Fossil Fuel Subsidies and Phaseout Politics
Why the world spends trillions subsidizing fossil fuels, why reform is so difficult, and the COP debates over phaseout vs. phasedown.
The Subsidy Landscape
Fossil fuel subsidies are one of the great paradoxes of climate policy. Governments simultaneously pledge to cut emissions while spending trillions to make fossil fuels cheaper. The IMF calculates global fossil fuel subsidies at $7 trillion in 2022 when including the failure to price environmental and health damage. Explicit subsidies alone -- direct payments, tax breaks, below-cost pricing -- exceeded $1.3 trillion.
The politics are straightforward: cheap energy wins votes. In Nigeria, fuel subsidies consumed 30% of government spending before their partial removal in 2023. In India, subsidized cooking gas reaches 300 million households. In the US, the oil industry benefits from a century-old depletion allowance that no politician dares eliminate. Removing these subsidies would be the single most impactful climate policy available, but it is also among the most politically dangerous.
