Originally published July 22, 2010. Updated July 19, 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 publishes a far bigger figure for the same year, $7 trillion, because it counts more than government spending. In the US, the subsidies aren’t mostly about cheap gas at the pump. They’re tax breaks for drillers, worth about $2.1 billion in FY2022, and the 2025 tax law expanded some of them instead of cutting them.
How much are fossil fuels subsidized worldwide
The IEA’s count hit a record above $1 trillion in 2022, then dropped back to $620 billion in 2023 the following year. For that same year, 2022, the IMF’s number was $7 trillion, equal to 7.1% of the entire world’s economic output. Even the IEA’s own record year is a small piece of the IMF’s total for the same twelve months.
| 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 only counts explicit subsidies, direct payments that hold down 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 the costs of global warming and local air pollution alone account for about 60%. That’s the plain reason the IMF number comes out so much bigger. More than half of it prices damage that no government wrote a check for.
An earlier IMF estimate covering 20 major economies in 2020 found a similar split: $454.79 billion explicit against $5,402.57 billion implicit. A carbon price is the policy built to close that implicit gap, by putting a number on pollution so it 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. The EIA counts $780 million a year in the intangible drilling costs deduction, which lets drilling companies write off site-prep and drilling costs immediately instead of spreading them out over the life of a well. 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.
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 tied to 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 ten years, though earlier legislative estimates had put it closer to $1.1 billion. It 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. 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, diesel, cooking gas or electricity. 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.
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. They’re two separate kinds of support, one at the pump and one in the tax code, 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, a real drop, and IEA’s database has already been extended 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 2025. Instead of ending intangible drilling cost expensing or percentage depletion, the 2025 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.
Does divestment keep carbon in the ground
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, and the tracker’s own page doesn’t list a date for when institutions acted on their commitments. Whether pledged money is leaving fossil fuel investments, or sitting as a promise on paper, is the open question that number alone doesn’t answer, and it’s the one worth watching as the pledged total keeps climbing.
