Originally published July 22, 2010. Updated September 28, 2026.
Fossil fuels got about $620 billion in direct government support worldwide in 2023, according to the International Energy Agency. That’s down from a record above $1 trillion in 2022. The International Monetary Fund puts the number far higher for that same year, $7 trillion, because it counts climate and health costs on top of government spending. In the US, the subsidies are mostly tax breaks for drillers worth about $2.1 billion in FY2022, and none of that shows up as a discount when you fill up at the pump.
How much are fossil fuels subsidized worldwide
For 2022, the same year as the IEA’s record high, the IMF put the total at $7 trillion, equal to 7.1% of world economic output. Even the IEA’s own record, more than $1 trillion in 2022, is a small piece of that IMF number for the same twelve months. None of it would show up on your receipt at a US pump. The US doesn’t cap gasoline or diesel prices the way many of the countries in the IEA’s count do.
| Measure | Amount | Year |
|---|---|---|
| IEA consumption subsidies | $620 billion | 2023 |
| IEA consumption subsidies, record high | over $1 trillion | 2022 |
| IMF total, explicit plus implicit | $7 trillion | 2022 |
| IMF total, share of world GDP | 7.1% | 2022 |
Why the IEA and IMF numbers are so different
IEA counts only explicit subsidies, government payments that hold the price of oil, gas, coal or the electricity made from them below what it costs to supply. The IMF’s number adds implicit subsidies too, the climate and health costs of burning fossil fuels that never show up on a government’s books.
In the IMF’s $7 trillion total for 2022, explicit subsidies make up 18% of the total, and global warming and local air pollution costs alone account for about 60%. That local air pollution share is the smog you’d breathe living near a coal plant or a busy refinery, priced in dollars for the first time.
A carbon price is the policy built to close that implicit gap. It puts a number on pollution so the cost shows up in what people pay, instead of getting left off the books entirely.
How much does the US spend subsidizing oil and gas
In the US, the subsidy question is about the tax code that applies to drillers. Picture a drilling rig boring a new well. Everything from building the access road to drilling the hole counts as an intangible drilling cost, the deduction that lets a company write off that spending immediately instead of spreading it out over the life of a well. The EIA counts this deduction at $780 million a year.
Percentage depletion adds another $960 million a year, a flat percentage of a well’s income that companies can keep deducting even after they’ve already written off more than they originally invested. Add in the rest of the federal tax code for oil and natural gas, and the total came to about $2.1 billion for FY2022. Neither deduction touches what you pay at the pump or on a power bill. Both lower what the drilling company owes the IRS.
These figures move by year. In FY2016, the same intangible drilling costs provision brought the Treasury $540 million in net revenue instead of costing money, and percentage depletion cost $492 million that year, about half its FY2022 total.
Don’t confuse the two provisions. Intangible drilling costs let a company expense its drilling bill early. Percentage depletion is a separate deduction based on a well’s income, one that can outlast the money a company put into the ground.
What changed under the 2025 tax law
Congress passed the One Big Beautiful Bill Act in July 2025, and it moved several of these provisions in the opposite direction from repeal. The law let drillers exclude intangible drilling costs from the new 15% corporate minimum tax, a change the Joint Committee on Taxation scored at $427 million over the next decade, though an earlier JCT analysis of similar legislation had put the same kind of change at $1.1 billion over ten years.
The law also cut the federal royalty rate on oil and gas leases on public land, from 16.67% back down to 12.5%, undoing an increase Congress made in the 2022 Inflation Reduction Act. That royalty comes from leases on land you and every other citizen technically own a share of, managed by the federal government on the public’s behalf. A lower rate means the government collects less from every well drilled there.
Percentage depletion itself wasn’t touched either way. Counting these changes alongside the law’s other energy provisions, Taxpayers for Common Sense put the total value of new and expanded fossil fuel tax breaks at about $70.5 billion over ten years.
Who these subsidies reach, drivers or drillers
Worldwide, most of the $620 billion IEA counts goes toward capped consumer prices, government programs that hold down what people pay for gasoline and diesel at the pump, or cooking gas and electricity at home. A subsidized pump price reaches anyone who buys fuel there, regardless of income, the same explicit-subsidy mechanism the IEA counts as holding a price below the cost of supply. A government that caps its own fuel prices turns this subsidy into a discount at your pump. The US doesn’t do that.
The US tax breaks work differently. None of the $2.1 billion in federal tax expenditures lowers what a driver pays at the pump. Intangible drilling costs and percentage depletion both reduce a drilling company’s tax bill, and comparing the IEA’s $620 billion against the $2.1 billion in US tax breaks dollar for dollar treats consumer relief and producer tax policy as the same thing.
Are governments phasing these subsidies out
The worldwide count and the US tax code haven’t moved the same way. IEA’s own number fell from a record above $1 trillion in 2022 to $620 billion in 2023, and its database now runs through 2024 in its newest edition, so next year’s public total could move again.
The specific US provisions that critics have wanted repealed for over a decade went the other direction in the 2025 tax law. Instead of ending intangible drilling cost expensing or percentage depletion, the law shielded IDC from the corporate minimum tax and cut the federal royalty rate that had been raised in 2022. On the global number, the trend is down. On the US tax code, it reversed.
That shift changes what the government collects, not what you pay at the pump.
Why a pledge to divest isn’t proof money moved
Divestment answers a different question than subsidies do. It asks whether investors keep funding fossil fuel production at all.
The Global Fossil Fuel Divestment Commitments Database tracks 1,731 institutions that have made a formal pledge to divest, representing about $40.76 trillion in combined assets under management. Stand.earth runs the database, which grew out of 350.org‘s Go Fossil Free campaign, launched in 2012. That count is a tally of pledges.
It isn’t proof that any of those trillions left fossil fuel holdings. The tracker’s own page lists no date for when an institution moved its money, so nobody publishes a number for how much of that pledged total has left fossil fuel investments versus how much still sits there as a promise on paper. If your own retirement account holds a fund that made this pledge, that’s the question its fine print won’t answer for you either.
