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Fossil Fuel Subsidies $500B to $1T Globally, Reports Say

The latest estimates from several sources indicate that fossil fuel subsidies globally are growing, ranging from $523 billion to more than $1.9 trillion, according to a Worldwatch Institute research fellow. Subsidy levels have rebounded back to 2008 levels, according to Philipp Tagwerker.

Despite growing global support for renewable energy to combat greenhouse gas (GHG) emissions, government-backed financial support for the production and consumption of fossil fuels has climbed back to pre-2009 levels, according to a report released earlier in January by the International Energy Agency (IEA) looking a six European Union (EU) nations.

The latest reports are in stark contrast to the pre-recessionary times of six to 10 years ago, when organizations like Worldwatch and IEA were predicting a sharp decline in the use of fossil fuels globally. In 2008, IEA said that an "energy revolution" could cut GHG emissions in half by 2050, although they recognized that huge coal-dependent economies in places like China and India made the prospects for slashing carbon emissions very difficult (see Daily GPI, June 9, 2008). The latest statistics further underscore that challenge.

Both the Worldwatch and IEA assessments focused on two types of financial support for fossil fuels: separate subsidies for production and consumption. The latest data was compiled by IEA with the Institute for Environmental Studies at Amsterdam University, "Budgetary Support and Tax Expenditures for Fossil Fuels."

There is no clear definition for these subsidies, so it is difficult to compare and contrast various measurements that have been done by the Organization of Economic Co-operation and Development (OECD), IEA, the World Bank and the Organization of Petroleum Exporting Countries (OPEC), which are all cited by Worldwatch, a Washington, DC-based independent research organization focused on global energy, environmental and resources issues.

Oil and natural gas enjoyed the bulk of the subsidies in developing countries, according to OECD, with oil getting $285 billion, or more than half subsidies in 2011; natural gas received another $131 billion. By comparison, coal received only $3 billion in consumption subsidies in the 38 OECD nations.

Consumption subsidies -- rather than production-related ones -- are favored in developing economies, compared with the production support that predominates OECD nations. In turn, IEA looked a six EU nations that still have not joined OECD: Bulgaria, Cyprus, Latvia, Lithuania, Malta, and Romania.

OECD began collecting subsidy data four years ago, and it has identified more than 550 individual producer or consumer support mechanisms for fossil fuels in all 34 OECD nations.

"Financial support for the production and consumption of fossil fuels, while clearly at odds with the objective of GHG emission reductions, is still a widespread phenomenon throughout the world," IEA's report said.

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