What are fossil fuel subsidies?
A handy guide
If you’ve seen our subsidy calculator, you’ll know how much we are all paying. But what are fossil fuel subsidies?
In most countries across the world the fossil fuel industry has its operations, as well the social and environmental damage it causes, subsidized both directly by our taxes and indirectly by the natural environment we rely on.
Fossil fuel subsidies come in two forms
Explicit fossil fuel subsidies are government payments that support fossil fuel companies – such as oil and gas – in locating and producing the fuels they make, as well as tax breaks to make their products cheaper than they otherwise would be.
Implicit fossil fuel subsidies encompass all other costs associated with the many harms fossil fuels have on nature and society. Our taxes pay for some of these implicit costs, such as healthcare costs in places with harmful levels of air pollution or clearing up environmental damage caused by increasingly unpredictable weather patterns. Other costs remain unpaid, such as the costs linked to the erosion of our natural ecosystems that will have a long-term impact on our economies.
Explicit
Government actions that lower the cost of fossil fuel production, raise prices received by producers or lower prices paid for fossil fuel energy by consumers.
Things like:
- Lower sales taxes being imposed on domestic energy consumption
- Direct subsidies to producers for oil and gas exploration
- Tax payments to compensate producers for declining production
Implicit
Other costs imposed by fossil fuels which the industry does not pay for that are either paid by others or are not paid for at all.
Things like:
- Increased healthcare costs incurred from things like air pollution and heat
- Costs of addressing the consequences of fossil fuel driven climate change
- Limited liability for environmental damage caused by fossil fuels
The history of fossil fuel subsidies
