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Charted: $5 Trillion in Fossil Fuel Subsidies

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Fossil fuel subsidies

Charted: $5 Trillion in Fossil Fuel Subsidies (2010-2021)

With energy consumption vital for life and business, governments often look to fossil fuel subsidies to make energy as affordable as possible.

These subsidies artificially reduce the price of fossil fuels and generally take two forms:

  • Production subsidies occur when governments provide tax cuts or direct payments that reduce the cost of producing coal, oil, or gas.
  • Consumption subsidies cut fuel prices for the end-user through price controls and other such measures.

Each year, governments around the world pour nearly half a trillion dollars into fossil fuel subsidies. This chart breaks down a decade of fossil fuel consumption subsidies by energy source using data from the International Energy Agency (IEA).

Breaking Down Fossil Fuel Consumption Subsidies

Since 2010, governments have spent over $5 trillion in fossil fuel consumption subsidies. The majority of this sum went towards making oil more affordable, as seen below:

Subsidies by Year (US$)OilElectricityNatural GasCoalTotal
2010$203.0B$143.5B$113.6B$2.7B$462.9B
2011$263.7B$147.2B$100.4B$3.6B$514.0B
2012$304.0B$149.9B$132.2B$3.3B$589.5B
2013$300.0B$132.8B$119.1B$1.7B$553.6B
2014$262.4B$124.1B$104.2B$1.1B$491.9B
2015$147.3B$119.2B$83.6B$1.5B$351.5B
2016$110.2B$132.8B$56.7B$2.2B$301.9B
2017$153.5B$136.2B$65.2B$2.7B$357.6B
2018$195.3B$167.4B$106.0B$3.0B$471.7B
2019$134.2B$124.8B$51.0B$2.2B$312.2B
2020$90.4B$52.5B$36.9B$1.7B$181.5B
Total$2,164.0B$1,430.4B$968.9B$25.7B$4,588.3B

Fossil fuel subsidies fell to a decade low in 2020 as the pandemic hampered fuel consumption and triggered a nosedive in oil prices. However, after two years of straight declines, the IEA estimates that governments around the world spent $440 billion on subsidizing fossil fuel consumption over 2021, representing a 142% rise year-over-year.

Breaking down the subsidies by fuel, oil accounts for 43% or over $2 trillion of all subsidies between 2010 and 2020. Together, oil and electricity generated by fossil fuels received nearly 75% of all subsidies.

Despite growing support for the clean energy transition, the fossil fuel industry reaps the benefits of billions in subsidies annually—but why?

Why Do Governments Subsidize Fossil Fuels?

High energy prices can have rippling effects throughout an economy.

For consumers, heating and transportation become more expensive. And for producers who use energy and oil as inputs, the cost of goods and services goes up.

Often, governments turn to energy subsidies to keep prices down and encourage economic activity. Therefore, there’s a high cost to removing these subsidies, especially in developing countries where large parts of the population might lack access to affordable energy.

But fossil fuel subsidies can also have detrimental effects. By artificially lowering prices, they can encourage overconsumption of carbon-intense fuels, creating negative externalities through adverse environmental and health impacts. According to the International Renewable Energy Agency, these add up to an amount anywhere between $2.6 to $8.1 trillion globally.

Despite these disadvantages, fossil fuels remain an important part of the global energy mix, with continued support from governments. And with energy prices soaring, 2022 could be another year of billions in fossil fuel subsidies.

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Energy Shift

Mapped: Solar and Wind Power by Country

Wind and solar generate over a tenth of the world’s electricity. Taken together, they are the fourth-largest source of electricity, behind coal, gas, and hydro.

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Solar and Wind per Country

Mapped: Solar and Wind Power by Country

Wind and solar generate over a tenth of the world’s electricity. Taken together, they are the fourth-largest source of electricity, behind coal, gas, and hydro.

This infographic based on data from Ember shows the rise of electricity from these two clean sources over the last decade.

Europe Leads in Wind and Solar

Wind and solar generated 10.3% of global electricity for the first time in 2021, rising from 9.3% in 2020, and doubling their share compared to 2015 when the Paris Climate Agreement was signed.

In fact, 50 countries (26%) generated over a tenth of their electricity from wind and solar in 2021, with seven countries hitting this landmark for the first time: China, Japan, Mongolia, Vietnam, Argentina, Hungary, and El Salvador.

Denmark and Uruguay achieved 52% and 47% respectively, leading the way in technology for high renewable grid integration.

RankTop Countries Solar/Wind Power Share
#1🇩🇰 Denmark 51.9%
#2🇺🇾 Uruguay 46.7%
#3🇱🇺 Luxembourg 43.4%
#4🇱🇹 Lithuania 36.9%
#5🇪🇸 Spain 32.9%
#6🇮🇪 Ireland 32.9%
#7🇵🇹 Portugal 31.5%
#8🇩🇪 Germany 28.8%
#9🇬🇷 Greece 28.7%
#10🇬🇧 United Kingdom 25.2%

From a regional perspective, Europe leads with nine of the top 10 countries. On the flipside, the Middle East and Africa have the fewest countries reaching the 10% threshold.

Further Renewables Growth Needed to meet Global Climate Goals

The electricity sector was the highest greenhouse gas emitting sector in 2020.

According to the International Energy Agency (IEA), the sector needs to hit net zero globally by 2040 to achieve the Paris Agreement’s goals of limiting global heating to 1.5 degrees. And to hit that goal, wind and solar power need to grow at nearly a 20% clip each year to 2030.

Despite the record rise in renewables, solar and wind electricity generation growth currently doesn’t meet the required marks to reach the Paris Agreement’s goals.

In fact, when the world faced an unprecedented surge in electricity demand in 2021, only 29% of the global rise in electricity demand was met with solar and wind.

Transition Underway

Even as emissions from the electricity sector are at an all-time high, there are signs that the global electricity transition is underway.

Governments like the U.S., Germany, UK, and Canada are planning to increase their share of clean electricity within the next decade and a half. Investments are also coming from the private sector, with companies like Amazon and Apple extending their positions on renewable energy to become some of the biggest buyers overall.

More wind and solar are being added to grids than ever, with renewables expected to provide the majority of clean electricity needed to phase out fossil fuels.

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Energy Shift

How Far Are We From Phasing Out Coal?

In 2021 coal-fired electricity generation reached all-time highs. Here’s the pathway that would be needed to phase it out of the energy mix.

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Phasing_Out_Coal

How Far Are We from Phasing Out Coal?

At the COP26 conference last year, 40 nations agreed to phase coal out of their energy mixes.

Despite this, in 2021, coal-fired electricity generation reached all-time highs globally, showing that eliminating coal from the energy mix will not be a simple task.

This infographic shows the aggressive phase-out of coal power that would be required in order to reach net zero goals by 2050, based on an analysis by Ember that uses data provided by the International Energy Agency (IEA).

Low-Cost Comes at a High Environmental Cost

Coal-powered electricity generation rose by 9.0% in 2021 to 10,042 Terawatt-hours (TWh), marking the biggest percentage rise since 1985.

The main reason is cost. Coal is the world’s most affordable energy fuel. Unfortunately, low-cost energy comes at a high cost for the environment, with coal being the largest source of energy-related CO2 emissions.

China has the highest coal consumption, making up 54% of the world’s coal electricity generation. The country’s consumption jumped 12% between 2010 and 2020, despite coal making up a lower percentage of the country’s energy mix in relative terms.

Top Consumers2020 Consumption (Exajoules) Share of global consumption
China 🇨🇳82.354.3%
India 🇮🇳17.511.6%
United States 🇺🇸9.26.1%
Japan 🇯🇵4.63.0%
South Africa 🇿🇦3.52.3%
Russia 🇷🇺3.32.2%
Indonesia 🇮🇩3.32.2%
South Korea 🇰🇷3.02.0%
Vietnam 🇻🇳2.11.4%
Germany 🇩🇪1.81.2%

Together, China and India account for 66% of global coal consumption and emit about 35% of the world’s greenhouse gasses (GHG). If you add the United States to the mix, this goes up to 72% of coal consumption and 49% of GHGs.

How Urgent is to Phase Out Coal?

According to the United Nations, emissions from current and planned fossil energy infrastructure are already more than twice the amount that would push the planet over 1.5°C of global heating, a level that scientists say could bring more intense heat, fire, storms, flooding, and drought than the present 1.2°C.

Apart from being the largest source of CO2 emissions, coal combustion is also a major threat to public health because of the fine particulate matter released into the air.

As just one example of this impact, a recent study from Harvard University estimates air pollution from fossil fuel combustion is responsible for 1 in 5 deaths globally.

The Move to Renewables

Coal-powered electricity generation must fall by 13% every year until 2030 to achieve the Paris Agreement’s goals of keeping global heating to only 1.5 degrees.

To reach the mark, countries would need to speed up the shift from their current carbon-intensive pathways to renewable energy sources like wind and solar.

How fast the transition away from coal will be achieved depends on a complicated balance between carbon emissions cuts and maintaining economic growth, the latter of which is still largely dependent on coal power.

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