Fossil Fuel Companies Receive $11 Million a Minute in Subsidies, New Report Reveals

Fossil fuel companies received $5.9 trillion in subsidies last year, which works out at $11 million per minute, the International Monetary Fund (IMF) says in a new report.

The subsidies represent 6.8% of the global GDP and are expected to rise to 7.4% by 2025, says the report, which looked into the benefits that fossil fuel companies receive in ​​191 countries. 

The analysis found fossil fuels are underpriced, which leads to higher consumption, which in turn means more greenhouse gas emissions that accelerate climate change and other environmental problems, “including losses to human life from local air pollution and excessive and road congestion and accidents.”

“People in power are spending $11 million every minute on practices that destroy our living conditions and life supporting systems. Ignorance and stupidity defined,” tweeted climate activist Greta Thunberg shortly after the report was released.

The benefits that fossil fuel companies enjoy include direct subsidies that reduce prices (8%) and tax exemptions (6%), as well as indirect subsidies due to the economic costs of lives caused by air pollution (42%) and extreme weather events caused by global warming (29%), as well as congestion and road accidents (15%).

The IMF said scrapping subsidies could help prevent nearly 1 million annual deaths from air pollution alone.

Adding these costs to fuel prices would lead to less fossil fuel consumption, which in turn could help the world slash carbon emissions by almost a third and provide governments with additional revenues that could potentially be invested in clean energy. 

“Too little revenue is raised from fuel taxes, implying other taxes or government deficits must be higher or public spending lower,” says the report.

Despite efforts to invest in renewable energy and decarbonize the transportation sector, the IMF found that fossil fuel subsidies have increased in recent years and the organization forecasts that they will continue increasing, even though G7 nations had previously agreed to scrap fossil fuel subsidies by 2025. 

The IMF estimates that the U.S. government will provide approximately $730 billion in direct and indirect subsidies to fossil fuel companies this year, a figure that is expected to increase to $850 billion by 2025. EU lawmakers last month voted to continue providing subsidies to fossil fuel companies until at least 2027.

President Joe Biden has called for an end to fossil fuel subsidies but many Republicans—as well as Democrats representing fossil fuel states, including Joe Manchin—are fighting for the subsidies to continue.

A study by the Stockholm Environment Institute and Earth Track published in July found that U.S. subsidies and exemptions to environmental regulations “could increase the profitability of new oil and gas fields by more than 50% over the next decade.” The authors found most of the subsidies translated into higher profits for fossil fuel companies, especially when crude oil prices are high, as is the case now.

Because subsidies significantly reduce production costs, fossil fuel companies drill more wells than they would otherwise, which triggers a vicious circle that leads to higher production, higher consumption, and higher emissions. Indeed, the Biden administration is on track to issue the highest number of drilling permits on U.S. public lands since 2008.

The fossil fuel industry has lobbied for subsidies to continue. The American Exploration & Production Council last month told E&E News that if the U.S. Congress were to slash tax breaks the industry “would reduce newly drilled wells by about 25 percent.”

Eliminating fossil fuel subsidies can lead to higher fuel and electricity prices, which could trigger protests, and even riots, but countries including El Salvador, Indonesia, and India have successfully scraped fuel subsidies in the past without igniting protests.

To avoid social unrest, the IMF recommends “a comprehensive strategy, for example with measures to assist low-income households, displaced workers, trade-exposed firms/regions, and the use of revenues from price reform to boost the economy in an equitable way.”

The subsidies come on top of the funding that many countries give to fossil fuel companies.  According to Oil Change International, G20 nations provide at least three times as much public finance for fossil fuels ($77 billion) as for clean energy ($28 billion) every year. Meanwhile, data gathered by the Energy Policy Tracker, a website that tracks energy investments, indicates that economic recovery packages from G20 nations have earmarked $311 billion for fossil fuel companies and $278 billion for clean energy.