GOVERNMENT SUBSIDIES
The cost of these measures looks set to rise to about US$1.1 trillion this year, according to a study last week by the United Nations Development Programme. If crude averages US$110 a barrel over the full year, it could climb as high as US$1.43 trillion. That’s almost as much as was spent on such subsidies during the year the Ukraine war started in 2022.
Whatever the final figure, the amount of government cash support pumped into the fossil fuel system this year will be running close to the amount that both public and private investors were prepared to invest in it. It’s an extraordinary situation for an industry that claims to be governed by capitalist laws of supply and demand, rather than statist central planning.
One might expect such behavior from the administration of President Donald Trump, which has directed US$700 million of public money to revive coal mining and another US$1 billion as a sort of anti-subsidy to encourage TotalEnergies and its co-investors to quit offshore wind leases and spend money on oil and gas instead.
What’s more shocking, some 10 years after the 2015 Paris Agreement on climate change, is that it’s far more widespread than that. In the European Union, normally seen as a bastion of green policymaking, subsidies for fossil fuels in 2024 came to 97 billion euros (US$110 billion), well above the 76 billion euros that went to renewables.
Or take the UK. If you want to warm your home with a heat pump using its 68 per cent clean grid, you’ll be paying an effective carbon price on every kilowatt-hour, thanks to wrinkles in the way electricity is priced. If you use a boiler and 100 per cent dirty gas, you won’t pay a cent for your emissions. That’s one reason it has been so hard to convince householders that a switch to heat pumps makes financial sense.