World governments hit record high of USD 1.7 trillion in fossil fuel support, impeding climate action—new report

November 22, 2023—Governments provided over USD 1.7 trillion in public money to support fossil fuels in 2022—a record high—despite 91% of global carbon dioxide emissions originating from fossil fuels last year, according to new research. As the UN Climate Change Conference (COP 28) kicks off next week, this remains a central issue in climate negotiations.

The amount includes fossil fuel subsidies (USD 1.3 trillion), investments by state-owned enterprises in G20 countries (USD 350 billion), and lending from public financial institutions by G7 countries and multilateral development banks (USD 22 billion), reveals the study Burning Billions: Record Public Money for Fossil Fuels Impeding Climate Action by the International Institute for Sustainable Development (IISD).

Fossil fuel subsidies increased substantially in 2022, reaching more than four times the annual average in the 2010s, with the jump driven by vast consumer subsidies in response to the energy crisis. 

Meanwhile, investments in fossil fuel infrastructure by state-owned energy companies in G20 countries hit an 8-year high. And although the international public financing for fossil fuel projects has decreased in recent years, it is still nearly four times greater than financing for clean energy.

“Despite bold commitments to combat climate change, governments continue to pour trillions of dollars into the production and consumption of fossil fuels,” says Tara Laan, Senior Associate at IISD and the lead author of the study. “Commitments need deadlines and frameworks to be effective. To turn global leaders’ words into action, it’s crucial that they fortify their efforts to shift subsidies and other financial flows away from fossil fuels and into clean energy solutions, starting at COP 28.”

What might that look like? At COP 27, countries reaffirmed their promise to accelerate efforts to phase out “inefficient fossil fuel subsidies.” Laan says COP 28 parties should drop the “inefficient” qualifier, and set a deadline for eliminating all fossil fuel subsidies—2025 for developed countries and 2030 for developing countries—while defining specific cases when temporary exceptions could apply, such as for targeted subsidies supporting essential energy access until alternatives are in place. 

IISD experts emphasize that these measures should be implemented in parallel with policies to ensure protection for vulnerable populations and support for fossil-fuel-dependent communities.

Renewable energy rise must come with the phase-out of fossil fuels.
“Though financial support for clean energy is on the rise, this alone will not be sufficient to limit global warming to 1.5°C,” says Laan. “Governments need to use every available tool to accelerate the clean energy transition, and phasing out funding for fossil fuels, as well as their production and use, is the other half of the equation.”

The report shows that global investment in renewable power generation by both public and private sources rose to record levels, hitting an annual investment of USD 486 billion in 2022. However, the data shows this is only half the amount invested in fossil fuels in the same period and far less than what is needed to achieve the Paris Agreement goals. 

By redirecting the financial support currently going to fossil fuel consumption and production and raising fossil fuel taxes to better reflect their social costs, governments could better support developing countries’ energy transitions as well as boost national social welfare, sustainable critical raw mineral industries, clean energy, and behavioural change in key areas such as transportation. 

In response to justifications of fossil fuel spending that point to the continued dominance of fossil fuels in the world’s energy systems, the authors say the problem is that dominance can’t end while fossil fuels continue to receive support from taxpayers. 

“There’s just no credible argument for continuing fossil fuel subsidies in the face of a climate crisis that will destroy economies and livelihoods, while clean energy sources are increasingly cost-competitive and provide an opportunity to make the world more just and equitable,” adds Laan.

Media Contacts
Tara Laan, Senior Associate, IISD: tara.laan@iisd.net
Aia Brnic, Senior Communications Officer, IISD: abrnic@iisd.org