The OECD uses a bottom-up method of estimating government support to fossil fuels by identifying and quantifying individual policy measures. This approach measures fossil fuel support as all direct budgetary transfers and tax expenditures that provide a benefit or preference for fossil-fuel production or consumption.

The definition of support, as opposed to subsidy, is a deliberately broader one, which encompasses policies that can induce changes in the relative prices of fossil fuels. The Inventory casts a wide net, in line with its objective of promoting the transparency of public policies. The OECD definition follows the subsidy definition in the Agreement on Subsidies and Countervailing Measures (ASCM) under the World Trade Organization (WTO), which can be found in its full extent in the Glossary below.

The OECD’s broad definition of support was adopted in 2019 to track and measure the Sustainable Development Goal Indicator 12.c.1 on fossil-fuel subsidies, in a joint publication by UNEP, IISD and OECD. This joint effort allows data reporting for this indicator to be cost-effective, uniform and transparent across countries, capitalising on the data collection and processing activities in place for the OECD Inventory of Support Measures for Fossil Fuels.

The data in the Inventory are obtained from official government sources. They are as comprehensive as possible, but not exhaustive. There is, in particular, more information presented in the Inventory for those countries that have been relatively more transparent in their budget books. This does not necessarily mean that these countries have higher levels of support than other countries, but may reflect that they have been more transparent about the support that is provided. The measures captured in the Inventory are classified as support without reference to the purpose for which they were first put in place or their economic or environmental effects. No judgment is therefore made as to whether or not such measures are inefficient or ought to be reformed (see discussion in the OECD Companion to the Inventory of Support Measures for Fossil Fuels 2015 for more detail).




General definitions

Support: budgetary transfers and tax expenditures that provide a benefit or preference for fossil-fuel production or consumption.

Subsidy (WTO definition): in the Agreement on Subsidies and Countervailing Measures (ASCM) under the World Trade Organization (WTO), a subsidy shall be deemed to exist:

1. if there is a financial contribution by a government or any public body within the territory of a country, i.e. where:

        i. a government practice involves a direct transfer of funds (e.g. grants, loans, and equity infusion), potential direct transfers of funds or liabilities (e.g. loan guarantees);

        ii. government revenue that is otherwise due is forgone or not collected (e.g. fiscal incentives such as tax credits);

        iii. a government provides goods or services other than general infrastructure, or purchases goods;

        iv. a government makes payments to a funding mechanism, or entrusts or directs a private body to carry out one or more of the type of functions illustrated in (i) to (iii) above which would normally be vested in the government and the practice, in no real sense, differs from practices normally followed by governments.

2. Or if there is any form of income or price support in the sense of Article XVI of GATT 1994.

3. And if a benefit is thereby conferred.

Support Mechanism

  • Direct budgetary transfers: payments made by governments, or bodies acting on behalf of governments, to individual recipients. This includes direct spending, e.g. for specific support programmes, and government ownership (fully or through equity shares) of energy-related enterprises.
  • Tax expenditures: tax concessions that are typically provided through lower rates, exemptions, or rebates of consumption taxes on fossil fuels (mainly value-added taxes and excise taxes) or measures to reduce the cost of the extraction of fossil fuels (including accelerated-depreciation allowances for capital expenditure, investment tax credits, deductions for exploration and development expenses, and preferential capital-gains treatment). Tax expenditures can also take less visible forms such as the special treatment of income from state-owned enterprises, tax relief for income earned on industry sinking funds (e.g. for site remediation), tax exempt bonds, the use of foreign tax credits for what may be considered royalty payments, or preferential tax rates on fuels used as inputs in fossil-fuel production. Tax expenditures are often premised on providing government support to activities or entities deemed to be socially beneficial; or on concerns relating to risk and uncertainty, energy security, capital intensity, high upfront costs, and long project timelines. Various approaches of varying levels of difficulty are used to derive estimates of the cost of tax expenditures. The revenue forgone approach is the most straightforward and the most commonly used in OECD countries. Revenue forgone is the difference between the tax revenue raised with and without the tax expenditure, all else being equal. The revenue forgone approach is a static measure. In other words, it does not account for behavioural responses related to the removal of the tax expenditure.
  • Induced transfers (or price support or price-gap): estimated subsidies due to market regulation and price support for lower end-user price relative to the full cost of supply. It refers to a change in prices received by producers and paid by domestic consumers as a consequence of government interventions, such as through direct price regulation, pricing formulas, border controls or taxes, and domestic purchase or supply mandates. The difference between the end-use price and the reference price (reflecting the full cost of the supply, which would prevail in a competitive market) amounts to the price gap or induced transfer. For countries that import a given product, consumer subsidy estimates derived through the measurement of price-gaps are explicit. That is, they represent net expenditures resulting from the domestic sale of imported energy at lower, regulated prices. In contrast, for countries that export a given product – and therefore do not pay world prices – subsidy estimates are implicit and have no direct budgetary impact. Rather, they represent the opportunity cost of pricing domestic energy below market levels. For countries that produce a portion of their fossil-fuel consumption themselves and import the remainder, the estimates represent a combination of opportunity costs and direct government expenditures.


  • Producer Support Estimate (PSE): transfers or expenditures from consumers and taxpayers to producers of fossil fuels. Fossil-fuel production encompasses the following activities along the supply chain: exploration and extraction; bulk transportation and storage; and refining and processing.
  • Consumer Support Estimate (CSE): transfers or expenditures in favour of consumers of fossil fuels. Consumption of fossil fuels refers to the stage at which fuels are combusted or used as raw materials by various end-use sectors, whether it occurs in motor vehicles, stationary engines, heating equipment or power plants. Consumption encompasses the following activities: the use of fossil fuels in power and heat generation; their use in industrial processes and activities outside of the energy sector; and all other final uses of fossil fuels, whether in the transport sector, the residential sector, or primary industries outside of the energy sector (e.g. agriculture and forestry).
  • General Services Support Estimate (GSSE): 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). It includes policies where fossil fuels are the main beneficiaries, but does not include any payments to individual producers. GSSE transfers do not directly alter producer receipts or costs, or consumption expenditures, although they may affect production or consumption of fossil fuels in the long term.

See the OECD’s PSE-CSE accounting framework for more details.

Fuel type

The range of fuels covered by the Inventory comprises both primary fossil-fuel commodities (e.g. crude oil, natural gas, coal, and peat) and secondary refined or processed products (e.g. diesel fuel, gasoline, kerosene, and coal briquettes). Primary fuels include in particular those fossil fuels that are extracted from unconventional sources, such as oil extracted from bituminous sands, shale-based natural gas, or coal-bed methane. Measures supporting the production or use of biofuels are not, however, included in the Inventory.

  • Coal: including hard coal and briquettes, and peat.
  • Natural gas: both liquefied and in the gaseous state.
  • Petroleum: petroleum oils and oils obtained from bituminous minerals, crude oil as well as secondary refined or processed products (e.g. diesel fuel, gasoline, kerosene). 
  • End-use electricity: electricity for end-user consumption of fossil-fuel origin. Support under end-use electricity includes measures providing electricity tariffs below cost recovery or annual average-cost pricing for electricity end-users and only includes the fossil-fuel component of the support (i.e. renewables and other non-fossil-fuel sources are excluded). Amounts related to cross-border power exchanges are also excluded due to the technical difficulties in determining the traded electricity’s ultimate generation origin. Support amounts benefiting fossil fuels as power generation inputs are aggregated under their respective fuel type, i.e. petroleum, coal or natural gas.


The Inventory adopts the IEA’s World Energy Balances categorisation of fossil-fuel production and consumption sectors.

  • Production sector: includes measures that support the production, exploration, trade, storage and transportation of fossil fuels.
  • Transportation sector: includes measures that support the final uses of fossil fuels in the transport sector, including domestic aviation, domestic navigation, road, and rail.
  • Residential sector: includes measures that support the final uses of fossil fuels in the residential sector, including consumption by households.
  • Electricity generation sector: includes measures that support the use of fossil fuels in electricity and heat generation. This includes fossil-fuel inputs to electricity and heat plants, both main and auto producers.
  • Other sectors: includes measures that support the use of fossil fuels in the energy transformation sector other than electricity and heat generation; industrial and manufacturing sector; commercial and public services; agriculture, forestry and fisheries sector; non-energy use.