By Paul Homewood
We’re used to claims that fossil fuels are being subsidised to the tune of trillions of pounds by governments around the world.
For instance, this baloney from the Guardian a couple of years ago:
The implication is that our taxpayer money is being handed out to the fat cats of Big Oil, and that money could be spent on much more worthwhile things.
That in fact is an outright lie.
I was reminded of this issue yesterday, when one naive commenter, (there’s always one!), in a Telegraph article on obscene subsidies for renewables asked “what about all of the subsidies paid out to oil and gas companies”.
Don’t believe me, this is what even the anti-fossil fuel International Energy Agency say.
The IEA have been estimating the cost of fossil fuel consumption subsidies for a few years now. These effectively reflect the sale of fossil fuels at below the market price, or what they call the “reference price”. Note that this does not necessarily mean below cost.
The IEA reckon subsidies added up to $620 billion in 2023, nothing like $7 trillion bandied about by the Guardian, which is based on an IMF report.
https://www.iea.org/data-and-statistics/data-product/fossil-fuel-subsidies-database
$620 billion is still a lot of money, but as Our World in Data point out, nearly all of this takes place in major fossil fuel producing countries, such as Russia and the Middle East.
Not a solitary penny is paid out in the UK, according to the data.
https://ourworldindata.org/how-much-subsidies-fossil-fuels
Indeed just thirteen countries account for $517 billion of the total.
Obviously if you’ve got a lot of oil and gas under your land, it makes sense to exploit it. Iran is a classic example – they could sell it all at full price on the international market, but it prefers to sell it at a lower, affordable price to its own citizens. Without it, they would die off in their thousands during the bitterly cold winters there. What else are they supposed to do? Heat their homes with solar panels?
What the Mullahs, or the Saudis or the Russians choose to do with their own oil and own money is their business and theirs alone. It has nothing to do with the Guardian, IEA or IMF.
Consumption subsidies account for about 80% of total “explicit” subsidies – more on this later. The other 20% are “production subsidies”, effectively where government money is paid to fossil fuel industries.
But most of these are merely the same sort of tax breaks handed out to all companies, so are not directed at fossil fuels at all. This is no doubt why even the IEA don’t bother to count them.
So we see that the $7 trillion scare stories have no basis in reality, and in most of the world there are no subsidies at all, much as the Guardian would like to believe otherwise.
Which brings us back to that $7 trillion!
Our World in Data explains:
This $7 trillion figure comes from a report by the International Monetary Fund (IMF). For context, $7 trillion is equivalent to around 7% of global GDP, a huge amount of money.3
This estimate is much higher than the figures we looked at earlier because it includes not only explicit subsidies (i.e., direct payments) but also implicit subsidies — the societal costs of burning fossil fuels. When we burn fossil fuels, we cause local air pollution that damages human health, and we drive climate change, which also results in environmental and social damage. The IMF also attributes to fossil fuels the social costs of road accidents and congestion. Economists usually refer to these indirect costs, which aren’t reflected in market prices, as “externalities” rather than “subsidies”.
https://ourworldindata.org/how-much-subsidies-fossil-fuels
Whether the implicit costs actually exist in real life is not the point. It is the counterfactual that matters.
Yes, we may have more air pollution. But without fossil fuels, the world would be a much poorer place and a much less healthy one too.
Even more ludicrous is the “cost” of road use – accidents and congestion. A world without roads might not have any road accidents or traffic jams; but it also would not have all the benefits brought by them.
It’s like a doctor telling you to stop eating because you are obese. Yes, your health might suffer through overeating, but you would soon be dead if you stopped eating completely.
via NOT A LOT OF PEOPLE KNOW THAT
July 20, 2025 at 06:42AM
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