The fiscal cost of government support for fossil fuels fell by around one tenth from USD 1.03 trillion in 2023 to USD 0.92 trillion in 2024. This reflects a reduction in the fiscal cost of emergency support measures introduced by governments in 2022-23, as well as a fall of energy supply costs from their record highs in 2022. Yet, with many measures to support production and consumption of fossil fuels still in place, their fiscal cost of support to fossil fuels remains elevated relative to historical averages.
Most (84.2%) of the fiscal cost of support in 2024 was related to the consumption of fossil fuels. Support generally declined across sectors, with the exception of transportation, where the fiscal cost of support for fossil fuels increased, reaching USD 113.6 billion in 2024 (up from USD 111.8 billion in 2023). The largest decline in the fiscal cost of support (-28.7%), from USD 117.9 billion to USD 84.1 billion occurred in the residential sector; that said, this sector remained the second largest after transportation at 22% of the total fiscal cost of support to fossil fuels. Most of the remaining support in for consumption of fossil fuels continued to lack systematic targeting towards those in greatest need, raising both equity and efficiency concerns.
Following its peak in 2022, the global fiscal cost of emergency support measures in response to high energy prices was significantly reduced in 2024, from USD 163.9 billion in 2022 to USD 88.6 billion in 2023 and USD 57.7 billion in 2024, as energy prices fell. The number of such measures reporting a fiscal cost also fell, from 284 in 2022 to 192 in 2024, indicating that many emergency support measures partly phased out and not simply reduced.
Data to 2023 indicate that economic incentives to decarbonise, associated with fuel taxes, carbon taxes, emissions trading systems (ETSs), and price-reducing support mechanisms – summarised in the Net Effective Carbon Rate (Net ECR) declined compared to 2021. While ETS prices saw modest increases and carbon taxes remained essentially stable, the increase in support measures through direct budgetary transfers for fossil fuels and low fuel excise rates led to a decrease in the average Net ECR from EUR 18.6/tCO2e in 2021 to EUR 14.9/tCO2e in 2023.
The share of GHG emissions covered by a positive Net ECR increased from 43.3% in 2021 to 44.8% in 2023, while 30% of GHG emissions were covered by explicit carbon prices (carbon taxes or ETSs).
The high fiscal cost of government support for fossil fuels and low Net ECR highlight the challenges of ensuring the effective and efficient use of public resources to support well-functioning energy markets and meet public policy goals, including net-zero commitments, in the face of economic and geopolitical pressures.
While support to fossil fuels can reduce the burden of high energy bills on households and firms, it can have a sizeable fiscal cost, increase emissions, and undermine incentives for the energy transition and thus longer-term growth. Moreover, as currently designed, it tends to disproportionately benefit higher income households. Reforms should focus on better targeting those most in need and phasing out inefficient support for fossil fuels as soon as possible, to free-up much-needed public resources, make progress towards better functioning energy markets and the clean energy transition, help accelerate innovation in energy efficiency and better align fiscal policy with public policy and climate goals.
OECD Inventory of Support Measures for Fossil Fuels 2025
Policy Trends
