Notes: The G20 data shown here include European Union members Germany, France, and Italy but not the European Union as a block. 2022 data for public finance and some subsidies are projections. See the following sections for details.
Sources: Compilation of support discussed in this digital story. Learn more in the accompanying Methodology Note.
The 2022 energy price crisis, brought about by Russia’s invasion of Ukraine, has catapulted public financial support for fossil fuels to new levels. G20 governments were quick to cushion the effects of peaking fossil fuel prices and bolster energy supplies, providing a staggering USD 1.4 trillion in the form of subsidies, investments by state-owned enterprises (SOEs), and lending from public financial institutions (PFIs). While much of this was support for consumers, around one third (USD 440 billion) was driving investment in new fossil fuel production.
This support perpetuates the world’s reliance on fossil fuels, paving the way for yet more energy crises due to market volatility and geopolitical security risks. It also severely limits the possibilities of achieving climate objectives set by the Paris Agreement by incentivizing greenhouse gas (GHG) emissions while undermining the cost-competitiveness of clean energy. G20 governments need to shift their financial resources away from fossil fuels to instead provide targeted, sustainable support for social protection and the scaling-up of clean energy. Maintaining fossil fuel prices that reflect the cost these fuels impose on society will be necessary to reduce fossil fuel use.
In 2009, G20 governments committed “to phas[ing] out and rationaliz[ing] over the medium term inefficient fossil fuel subsidies while providing targeted support for the poorest” (p. 3). By signing and ratifying the Paris Agreement in 2015, all G20 countries pledged to make “finance flows consistent with a pathway toward low GHG emissions and climate-resilient development” (Article 2.1(c)). Public financial flows should be the first to move: they fall directly under government influence and can leverage private financial flows.
In 2023, the G20 has an important leadership role to play in driving reform and demonstrating to the global community that commitments can and should be followed up by firm action. As G20 chair, India can confidently demonstrate global leadership in this area, having reduced its fossil fuel subsidies by 76% from 2014 to 2022 while significantly increasing support for clean energy.
This digital story provides the latest evidence regarding the extent to which the G20, as a whole, has made progress in aligning public financial flows with the need to reduce GHG emissions. The first sections examine the four main types of support for fossil fuels: subsidies, investments by SOEs, lending from PFIs, and under-taxation. The final two sections examine progress on renewable energy subsidies and investments. Each section contains recommendations for the G20.
Overarching recommendations for the G20
- Act on climate commitments by eliminating all public financial flows to fossil fuels—including subsidies, investments by SOEs, and public financing—other than those necessary to provide energy access to the poorest. The boldest, fastest action should be from the G20’s highest per-capita income members, given their historical responsibility for emissions and higher emissions per unit of GDP.
- Incentivize consumers and investors to shift away from fossil fuels by setting minimum carbon taxation levels of between USD 25 and USD 75 per tonne of carbon dioxide equivalent (tCO2e), depending on country income.
- Use revenues from subsidy reform and carbon pricing to provide support to low-income and vulnerable households—through redistributive measures, with targeting based on income and assets—and for the rapid scale-up of clean energy.
- Contribute their fair share in the delivery of a globally just transition to ensure fossil-dependent communities and energy consumers, particularly developing countries, are supported through flows of finance, knowledge, capacity, and technology.