Fossil fuel subsidies

Fossil fuel subsidies are energy subsidies on fossil fuels. They may be tax breaks on consumption, such as a lower sales tax on natural gas for residential heating; or subsidies on production, such as tax breaks on exploration for oil. Or they may be free or cheap negative externalities; such as air pollution or climate change due to burning gasoline, diesel and jet fuel. Some fossil fuel subsidies are via electricity generation, such as subsidies for coal-fired power stations.

Eliminating fossil fuel subsidies would reduce the health risks of air pollution,^[1] and would greatly reduce global carbon emissions thus helping to limit climate change.^[2] As of 2021^[update], policy researchers estimate that substantially more money is spent on fossil fuel subsidies than on environmentally harmful agricultural subsidies or environmentally harmful water subsidies.^[3] The International Energy Agency says: "High fossil fuel prices hit the poor hardest, but subsidies are rarely well-targeted to protect vulnerable groups and tend to benefit better-off segments of the population."^[4]

Despite the G20 countries having pledged to phase-out inefficient fossil fuel subsidies,^[5] as of 2023^[update] they continue because of voter demand,^[6][7] or for energy security.^[8] Global fossil fuel consumption subsidies in 2022 have been estimated at one trillion dollars;^[4] although they vary each year depending on oil prices, they are consistently hundreds of billions of dollars.^[9]