How the G7 Can Advance Action on Fossil Fuel Subsidies in 2025

This research paper analyzes the G7's failure to meet its 2025 deadline to phase out inefficient fossil fuel subsidies, noting that subsidies reached a record USD 282 billion in 2023. The author examines the drivers of this increase, the distribution of subsidies across G7 members, and provides policy recommendations for the G7 to advance reform under Canada's presidency.

• G7 countries are on track to miss their 2025 deadline to phase out inefficient fossil fuel subsidies, with total subsidies reaching a record high of USD 282 billion in 2023, compared to USD 71 billion in 2016 (in 2023 real terms).
• The surge in subsidies was primarily driven by responses to the energy crisis following Russia's invasion of Ukraine, with Germany recording the highest subsidies in 2023 at USD 83 billion due to price brakes on electricity, heat, and gas.
• Consumer subsidies dominated G7 spending in 2023, averaging 88% of the total. However, producer subsidies remained significant in the United States (30%), Canada (18%), and the United Kingdom (11%), with U.S. producer subsidies rising 76% above 2020 levels due to state-level tax expenditures in Texas, Alaska, and West Virginia.
• Subsidy types varied by country: natural gas subsidies were the primary driver in Germany, France, the United States, Italy, and the United Kingdom, while petroleum subsidies dominated in Canada (83%) and Japan (72%). Coal subsidies have declined since 2010, remaining notable only in the United States (8.1%) and Germany (3.1%).
• While some G7 members have taken steps—such as Italy eliminating five subsidies in 2021 and France mandating a 30% reduction in 'unfavourable expenditures'—overall progress is hindered by vague terminology like 'inefficient' and varying definitions of 'subsidy'.
• The author recommends that the G7 drop the qualifier 'inefficient', require national action plans for phasing out subsidies, and prohibit all subsidies to coal and fossil fuel production, citing the ACCTS agreement between Switzerland, New Zealand, Iceland, and Costa Rica as a model.

APA

Do,, N. J. K. G. (2025). How the G7 Can Advance Action on Fossil Fuel Subsidies in 2025. International Institute for Sustainable Development. https://www.iisd.org/articles/deep-dive/how-g7-can-advance-action-fossil-fuel-subsidies-2025

Chicago

Do,, Natalie Jones,Jonas Kuehl,Ivetta Gerasimchuk,Nhat. How the G7 Can Advance Action on Fossil Fuel Subsidies in 2025. International Institute for Sustainable Development, 2025. https://www.iisd.org/articles/deep-dive/how-g7-can-advance-action-fossil-fuel-subsidies-2025.

Wikipedia

{{cite report |last1=Do, |first1=Natalie Jones,Jonas Kuehl,Ivetta Gerasimchuk,Nhat |title=How the G7 Can Advance Action on Fossil Fuel Subsidies in 2025 |publisher=International Institute for Sustainable Development |date=8 April 2025 |url=https://www.iisd.org/articles/deep-dive/how-g7-can-advance-action-fossil-fuel-subsidies-2025 |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{do2025how, author = {Do,, Natalie Jones,Jonas Kuehl,Ivetta Gerasimchuk,Nhat}, title = {{How the G7 Can Advance Action on Fossil Fuel Subsidies in 2025}}, institution = {International Institute for Sustainable Development}, year = {2025}, month = apr, url = {https://www.iisd.org/articles/deep-dive/how-g7-can-advance-action-fossil-fuel-subsidies-2025}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }