The outrageous reality that governments spend $7 trillion annually subsidizing the fossil fuels causing climate catastrophe.
G20 Pledges, Continued Subsidies
G20 nations pledged to phase out “inefficient” fossil fuel subsidies in 2009. Fourteen years later, subsidies reached record highs. The IMF calculated $7 trillion in 2022 subsidies (direct and indirect) when accounting for unpriced environmental and health costs. Countries subsidized coal, oil, and gas while simultaneously pledging net-zero.
Direct vs. Indirect
Direct subsidies included production tax breaks, below-cost fuel sales, and exploration support. Indirect subsidies were larger: health costs from air pollution, climate damages, environmental cleanup. Climate activists argued taxing polluters made more sense than paying them to pollute more.
Reform Challenges
Attempts to cut subsidies triggered protests—fuel price increases hurt poor consumers. France’s yellow vests, Ecuador’s 2019 protests, and Sri Lanka’s 2022 crisis all involved fuel subsidy reforms. The political economy was vicious: subsidies benefited powerful industries and created consumer dependencies hard to unwind without compensatory policies.
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