Fossil Fuel Subsidies Explained: Concepts and trends

This guide from the International Institute for Sustainable Development explains the nature, impacts, and trends of fossil fuel subsidies, highlighting that public financial support for fossil fuels significantly outweighs that for clean energy.

• Fossil fuel subsidies are mechanisms that ensure fossil fuels are priced below their actual costs. These include direct budget transfers, tax breaks, retail prices kept artificially low, and preferential finance or regulated tariffs for enterprises.
• Subsidies are categorized into three types: consumer subsidies (often price supports to shield citizens from shocks), producer subsidies (to encourage exploration, development, and private investment), and general services (costs for policy measures creating enabling conditions via infrastructure, institutions, and services).
• Fossil fuel subsidies create market distortions, encourage overconsumption, and lock countries into fossil fuel dependence. Consumption subsidies often exacerbate socio-economic inequalities because they are untargeted, allowing wealthier households with higher energy consumption to benefit disproportionately.
• Global fossil fuel subsidies reached a record high of USD 1.76 trillion during the 2022 energy crisis. By 2024, they declined by 48% from that peak to USD 921 billion. In 2024, petroleum was the largest recipient at USD 403.5 billion, followed by end-use electricity subsidies at USD 216 billion, and coal subsidies which remained above USD 40 billion.
• In 2024, public financial support for fossil fuels exceeded USD 1.2 trillion, which is approximately five times the USD 254 billion provided for clean energy.
• The 2026 energy crisis, characterized by supply disruptions and an average oil price of USD 95.6 per barrel in March 2026 due to Middle East geopolitical escalation, risks increasing subsidies as governments implement price caps and tax concessions.

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} }