Fossil-Fuel Subsidies
How much does the world spend keeping fossil fuels cheap? The answer depends entirely on what you count. The IEA measures explicit consumption subsidies that topped a record $1 trillion in 2022; the IMF adds the uncharged environmental and health costs to reach roughly $7 trillion, about 7% of global GDP.
Key Fossil-Fuel Subsidy Insights
Two numbers, one debate
The IEA's price-gap measure of explicit consumption subsidies topped $1 trillion in 2022, while the IMF's broader figure including uncharged environmental costs reached about $7 trillion. Both describe 2022, but count very different things.
Most of it is implicit
In the IMF's accounting, 82% of the $7 trillion (about $5.7 trillion) is implicit: the unpriced costs of air pollution, climate damage, congestion and road accidents. Only 18% ($1.3 trillion) is explicit cash undercharging.
The 2022 spike was a crisis spike
IEA explicit consumption subsidies jumped from about $100 billion in 2020 to over $1 trillion in 2022 as governments shielded consumers from energy-crisis prices, then eased to roughly $600 billion in 2023 as market prices fell.
A handful of countries dominate
China alone accounted for about $2.2 trillion of the IMF's 2022 total, followed by the United States ($760B), Russia ($420B), India ($350B) and the EU ($310B). Gulf states lead on a per-capita basis, often exceeding $1,000 per person.
IEA Consumption Subsidies Over Time
The IEA's price-gap measure of explicit fossil-fuel consumption subsidies, which spiked to a record above $1 trillion during the 2022 energy crisis before easing as international prices fell.
Key Finding: Subsidies surged roughly tenfold from about $100B in 2020 to over $1 trillion in 2022, then fell to around $600B in 2023.
Explicit vs Implicit Subsidies (IMF, 2022)
The IMF splits its $7 trillion total into explicit subsidies (undercharging for supply costs) and the far larger implicit subsidies (undercharging for environmental and health costs).
Key Finding: Implicit subsidies of $5.7 trillion are more than four times the $1.3 trillion in explicit cash undercharging.
Total Subsidies by Fuel (IMF, 2022)
How the IMF's $7 trillion total breaks down across fuels, where oil products and coal together account for more than three-quarters of all subsidies.
Key Finding: Oil products (47%) and coal (30%) dominate; natural gas is 18% and electricity just 5%.
Top Subsidising Economies (IMF, 2022)
The five largest providers of fossil-fuel subsidies by total value, combining explicit cash support and implicit uncharged costs.
Key Finding: China's $2.2 trillion in subsidies is nearly three times that of the next-largest, the United States ($760B).
What Drives Implicit Subsidies (IMF, 2022)
The components of the IMF's $5.7 trillion in implicit subsidies, dominated by unpriced local air pollution and global-warming damages.
Key Finding: Local air pollution and global warming each make up about 30% of implicit subsidies; road-use costs add another 17%.
Understanding Fossil-Fuel Subsidy Data
Explicit vs implicit subsidies
Explicit subsidies occur when consumers pay less than the supply cost of a fuel, for example when a government caps petrol or electricity prices below what it costs to deliver them. Implicit subsidies arise when prices fail to reflect the external costs imposed on society, such as air pollution, climate damage, traffic congestion and accidents, plus forgone consumption-tax revenue. The IMF counts both; the IEA's headline figure measures only explicit consumption subsidies.
The price-gap method
Both agencies rely on the price-gap approach: the subsidy equals the difference between the price consumers actually pay and a reference price. For explicit subsidies the reference is the fuel's supply cost (international market price plus delivery). For implicit subsidies the IMF uses an efficient price that also embeds the environmental and health costs of burning the fuel. Multiplying that gap by consumption gives the subsidy total.
Why IEA and IMF differ so much
The roughly $1 trillion IEA figure and the $7 trillion IMF figure are not contradictory; they measure different things. The IEA captures the cash that governments forgo or pay out, mainly in developing and fossil-fuel-exporting economies. The IMF adds the much larger unpriced damages to health and climate, which is why 82% of its total is implicit. As the IMF stresses, there is no $7 trillion pot to reallocate; only the explicit portion could be redirected immediately.
Caveats and reference year
Figures here center on 2022, the peak energy-crisis year; IEA consumption subsidies have since eased (to roughly $600B in 2023). Estimates are sensitive to assumptions about reference prices, the social cost of carbon and the valuation of health damages, so totals carry wide uncertainty. Country and per-capita comparisons mix explicit and implicit components and should be read as orders of magnitude, not precise accounts.