New OECD and IEA data show that the fiscal cost and implicit government support for fossil fuels in 82 economies has fallen by almost a third, from $1.6 trillion in 2022 to $1.1 trillion in 2023. Lower prices to fossil fuels, especially for natural ones. gas, has narrowed the gap between market-based and subsidized consumer prices in some economies. However, many governments have maintained substantial initiatives to ease the burden of high energy bills on households and firms, most of which translated into support for fossil fuel production and consumption. Policy responses to the 2022 energy crisis were largely designed as stopgap measures, but many are still in place. Furthermore, most of this support has not been systematically targeted at those most in need, raising both equity and efficiency concerns.

The OECD and the IEA produce complementary databases that provide estimates of various forms of government support for fossil fuels. The current combined OECD-IEA estimates cover 82 major economies, comprising the OECD, the G20 and 33 other major energy producing and consuming economies, accounting for approximately 85% of the world’s total energy supply.

The OECD Inventory of Fossil Fuel Support Measures 2024 shows that direct fiscal transfers and tax credits related to the production and use of coal, oil, gas and other petroleum products in 48 OECD and partner economies grew to $514.1 billion in 2023, up from $503.7 billion in 2022 .

Data from the OECD Inventory also show that consumer support accounted for 90% of the total fiscal cost of fossil fuel support. The fiscal cost of support for residential users rose 29% to record highs to reach $189.3 billion in 2023 (from $146.4 billion in 2022), while for manufacturing and other industries it increased by 14% to $103.8 billion in 2023 (from $103.8 billion in 2023). USD 90.9 billion in 2022). Support to fossil fuel producers accounted for 7% of the fiscal cost of support and general services (not specifically targeting either producers or consumers) 3%.

The IEA tracks fossil fuel subsidiesincluding implicit support, by identifying cases where consumer prices are lower than the market value of the fuel. The IEA finds that subsidies for fossil fuel consumption are halved in 2023, amounting to more than $600 billion due to falling international market prices. Of the support measures provided in 2023, more than 85% were not well targeted to help the most vulnerable consumers.

The new analysis also shows that the increase in the fiscal cost of fossil fuel support in recent years has contributed to a decline in the economic incentives to decarbonise compared to 2021. While carbon taxes and emissions trading schemes (ETS) have seen increases modest, high direct budget transfers (direct government subsidies) for fossil fuels and low fuel excise rates have reduced net effective carbon rates (Net ECR) at EUR 14.0 per tonne of CO₂-equivalent in 2023 from 17.9 EUR/tCO₂e in 2021. The share of emissions covered by carbon pricing in 2023 remained unchanged from 2021, with 42% of greenhouse gas emissions subject to a net ECR, 27% of which are covered by explicit carbon prices (carbon taxes or ETS).

The OECD and IEA continue to call for more ambitious action to phase out ineffective support for fossil fuels and redirect public funding towards developing low-carbon alternatives, alongside improving energy security and energy efficiency. Governments should also reform existing support measures to better target those most in need. Given the high costs of inaction, governments should reaffirm and implement their commitments to the Sustainable Development Goals by phasing out and reforming inefficient support for fossil fuels, thereby aligning fiscal policies with climate goals.

Read more at: www.oecd.org/fossil-fuels/ and Energy Subsidies – Subjects – IEA.

For more information, journalists are invited to contact Elisabeth Schoeffmann in the OECD Media Office (+33 1 45 24 97 00) or Merve Erdil at the AIE Press Office (+33 1 40 57 66 94).