In 2022, a significant milestone was reached in the realm of global energy economics, as a new report unveiled the staggering figure of $7 trillion in fossil fuel subsidies for that year, representing an all-time high. This financial commitment stemmed from countries’ swift actions to shield consumers from escalating energy costs prompted by the Ukraine conflict.

This revelation was part of the latest update on worldwide fossil fuel subsidies released by the International Monetary Fund (IMF). The report disclosed that explicit subsidies, which directly curtail fuel prices for consumers, more than doubled from $500 billion in 2020 to an astounding $1.3 trillion in 2022. Among these, undercharging for oil products accounted for nearly 50% of the total, followed by coal at 30%, and natural gas at 20%. However, the most notable revelation was that a substantial 82% of the global fossil fuel subsidies came in the form of implicit subsidies. These are the consequences of governments not accurately accounting for the environmental toll incurred by burning fossil fuels.

Further analysis of the financial landscape reveals that the cumulative investments in the fossil fuel sector outpaced the funds allocated for education and constituted about two-thirds of healthcare expenditures. This data paints a complex picture of global priorities, indicating the extensive resources channeled into supporting the fossil fuel industry, which significantly contributes to climate change, while essential sectors like education and healthcare receive relatively less attention. Geographically, nearly half of these subsidies originated from the East Asia and Pacific region, with China emerging as the largest fuel spender, followed by the United States, Russia, the European Union, and India.

The IMF’s assessment coincided with the Institute for Sustainable Development’s (IISD) analysis, revealing an even more alarming trend. The IISD found that G20 nations collectively invested a record-breaking $1.4 trillion in the fossil fuel industry during the same year. This staggering amount was more than double the pre-pandemic and pre-energy level investments of 2019. These findings have sparked widespread criticism from climate experts and activists who have long been sounding the alarm about the impending consequences of unchecked fossil fuel consumption. The urgency of addressing climate change has been emphasized repeatedly as the planet races against time to mitigate its dire impacts.

The warnings of climate experts and the increasing frequency of extreme weather events highlight the urgent need to transition from fossil fuels to renewable energy sources. As United Nations Secretary-General António Guterres aptly put it, humanity is entering an “era of global boiling,” underscoring the escalating climate crisis. Guterres calls on world leaders to seize critical opportunities on the horizon, including the Africa Climate Summit, the forthcoming G20 meeting in India, and the 28th Conference of Parties (COP28), to expedite a just and equitable transition to renewable energy. The unprecedented levels of fossil fuel subsidies underscore the complexities of the energy landscape, where economic considerations often clash with the urgent need for sustainable practices.

The revelation of record-breaking fossil fuel subsidies totaling $7 trillion in 2022 is a stark reminder of the challenges posed by climate change and the choices nations make to balance economic interests with environmental concerns. The confluence of rising energy prices due to geopolitical tensions and the mounting urgency to tackle climate change has led to substantial financial support for the fossil fuel sector. As global leaders convene in international forums, the imperative to accelerate the transition to renewable energy sources takes center stage, prompting a reevaluation of policies and priorities to ensure a sustainable future for the planet.

Reporting by Emad Martin