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Rising fossil fuel support poses a threat to building a healthier and climate-safe future

OECD analysis of budgetary transfers, tax breaks and spending programmes linked to the production and use of coal, oil, gas and other petroleum products in 44 OECD and G20 economies showed that total fossil fuel support rose by 10% to USD 178 billion in 2019, ending a five-year downward trend. The analysis builds on the OECD Inventory of support measures for fossil fuels.

In 2019, oil and gas industries in several countries received additional benefit, mostly through direct budgetary support to alleviate corporate debt, fossil-fuel infrastructure investments, and tax provisions that provide preferential treatment on capital expenditures for fossil-fuel production. This represents a rise in overall support for the production of fossil fuels of 38%. This trend seems set to continue in 2020 with some countries targeting state aid to fossil fuels and related industries in the wake of the disruptions caused by Covid-19 bringing fuel price levels to record lows. In most countries, support for fossil-fuel consumption remains widespread. Among energy products, support to petroleum remained the largest component with 74% of the total support estimate. Natural gas receives the next largest portion of the total support estimate with 12%, followed by electricity at 8% and coal at 7%. 

By inducing increased greenhouse gas and air pollutant emissions, such policies go against domestic efforts to curb climate change and improve air quality. They maintain economies locked up in energy- and pollution-intensive technologies; they jeopardise efforts to modernise economies and strengthen the competitiveness of clean, low-carbon sectors; and they may be socially inequitable. By encouraging combustion of fossil fuels, such government support contributes to exposing people to air pollution, which can exacerbate vulnerability to pandemics like the Covid-19.

Nonetheless, some progress has been made. Western Europe has completed its phasing out of hard-coal subsidies and efforts continue to end state aid to coal-fired power generation in the European Union.

Support for fossil fuels in the OECD and selected partner economies is on the rise again after five years of steady declines

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Lower fuel prices helped reduce global fossil-fuel consumption subsidies

Government support for the production and consumption of fossil fuels totalled USD 478 billion in 2019, according to OECD and IEA analysis of 77 economies. The analysis uses a combined OECD-IEA estimate of support for fossil fuels that merges OECD Inventory estimates and IEA price-gap estimates.

The combined OECD-IEA estimate shows an 18% decline from USD 582 billion in 2018 that is due mostly to the mechanical effect of the drop in global oil prices on consumption subsidies. Lower oil prices meant governments spent less subsidising energy costs for end-users. It does not reflect real efforts to phase out inefficient subsidies. The plunge in oil prices this year offers a clear chance to wean economies off this support.



Further information: IEA Energy subsidies - Tracking the impact of fossil-fuel subsidies

OECD analysis of budgetary support and tax expenditures





More on the Inventory of Support Measures for Fossil Fuels database



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