Jun 18, 2019

The persistence of fossil fuel subsidies

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Reproduced from IEA; Note: In 2018 dollars; Chart: Axios Visuals

International Energy Agency data shows that worldwide subsidies that lower consumer costs for fossil fuels grew to over $400 billion last year, their highest levels since 2014.

Why it matters: The persistence of the payments, despite some progress in pricing reforms in recent years in several nations, are among the many headwinds in the effort to combat climate change.

  • And the IEA report doesn't even include various governments' support for fossil fuel production projects.

What they're saying: "The continued prevalence of these subsidies — more than double the estimated subsidies to renewables — greatly complicates the task of achieving an early peak in global emissions," IEA analysts said in a June 13 report.

Where it stands: Higher oil prices in 2018 than 2017 were one driver of the overall increase, while higher energy consumption was another.

  • Oil-related subsidies rose from $143 billion in 2017 to $182 billion last year.
  • Higher petro prices were a strain in countries where consumers faced higher retail costs, "particularly where national currencies were losing value against the U.S. dollar," IEA notes.
  • Indonesia, Iran, Egypt and Venezuela saw the biggest subsidy increases for oil products. Iran, Venezuela, Mexico, Egypt and China all saw higher subsidies for fossil-based power.

The intrigue: Tackling subsidies is tricky — as IEA notes, there's a need to make energy more affordable to poor and vulnerable populations.

  • "But many subsidies are poorly targeted, disproportionally benefiting wealthier segments of the population that use much more of the subsidised fuel," the report states.

Go deeper: 2020 Democrats pushing to end public financing of fossil fuels

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