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Concept
Fossil fuel subsidies
Summary
Fossil fuel subsidies are energy subsidies on fossil fuels. They may be tax breaks on consumption, such as a lower sales tax on natural gas for residential heating; or subsidies on production, such as tax breaks on exploration for oil. Or they may be free or cheap negative externalities; such as air pollution or climate change due to burning gasoline, diesel and jet fuel. Some fossil fuel subsidies are via electricity generation, such as subsidies for coal-fired power stations.
Eliminating fossil fuel subsidies would reduce the health risks of air pollution, and would greatly reduce global carbon emissions thus helping to limit climate change. , policy researchers estimate that substantially more money is spent on fossil fuel subsidies than on environmentally harmful agricultural subsidies or environmentally harmful water subsidies.
The International Energy Agency says that "High fossil fuel prices hit the poor hardest, but subsidies are rarely well-targeted to protect vulnerable groups and tend to benefit better-off segments of the population."
Despite the G20 countries having pledged to phase-out inefficient fossil fuel subsidies, they continue because of voter demand or for energy security. Global fossil fuel consumption subsidies in 2022 have been estimated at one trillion dollars; although they vary each year depending on oil prices they are consistently hundreds of billions of dollars.
Fossil fuel subsidies have been described as "any government action that lowers the cost of fossil fuel energy production, raises the price received by energy producers, or lowers the price paid by energy consumers." Including negative externalities such as health costs results in a much larger total. Thus by the IMF definition they are far larger than by the OECD and International Energy Agency (IEA) definitions.
Subsidies for electricity and heat may be taken into account, depending on the share produced by fossil fuels.
Official source
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