Fossil Fuel Subsidies Explained: Concepts and trends

Fossil fuel subsidies, which exceeded USD 1.2 trillion in public financial support in 2024, distort energy markets and lock countries into fossil fuel dependence. These subsidies take the form of consumer price supports, producer incentives, and general services. While subsidies declined to USD 921 billion in 2024 from a 2022 peak of USD 1.76 trillion, geopolitical tensions in 2026 are risking a new increase in support measures to shield consumers from price shocks.

• Fossil fuel subsidies are categorized into three main types: consumer subsidies (primarily price supports to shield citizens from price shocks), producer subsidies (to encourage exploration, development, and private investment), and general services (costs for policy measures creating enabling conditions through infrastructure, institutions, and services).
• Subsidies negatively impact energy systems by distorting markets, encouraging overconsumption, and creating fossil fuel dependence. Consumption subsidies often exacerbate socio-economic inequalities because they are typically untargeted, allowing wealthier households with higher energy consumption to benefit disproportionately.
• Global fossil fuel subsidies peaked at USD 1.76 trillion during the 2022 energy crisis before declining to USD 921 billion in 2024, a 48% decrease. In 2024, petroleum was the largest recipient of subsidies at USD 403.5 billion, followed by end-use electricity subsidies at USD 216 billion and coal subsidies at over USD 40 billion.
• A 2026 energy crisis, driven by geopolitical escalation in the Middle East and conflict between the United States and Iran, has pushed oil prices to an average of USD 95.6 per barrel in March 2026, risking a rise in subsidies as governments implement price caps and tax concessions.
• Public financial support for fossil fuels significantly outweighs support for clean energy; in 2024, fossil fuels received over USD 1.2 trillion compared to USD 254 billion for clean energy, representing approximately five times more support.
• The Fossil Fuel Subsidy Tracker (FFST) monitors 192 economies using data from the OECD (bottom-up inventory), the IEA (top-down price gap), and the IMF (top-down price gap). Because the OECD omits United States data, the FFST uses IMF estimates for that country.

APA

Picciariello,, N. D. (2026). Fossil Fuel Subsidies Explained: Concepts and trends. International Institute for Sustainable Development. https://www.iisd.org/articles/explainer/fossil-fuel-subsidies-explained-concepts-trends

Chicago

Picciariello,, Nhat Do,Angela. Fossil Fuel Subsidies Explained: Concepts and trends. International Institute for Sustainable Development, 2026. https://www.iisd.org/articles/explainer/fossil-fuel-subsidies-explained-concepts-trends.

Wikipedia

{{cite report |last1=Picciariello, |first1=Nhat Do,Angela |title=Fossil Fuel Subsidies Explained: Concepts and trends |publisher=International Institute for Sustainable Development |date=16 April 2026 |url=https://www.iisd.org/articles/explainer/fossil-fuel-subsidies-explained-concepts-trends |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{picciariello2026fossil, author = {Picciariello,, Nhat Do,Angela}, title = {{Fossil Fuel Subsidies Explained: Concepts and trends}}, institution = {International Institute for Sustainable Development}, year = {2026}, month = apr, url = {https://www.iisd.org/articles/explainer/fossil-fuel-subsidies-explained-concepts-trends}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }