At this year's climate gathering in Dubai, EU countries will be looking to harden the COP26 deal to phase out the subsidies by pushing for a deadline of 2030 to get it done, but it is unclear how much support the proposal will gain
World governments agreed at the COP26 climate summit in Glasgow two years ago to phase out "inefficient" fossil fuel subsidies to help fight global warming.
Since then, however, global fossil fuel subsidies have risen $2 trillion to $7 trillion, according to the International Monetary Fund, as governments around the world moved to protect consumers from rising energy prices.
At this year's climate gathering in Dubai, EU countries will be looking to harden the COP26 deal to phase out the subsidies by pushing for a deadline of 2030 to get it done, but it is unclear how much support the proposal will gain.
EU governments were among those that have increased support for fossil fuels since Glasgow, mainly as a response to energy security concerns following Russia's invasion of Ukraine. Here are some examples of how fossil fuels are subsidised around the world. China's total fossil fuel subsidies were the highest in the world at $2.2 trillion in 2022, amounting to 12.5% of the country's total GDP, according to the IMF. The bulk of the subsidies are "implicit", a category which includes undercharging for environmental costs or forgoing tax revenues, the IMF said.
Support offered to coal-fired power plants includes direct funding, preferential loans, and power purchase guarantees.
China also unveiled a new scheme earlier this month that pays coal-fired power plants not for the electricity they supply, but for making capacity ready and available to the grid when needed – a measure also used by grid operators in the U.S. to keep such plants from retiring.
A 2020 study by professors at Nanjing Audit University said China's coal subsidy policies effectively reduced China's coal prices by 4.2% and drove up output by 7.6%.
China also regularly intervenes to keep consumer power and fuel prices low. For example, it subsidises its refiners when global oil prices rise above $130 a barrel so they can keep fuel prices affordable.
US fossil fuel subsidies stretch across the US tax code, which makes detailing their costs complex. The IMF estimates they stood at $760 billion in 2022, a figure topped only by China.
One US tax break called intangible drilling costs allows producers to deduct a majority of their costs from drilling new oil wells. The Joint Committee on Taxation, a nonpartisan panel of Congress, has estimated that eliminating it could generate $13 billion over a decade.
Another, the percentage depletion tax break which allows independent producers to recover development costs of declining oil gas and coal reserves, could generate about $12.9 billion in revenue over 10 years, it has said.
