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OECD at COP26

Support to fossil fuel production is not aligned with a low carbon transition

Countries should resist raising government support for fossil fuels in response to the global surge in energy prices and the economic impacts of the pandemic. Instead, given the existential threat of climate change and the need for a green recovery, they should accelerate investment in sustainable energy infrastructure and the creation of green jobs, as well as meeting the UN Sustainable Development Goals, in particular SDG 7, to ensure access to affordable, reliable, sustainable and modern energy for all.

  

 Source: OECD (2021), Inventory of Support Measures for Fossil Fuels (database).

 

Source: OECD (2021), Inventory of Support Measures for Fossil Fuels (database).

 

The OECD Inventory shows that fossil fuel support fell by 10% to USD 183 billion in 2020 in 50 advanced and emerging economies. The transport sector alone saw a 15% drop in support due to the slump in fuel use from restrictions on mobility during the pandemic. Among fuels, petroleum has experienced the largest drop, with support down 19%.

On the production side, the data show a 5% rise in direct support for the production of fossil fuels (see producer support estimate in the graph above), some of this the result of large government bailouts to state oil and electricity companies. Were this support to persist beyond COVID-related emergency funding, it would become part of a structural policy landscape that would only exacerbate efforts to phase out fossil fuel support.

COVID-19 recovery measures being implemented around the world offer an opportunity to shift public resources into areas that support environmental and climate goals. 

Latest data from the OECD and the IEA

The latest OECD and IEA data show that government support for the production and consumption of fossil fuels across major economies totalled USD 351 billion in 2020, down 29% from 2019 as a drop in global activity and record-low oil prices meant governments spent less subsidising energy costs for end-users.

 

Source: OECD (2021), Inventory of Support Measures for Fossil Fuels (database), IEA (2021), Fossil Fuel Subsidies Database.

 

Yet this decrease was the direct result of declining fuel prices and demand as the COVID-19 pandemic led to a lull in global activity. In today’s climate of rising energy prices, it is expected that consumption subsidies will have risen again in 2021, aided by an uptick in economic activity. Indeed, the IEA estimates that consumption subsidies will more than double in 2021 due to higher fuel prices and energy use, coupled with hesitancy on pricing reforms.

Data visualisation

OECD Inventory of support measures for fossil fuels

Click on the series legend to remove or add categories and play with the visualisation.

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