IEA: Global energy crisis pushed fossil fuel consumption subsidies to an all-time high in 2022
(Climate Action, 21 Feb 2023) Fossil fuel consumption subsidies worldwide soared in 2022, rising above USD 1 trillion for the first time, according to new IEA estimates, as turmoil in energy markets sent fuel prices in international markets well above what was actually paid by many consumers.
The IEA has been tracking fossil fuel subsidies for many years, examining instances where consumer prices are lower than the market value of the fuel itself. The new report provides the first estimates for 2022, which show that global fossil fuel consumption subsidies doubled from the previous year to an all-time high of USD 1 trillion.
These escalating outlays were in sharp contrast with the Glasgow Climate Pact, which in November 2021 called on countries to “phase-out … inefficient fossil fuel subsidies, while providing targeted support to the poorest and most vulnerable”.
The analysis shows that many of these government measures were not well targeted, and while they may have partially protected customers from skyrocketing costs, they artificially maintained fossil fuels' competitiveness versus low-emissions alternatives.
However, they note, that today’s global energy crisis has also highlighted the political challenges of doing so. Russia’s invasion of Ukraine caused the crisis, but 2022’s subsidy jump brings some broader lessons on the need for orderly and people-centred transitions.