REM: Fossil fuel consumption subsidies in 2022 at record high of $1 trillion

According to the International Energy Agency (IEA), worldwide subsidies for fossil fuel consumption increased dramatically in 2022, surpassing $1 trillion for the first time.

This surge in subsidies was caused by energy market turbulence, which led to international fuel prices soaring well above what many consumers paid. Consumption subsidies are energy price cuts for consumers, for example setting fixed prices for retail gasoline.

The 2022 subsidies, driven by the global energy crisis resulting from Russia's invasion of Ukraine, were twice the levels seen in 2021 and almost five times those in 2020. This is according to IEA in a just-published report, Fossil Fuel Consumption Subsidies 2022.

However, IEA found that the government measures taken to protect consumers were not well-targeted, and although they may have helped to alleviate the impact of skyrocketing costs, they artificially maintained the competitiveness of fossil fuels compared with low-emissions alternatives.

The finding of the report underlines the problem of governments dealing with high fuel inflation, while still trying to encourage the energy transition. The fossil fuel spending by world governments in 2022 – not just consumtpion subsidies but total spending – was more than twice the total investment in renewable energy sources, according to BloombergNEF.