Fossil Fuel Subsidies

Undercharging for fuels is disaggregated into explicit and implicit subsidies. Explicit subsidies measure the amount that the financial cost to supply a fuel (i.e., the supply cost) exceeds the price paid by the fuel user. Implicit subsidies measure the difference between a fuel’s full social cost and the price paid by the fuel user, exclusive of any explicit subsidy. A fuel’s full social cost includes both supply costs and negative externalities, which are costs imposed on society due to consuming the fuel and primarily include local air pollution, climate change, and broader externalities related to driving. It should be noted that the concept of “subsidies” used here differs from the definition of subsidies in macroeconomic statistics. Sources: Black, Simon; Liu, Antung A.; Parry, Ian; Vernon, Nate. 2023. IMF Fossil Fuel Subsidies Data: 2023 Update. International Monetary Fund. ISBN: 9798400249006/1018-5941. IMF staff estimations. Category: Mitigation Data series: Fossil Fuel Subsidies - Total Implicit and Explicit Fossil Fuel Subsidies - Total Implicit and Explicit - Natural Gas Fossil Fuel Subsidies - Total Implicit and Explicit - Coal Fossil Fuel Subsidies - Total Implicit and Explicit - Electricity Fossil Fuel Subsidies - Total Implicit and Explicit - Petroleum Explicit Fossil Fuel Subsidies - Total Explicit Fossil Fuel Subsidies - Coal Explicit Fossil Fuel Subsidies - Electricity Explicit Fossil Fuel Subsidies - Natural Gas Explicit Fossil Fuel Subsidies - Petroleum Implicit Fossil Fuel Subsidies - Total Implicit Fossil Fuel Subsidies - Accidents Implicit Fossil Fuel Subsidies - Coal Implicit Fossil Fuel Subsidies - Congestion Implicit Fossil Fuel Subsidies - Electricity Implicit Fossil Fuel Subsidies - Foregone VAT Implicit Fossil Fuel Subsidies - Global Warming Implicit Fossil Fuel Subsidies - Local Air Pollution Implicit Fossil Fuel Subsidies - Natural Gas Implicit Fossil Fuel Subsidies - Petroleum Implicit Fossil Fuel Subsidies - Road Damage Methodology: The calculations follow two steps for each fuel source and use (e.g., industrial coal use): (i) estimation of country-level externalities by fuel on societal costs of associated local air pollution, greenhouse gas emissions, congestion and road accidents, and (ii) calculation of country-level subsidies based on support given to producers and the gap between retail prices and the socially optimal price. Subsidies are disaggregated into explicit and implicit subsidies, where explicit refers to subsidies caused by the supply costs being greater than the retail prices, whereas implicit subsidies reflect subsidies caused by the efficient price (incorporating the cost of negative externalities of fossil fuel use and foregone consumption tax revenues), being greater than the retail price exclusive of explicit subsidies. A full description of the methodology and associated data is provided in the Working Papers titled Still Not Getting Energy Prices Right: A Global and Country Update of Fossil Fuel Subsidies and IMF Fossil Fuel Subsidies Data: 2023 Update, and on the IMF’s energy subsidy website. Disclaimer: The subsidy amounts are estimates using the available data. See the associated Working Paper for additional caveats.