Governments Spent Record $1 Trillion Last Year Subsidizing Fossil Fuels

(Bloomberg) -- Even as global governments raise their ambitions to cut fossil fuels in the future, they spent a record $1 trillion last year subsidizing energy sources that are the main driver of climate change. 

That’s the finding from the International Energy Agency, which estimates that the combined subsidies for oil, natural gas, electricity and coal hit an all-time high in 2022 as soaring energy prices crippled economies. It underlines the challenge for policy makers trying to grapple with the immediate threat of runaway fuel inflation, while still trying to push a shift to low-carbon sources. 

The spending by governments in 2022 was more than double total global investment in renewable energy sources, according to figures from BloombergNEF. The splash of state cash on energy last year followed climate talks in November 2021 when world leaders pledged to end such subsidies. 

“The Glasgow Climate Pact emphasized that phasing out fossil fuel subsidies is a fundamental step toward a successful clean energy transition,” the IEA said in its report. “However, today’s global energy crisis has also underscored some of the political challenges of doing so.”

The subsidies helped shield consumers from soaring energy prices as many economies were still recovering from the impact of the pandemic. As Russia cut supplies of natural gas following its invasion of Ukraine last year, the European Union spent $349 billion to reduce consumer energy bills. 

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