Fossil fuel subsidies

The EU’s Eighth Environment Action Programme, in line with EU and international commitments, calls for an immediate phase out of fossil fuel subsidies. Fossil fuel subsidies remained relatively stable at about EUR 56 billion (2022 prices), over the period 2015-2021, yet increased to EUR 123 billion in 2022. This can be interpreted as a result of high energy prices related to post-COVID recovery and Russia’s invasion of Ukraine. Most EU Member States have no concrete plans on how and when they will phase out these subsidies, therefore, it is unlikely but uncertain that the EU will make much progress towards phasing out fossil fuel subsidies by 2030.

Note for all figures: All monetary values are expressed in 2022 prices. Data for 2022 are provisional as fossil fuel subsidy figures (about 7% of total) are still under evaluation.

Fossil fuels are non-renewable sources of energy, and their production and use contribute significantly to climate change and pollution. In line with international commitments — such as the G20 Pittsburgh Summit and COP26 Glasgow Climate Pact — and the European Green Deal , the EU’s Eighth Environment Action Programme (8th EAP) calls for an immediate phase out of subsidies for fossil fuels (such as coal, gas and oil). Progress towards this is monitored as part of the European Commission’s State of the Energy Union report .

Fossil fuel subsidies remained more or less stable, at about EUR 56 billion (2022 prices), over the period 2015-2021. The increase of EUR 5 billion from 2015 to 2018 was mainly due to an increase in subsidies in the transport and industry sector. The decrease of EUR 4 billion from 2018 to 2021 was mostly due to decreases in the energy sector and decreases in subsidies for coal and lignite. The growth in fossil fuel subsidies in 2022 can be attributed to the energy price crisis and was intensified by the Russian invasion of Ukraine as EU Member States implemented more than 230 temporary subsidy measures to protect households and industries .

Member States are required to include information in their annual national energy and climate progress reports on phasing out energy subsidies, particularly fossil fuels. According to these reports , many countries have ambitions to move away from fossil fuel use, but only a few (Denmark, Germany, Ireland, Italy and Sweden) have translated these ambitions into laws or clear plans that specify when they intend to phase out fossil fuel subsidies .

It can be expected that the sharp rise in fossil fuel subsidies is an outlier as 47% of total fossil fuel subsidies in 2022 amounting to EUR 58 billion have a planned end-date before 2025 and only about 1% have an end-date between 2025 and 2030. There is no end-date provided or the end-date is after 2030 for the largest part of fossil fuel subsidies .

Fossil fuel subsidies in EU Member States, 2015 and 2022 (in 2022 prices)

An assessment of the progress towards phasing out fossil fuel subsidies – based on the amount of fossil fuel subsidies of 2022 – is difficult in the current political and economic environment. The EU Member States responded very different as most of them provided generous financial support through fossil fuel subsidies. On the contrary, the amount of fossil fuel subsidies declined in four EU Member States (Czechia, Denmark, Poland and Slovakia) between 2021 and 2022. When analysing the trend between 2015 and 2022 then seven EU Member States made progress in phasing out fossil fuel subsidies as fossil fuel subsidies are lower in these countries in 2022 as compared to 2015 (in 2022 prices).

It should be noted that, in terms of absolute value, that more than 60% of all fossil fuel subsidies granted in 2022 were spent in three countries: Germany (EUR 21 billion), Italy (EUR 25 billion) and France (EUR 30 billion).

The extent to which fossil fuel subsidies contribute to national economies also varies considerably across Member States. Fossil fuel subsidies represent the highest shares of gross domestic product (GDP) in Portugal, Greece, Cyprus, Hungary and Malta (1.3%) and the lowest share in Slovakia, Sweden, Czechia and Denmark (less than 0.2% of GDP) .

Additional figure: Fossil fuel subsidies as a share of national gross domestic products, 2020.

Supporting information

Definition

This indicator is based on the concept developed by the World Trade Organization (WTO) through the Agreement on Subsidies and Countervailing Measures (ASCM), which classifies subsidies and government interventions into four main categories:

direct transfers: direct expenditures by governments to recipients, which could be either consumers or producers;
tax expenditures: the amounts of tax benefits, or preferences, received by taxpayers and forgone by governments;
income or price support mechanisms: various types of economic mechanisms, most of which can be considered cross-subsidies, i.e. involve transferring amounts of money from groups of people/technology/territory to another specific group;
RD&D budgets: various types of provisions for financial and/or other preferential mechanisms to support innovation.

For more information on the concept and definition of energy subsidies, see Annex 5 to EC.

Methodology

A recurring obstacle preventing the pledge to phase out fossil fuel subsidies from being realised is the lack of a shared definition internationally . This repeatedly stressed barrier is addressed by the Commission under the Regulation on the Governance of the Energy Union and Climate Action through the adoption of ‘implementing acts… , including a methodology for the reporting on the phasing out of energy subsidies, in particular for fossil fuels’ . As the European Commission published Implementing Regulation (EU) 2022/2299 in November 2022, the basis of the current assessment for this indicator is the data-gathering exercise performed by external consultants for the European Commission and published in the Commission report on energy subsidies in the EU accompanying the 2023 State of the Energy Union report. The methodology behind the data collection and validation process is discussed in detail in Annex 5.1 to EC .

The data were deflated to 2022 prices as published in EC .

Policy/environmental relevance

This indicator is a headline indicator for monitoring progress towards meeting the objectives of the 8th EAP. It contributes mainly to monitoring progress in relation to aspects of Article 3(h), which requires, inter alia, ‘phasing out environmentally harmful subsidies, in particular fossil fuel subsidies, at Union, national, regional and local level, without delay… by... (ii) setting a deadline for the phasing out of fossil fuel subsidies consistent with the ambition of limiting global warming to 1,5°C’ . The European Commission communication on the 8th EAP monitoring framework specifies that this indicator should be used to monitor the reduction in ‘environmentally harmful subsidies, in particular fossil fuel subsidies, with a view to phasing them out without delay’ .

Accuracy and uncertaintiesData sources and providers

Metadata

DPSIRTopicsTagsTemporal coverageGeographic coverage

TypologyUN SDGsUnit of measureFrequency of dissemination

References and footnotes

OECD, 2009, Leaders’ statement: the Pittsburgh Summit — September 24-25 2009, Organisation for Economic Co-operation and Development.

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UK Government, 2022, COP26: the Glasgow Climate Pact, United Nations Climate Change Conference UK 2022.

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EC, 2019, Communication from the Commission to the European Parliament, the European Council, the Council, the European Economic and Social Committee and the Committee of the Regions ‘The European Green Deal’, COM (2019) 640 final of 11 December 2019.

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EC, 2022, Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions on the monitoring framework for the 8th Environment Action Programme: measuring progress towards the attainment of the programme’s 2030 and 2050 priority objectives, COM (2022) 357 final of 26 July 2022.

^a^b
EC, 2023, Report from the Commission to the European Parliament and the Council ‘2023 report on energy subsidies in the EU’ (COM(2023) 651 final of 24 October 2023).
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EC, 2023, Study on energy subsidies and other government interventions in the European Union — 2023 edition, Final Report, Directorate-General for Energy (
https://op.europa.eu/en/publication-detail/-/publication/32d284d1-747f-11ee-99ba-01aa75ed71a1/language-en
) doi: 10.2833/571674
^↵
EC, 2023, Report from the Commission to the European Parliament and the Council ‘2023 report on energy subsidies in the EU’ (COM(2023) 651 final of 24 October 2023).
^↵
EC, 2023, Study on energy subsidies and other government interventions in the European Union — 2023 edition, Final Report, Directorate-General for Energy (
https://op.europa.eu/en/publication-detail/-/publication/32d284d1-747f-11ee-99ba-01aa75ed71a1/language-en
doi: 10.2833/571674
^a^b^c
EC, 2022, Study on energy subsidies and other government interventions in the European Union — 2022 edition, Final Report, Directorate-General for Energy.

^a^b^c^d
OECD and IEA, 2021, Update on recent progress in reform of inefficient fossil-fuel subsidies that encourage wasteful consumption 2021, Contribution by the Organisation for Economic Co-operation and Development (OECD) and the International Energy Agency (IEA) to G20 Environment, Climate and Energy Ministers, in consultation with the Organization of Petroleum Exporting Countries (OPEC), Climate and Energy Joint Ministerial Meeting, Naples, 23 July 2021.

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EU, 2018, Regulation (EU) 2018/1999 of the European Parliament and of the Council of 11 December 2018 on the Governance of the Energy Union and Climate Action, OJ L 328, 21.12.2018, p. 1-77.

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EU, 2021, Regulation (EU) 2021/1119 of the European Parliament and of the Council of 30 June 2021 establishing the framework for achieving climate neutrality and amending Regulations (EC) No 401/2009 and (EU) 2018/1999 (‘European Climate Law’), OJ L 243, 9.7.2021, p. 1-17.

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EU, 2022, Commission Implementing Regulation (EU) 2022/2299 of 15 November 2022 laying down rules for the application of Regulation (EU) 2018/1999 of the European Parliament and of the Council as regards the structure, format, technical details and process for the integrated national energy and climate progress reports, OJ L 306, 25.11.2022. p. 1-98.

^↵
EC, 2022, Report from the Commission to the European Parliament and the Council ‘2022 report on energy subsidies in the EU’, COM(2022) 642 final of 15 November 2022.

^a^b
EU, 2022, Decision (EU) 2022/591 of the European Parliament and of the Council of 6 April 2022 on a General Union Environment Action Programme to 2030, OJ L 114, 12.4.2022, p. 22-36.

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Fossil fuel subsidies

Figure 1. Fossil fuel subsidies in the 27 EU Member States, 2015-2022

Figure 2. Fossil fuel subsidies in EU Member States, 2015 and 2022 (in 2022 prices)

Supporting information

Metadata

References and footnotes