into fossil fuel production.

Global subsidies ramped up in 2022 because the price of energy spiked due to Russia’s invasion of Ukraine. The chart below shows that consumption subsidies roughly doubled from 2021 to 2022 and fell back to their previous level in 2023.

In 2022, the price of gas increased by as much as 400%. For many consumers, this meant a sudden and large jump in the cost of basic energy services such as heating and electricity. This hit the poorest households hardest, pushing many into “fuel poverty”.

Many countries implemented mechanisms to support consumers, such as putting a price cap on gas and electricity — so that households paid a rate cheaper than the market price — with the government covering the remaining costs. This is what my government — in the United Kingdom — did. Our energy system was particularly vulnerable because our electricity prices are set by gas most of the time.²

Now, this money was going towards subsidizing fossil fuels. It’s clearly a fossil fuel subsidy. But it’s perhaps not quite as “explicit” a subsidy as the name might infer; the focus of governments was to make energy affordable for households and businesses, not specifically fossil fuels. But in the context of the current energy system, it so happened that fossil fuels were driving high prices.

That’s not to undermine their significance — governments have made fossil fuels artificially cheap before and after the recent energy crunch — but rather to highlight the importance of cheap alternatives. Consumption subsidies make energy more affordable, which is especially important for low-income consumers. Taking these subsidies away without cheap and available alternative energy sources would push some households into fuel poverty.

The good news is that low-carbon energy sources, such as solar and wind, and electric vehicles for transport have become much cheaper, which should reduce this dilemma over time. My colleague Max Roser previously wrote about some countries that have successfully reduced fossil fuel subsidies (even though this is often difficult and unpopular).

If anything, the huge spike in energy prices and fossil fuel subsidies in 2022 should give even greater motivation to transition away from fossil fuels to low-carbon sources. It’s the countries that were most reliant on fossil fuels — in particular, gas — that struggled the most. This is because fossil fuel plants rely on a constant supply of fuels, which can vary enormously in price depending on global markets. On the other hand, solar and wind have much lower running costs because the fuels — the sun and wind — are essentially free. A faster transition to clean energy would have shielded countries from these price shocks.

Which countries give the highest subsidies to fossil fuels?

So far, we’ve focused on subsidies at a global level, but there are huge differences between countries.

In the map below, you can see the level of fossil fuel subsidies given per person. This includes production and consumption subsidies, and it is shown for 2021, before the energy crisis.

Unsurprisingly, the countries that give the largest subsidies are large fossil fuel producers. Major oil producers, such as Saudi Arabia, Turkmenistan, Libya, and Algeria, spend more than $500 per person (sometimes over $1,000) to support fossil fuel production. These subsidies can represent more than 10% of GDP.

Countries across Europe, North and South America, and East Asia typically give less than $100 per person, and in Africa and South Asia, it’s even less than $20 — and sometimes close to zero.

The $7 trillion figure includes the social and environmental costs of fossil fuels

You might have heard $7 trillion quoted as the amount of subsidies going towards fossil fuels. That’s more than four times as much as the $1.5 trillion I mentioned at the beginning.

It’s a number that has been widely covered in global media:

• Fossil fuels being subsidised at rate of $13m a minute, says IMF: Oil, gas and coal benefited from $7tn in support in 2022 despite being primary cause of climate crisis — The Guardian
• U.N. chief calls for an end to $7 trillion in fossil fuel subsidies — CNBC
• The world feeds the climate crisis with public money: Fossil fuel subsidies amounted to $7 trillion in 2022 — El País

This $7 trillion figure comes from a report by the International Monetary Fund (IMF). For context, $7 trillion is equivalent to around 7% of global GDP, a huge amount of money.³

This estimate is much higher than the figures we looked at earlier because it includes not only explicit subsidies (i.e., direct payments) but also implicit subsidies — the societal costs of burning fossil fuels. When we burn fossil fuels, we cause local air pollution that damages human health, and we drive climate change, which also results in environmental and social damage. The IMF also attributes to fossil fuels the social costs of road accidents and congestion. Economists usually refer to these indirect costs, which aren’t reflected in market prices, as “externalities” rather than “subsidies”.

The chart below breaks down the $7 trillion figure into its components. The explicit subsidies, shown in purple on the left, amount to the 1.3 trillion (or up to 1.7 trillion, depending on the source) production and consumption subsidies discussed above. But more than three-quarters come from damages — shown in orange and brown on the right — with 60% from air pollution and climate change alone.

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These are certainly huge costs: millions of people die from air pollution caused by fossil fuels alone, and there is a whole academic literature on the social cost of carbon. However, these costs are implicit and, in contrast to the explicit costs, need to be converted into monetary costs by the IMF. This conversion is helpful to arrive at a total size, but it is not straightforward. There is no universal figure for these costs, as they’re sensitive to assumptions about damages from pollution and climate change.⁵

I think it’s important to understand the difference between these explicit and implicit subsidies.

When people hear that global subsidies for fossil fuels come to $7 trillion, they might reasonably assume that all of these are, effectively, explicit payments. And, if governments are handing this money to fossil fuels, they could reallocate that pot to something else (such as low-carbon technologies). In theory, they could do this tomorrow, and we could transition to clean energy very quickly.

The problem is that there isn’t a $7 trillion pot sitting there to be reallocated. There are annual payments of $1.2 to $1.5 trillion, given directly to fossil fuel production and consumption, which could be used elsewhere.⁶ Simply removing these explicit subsidies wouldn’t be enough. To tackle the other $5.7 trillion would require various approaches.

Below, I’ve added a section to the chart we just looked at, giving some examples of interventions we might use for different components. The way to tackle externalities is to put a price on them (for example, a pollution or carbon tax). The aim of these taxes is to make sure that the price reflects the total cost of burning coal, gas, or oil. My colleague, Max Roser, wrote an article on the argument for introducing a carbon price, and my colleague Pablo Rosado and I looked at which countries have done so.

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There is a strong argument for both reducing direct subsidies for fossil fuels and introducing a pollution and carbon price.

However, to see what interventions would help, we need to understand the differences between implicit and explicit subsidies. Bundling them together as a single “subsidy” figure makes it hard to get a clear picture of what’s needed. I hope my breakdown into explicit and implicit subsidies helps to put this into perspective.

Continue reading on Our World in Data

The argument for a carbon price

We are paying a price for fossil fuels, but that price is not paid by those that burn the fossil fuels – we need to change that.

Fossil fuel subsidies: If we want to reduce greenhouse gas emissions we should not pay people to burn fossil fuels

Repealing subsidies is not easy, but it is possible – and the world is slowly making progress in this direction

Hannah Ritchie (2025) - “How much in subsidies do fossil fuels receive?” Published online at OurWorldinData.org. Retrieved from: 'https://ourworldindata.org/how-much-subsidies-fossil-fuels' [Online Resource]

@article{owid-how-much-subsidies-fossil-fuels,
    author = {Hannah Ritchie},
    title = {How much in subsidies do fossil fuels receive?},
    journal = {Our World in Data},
    year = {2025},
    note = {https://ourworldindata.org/how-much-subsidies-fossil-fuels}
}

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