OECD Inventory of Support Measures for Fossil Fuels 2025

2. Key trends in the fiscal cost of support measures for fossil fuels

The fiscal cost of government support for fossil fuels continued to decline in 2024 as energy supply costs stabilized

New OECD and IEA data show that the fiscal cost of global support for fossil fuels decreased by 11% to USD 916.3 billion in 2024, down from USD 1 031.2 billion in 2023. Emergency measures introduced during the peak in energy prices in 2022 were significantly reduced and even phased out over the reporting period. Energy supply costs, used as a benchmark reference price, also continued to fall in many parts of the world, although less sharply than in 2023, thereby decreasing the estimated value of fossil fuels sold below this reference price (IEA, 2024[3]). That said, with many measures supporting production and consumption of fossil fuels still in place, the fiscal cost of support measures for fossil fuels continued to remain elevated relative to the historical average (Figure 2.1).

The OECD Inventory estimates that direct transfers and tax expenditures associated with support measures for fossil fuels amounted to a fiscal cost of USD 370.8 billion in 2024. In addition, the IEA calculates that fossil fuels sold below market prices amounted to USD 598.4 billion.1 End-use electricity and natural gas saw the most significant declines, falling by 22% and 13% respectively. Petroleum and coal also decreased to a lesser extent, by 3% and 7% respectively (Figure 2.1).

The 2024 IEA estimates of the under-pricing of fossil fuels (USD 598.4 billion) are broadly stable from 2023 (USD 633.8 billion). That said, the Inventory reports a significant decrease in the fiscal cost of support measures for fossil fuels compared with 2023 levels at USD 370.8 billion versus USD 441.5 billion. This reflects the decline in the fiscal cost of emergency support measures, as measures introduced in 2022-23 were either reduced or removed.

The fiscal cost of direct budgetary transfers amounted to USD 170.9 billion in 2024, falling by 22% from 2023 (USD 217.7 billion), while government revenue foregone due to preferential tax systems also fell, at USD 199.9 billion, down from USD 223.8 billion in 2023 (Figure 2.2). The significant decrease in the fiscal cost of direct transfers again reflects the reduction and phasing out of emergency support measures, including compensation for increased energy bills and regulated or capped energy prices to offset exceptionally high energy prices over 2022-2023.

Emergency support measures are being phased out

Prices for fossil fuels, which rose sharply in 2021-2022, started to stabilize from 2023 (OECD, 2024[2]). Globally, the World Bank’s Energy Price Index showed a continued decline, falling by about 6% in 2024 and being projected to fall by a further 17% in 2025, indicating a trend toward more stable and lower fossil fuel prices (World Bank, 2025[4]). A closer look at each fuel reveals that prices are continuing to decline across most energy sources, with the sharpest reductions observed in coal, suggesting that global energy markets are entering a period of moderate prices following the recent price spikes (Figure 2.3) (World Bank, 2025[5]). This easing raised new opportunities to help address fiscal pressures by phasing out support measures for fossil fuels aimed at responding to high energy costs.

Drawing on its detailed descriptions of measures, the OECD Inventory of Support Measures for Fossil Fuels can help identify individual support measures that were explicitly introduced or modified by national governments to respond to emergencies. Starting in 2022, many economies introduced emergency support measures to reduce energy prices with the aim of helping end-users to cope with rising costs. These measures, similar to those deployed during the COVID-19 pandemic, were intended to be temporary and are being reduced or phased out (Figure 2.4).

Following a significant increase in 2022, the global fiscal cost of these emergency support measures was significantly reduced starting in 2023, in line with the decline in energy prices.2 The number of such measures reporting a fiscal cost has also declined, from 284 in 2022 to 192 in 2024. COVID-related measures have also decreased, from 27 in 2021 to 10 in 2024. Similar decreases happened in other countries, as highlighted by the World Bank’s Global Fuel Subsidies and Price Control Measures Database, which analyses and provides qualitative information on the fuel pricing regime and types of fuel subsidies implemented across 154 economies since 2021. After fiscal transfers peaked in 2022, reflecting the need to protect consumers during the energy crisis, many countries either phased out support measures or shifted to less direct and costly mechanisms (World Bank, 2025[6]).

Using government support to reduce energy prices to help end-users to cope with rising costs represented a significant fiscal burden for the countries implementing such measures (ECB, 2024[7]; OECD, 2024[2]). Indeed, the fiscal cost of measures in response to the energy crisis exceeded the cost of those taken in response to the COVID-19 pandemic (Figure 2.4).

Moreover, a key challenge with deploying public support in emergencies is that, once established, support measures can be difficult to fully withdraw. It is for this reason that the OECD recommends that support measures should be explicitly designed to be temporary, with objective criteria to ensure support measures are phased out as conditions improve, and clear communication about the temporary nature of the support (OECD, 2023[8]).

In parallel to emergency support, the energy crisis forced many countries to reassess their global energy supply chains. Heavy reliance on external suppliers highlighted a vulnerability by limiting their capacity to respond effectively to rising prices. As a result, recent years have seen a surge in energy investments, not only in renewable sources but also in oil, natural gas, and coal focused on upstream sectors (IEA, 2024[9]; IEA, 2025[10]).

Most of the remaining fiscal cost of support is consumption by households and firms, with transportation the leading sector

While energy supply costs eased from their peak in 2022 (IEA, 2024[3]), the fiscal cost of support for fossil fuel consumption remained high in 2024 at USD 371 billion, albeit down from USD 441 billion in 2023. The Consumer Support Estimate (CSE) represented the highest share of the total fiscal cost of support to fossil fuels, accounting for just over 84% of the fiscal cost of support, a slight decline from 86% in 2023 (Figure 2.5). In contrast, support to producers (the producer support estimate, PSE) and the general support estimate (GSSE, which covers transfers or expenditures arising from policy measures that create enabling conditions for the fossil-fuel sector through the development of private or public services, institutions and infrastructure, regardless of their objectives and impact on fossil-fuel production and or consumption) accounted for 12% (from USD 43.7 billion to USD 42.5 billion) and 4% (from USD 15.7 billion to USD 16 billion) of the total fiscal cost in 2024, respectively.

In terms of sectors. the fiscal cost of support fell slightly across all sectors from 2023 levels, with the exception of transportation, for which the fiscal cost of support increased slightly by 1.6% to USD 113.6 billion, up from USD 111.8 billion (Figure 2.6). Transportation also became the sector with the largest share of the total fiscal cost of support at 30.6%, followed by residential support (22.7%) and support to manufacturers and industry (20.4%).

The fiscal cost of support to fossil fuel production, manufacturers and industry, and electricity generation also decreased by 21.8% (from USD 93.1 billion to USD 72.8 billion), 16.2% (from USD 90.3 billion to USD 75.7 billion) and 13.1% (from USD 28.3 billion to USD 24.6 billion), respectively.

But support for fossil fuel consumption remains largely not targeted at those most in need

While the fiscal cost of residential support experienced the largest decline (-28.7%), from USD 117 9 billion to USD 84.1 billion, it still remained the second largest sector in terms of the fiscal cost of support to fossil fuels, at 22.7% of the total.

The average pre-tax electricity price for households in the European Union increased by 8.6% in 2024 and now stands at 63% higher than 2021 levels (Eurostat, 2025[11]), with the most vulnerable populations, generally low-income households and the elderly, disproportionately affected (OECD, 2022[12]), including as rising energy bills limit their capacity to allocate resources to other essential needs,. Low- and middle-income households are particularly vulnerable, as they devote a larger portion of their income to energy costs (OECD, 2022[12]).

Support to consumption, if well-targeted, can play a key role in alleviating the burden on households in times of pressure from rising energy costs. However, in 2024, measures to support fossil fuel consumption were still largely poorly targeted at 71.4% of the fiscal cost of support measures from the Inventory (Figure 2.7). Emergency support measures were slightly more targeted toward the most vulnerable consumers, but 65% of the fiscal cost associated with emergency measures was represented by untargeted measures.

While defining and identifying the appropriate target group to support can be challenging (OECD, 2023[13]; Hemmerlé et al., 2023[14]), poorly targeted measures raise concerns regarding the efficient and effective use of public funds, equity, and the environment. Poorly targeted support measures entail unnecessarily high fiscal costs by extending benefits to a broader group of recipients beyond low-income households, thereby raising efficiency concerns. Moreover, such measures tend to disproportionately benefit wealthier households, who typically consume more energy (Wooders, 2024[15]), raising equity concerns. Finally, untargeted interventions weaken price signals, thereby sustaining elevated levels of fossil fuel consumption.

And risks distorting markets

Similarly, poorly targeted support measures provided to businesses raise concerns about competition, market efficiency, and environmental sustainability. Support to firms can distort prices by lowering firms’ energy input costs, which may be passed on to output prices, thereby generating indirect effects across broader markets. Moreover, government support to firms can have adverse climate implications when it sustains emission-intensive production processes, particularly in energy-intensive sectors (Garsous, Smith and Bourny, 2023[16]). While challenging to implement, governments should aim to target support toward companies facing liquidity and solvency problems due to energy price shocks, but which would otherwise remain viable (OECD, 2022[17]). This strategy would mitigate the risk of supporting inefficient firms, which undermine competition, constrain domestic productivity growth, and distort international markets (OECD, 2020[18]). In general, government support to firms should be time-limited, transparent, proportionate, and non-discriminatory (i.e. applying objective and transparent criteria for determining firms’ eligibility) (OECD, 2020[18]; 2021[19]).

Notes

← 1.  Support measures reported in both databases amount to USD 52.9 billion. The joint OECD-IEA estimate (net of overlapping support measures) is therefore USD 916.3 billion in 2024.

← 2.  Note, however, that the entire increase in support between 2021 and 2022 cannot be attributed solely to the rise in emergency measures. The total increase in support amounts to USD 199.4 billion, while the increase in emergency measures accounts for only USD 141.3 billion. This discrepancy may partly reflect the fact that some measures were modified to address emergency needs without any public announcement and that the fiscal cost of some measures introduced before the crisis increased mechanically with the increase in prices.