The fossil fuel industry in the United Kingdom continues to receive massive government support, with current subsidies estimated at £17.5 billion per year, the highest level since 2016.
The UK's approach stands out as particularly problematic, spending the least on low-carbon energy and climate action among major European nations.
These subsidies manifest in two primary forms.
Explicit subsidies occur when consumer prices are kept artificially below production and distribution costs, including infrastructure expenses. For oil specifically, these subsidies cover the cost difference between domestic consumption and international sales potential.
Implicit subsidies arise when prices don't account for external costs like climate change impacts, health effects, air pollution, harmful pollutants, and even traffic congestion.
The total global cost of fossil fuel subsidies reached a staggering $7 trillion in 2022, representing 7.1% of global GDP - a $2 trillion increase since 2020. Following energy price spikes due to the Russian invasion of Ukraine, subsidies have trended upward to compensate for the increasingly inefficient industry.
Without serious reform, these subsidies are projected to reach $8.2 trillion by 2030.
The consequences of these subsidies are far-reaching.
They encourage overconsumption of fossil fuels, drain government budgets away from essential services like healthcare and education, distort market forces against renewable energy, and create dangerous energy dependencies.
The International Energy Agency notes that for every dollar spent supporting renewable energy, six dollars go to fossil fuel subsidies, with only 8% of these subsidies reaching the poorest fifth of the population.
The Rosebank oil field exemplifies this misaligned policy.
Located 80 miles west of the Shetland Islands, this largest undeveloped UK oil and gas field would receive billions in taxpayer subsidies through tax breaks if approved. Containing 300 to 500 million barrels of oil, its emissions would exceed those produced by 700 million people in the world's poorest countries annually. Since the oil would be exported, it wouldn't reduce UK fuel bills or enhance energy security.
Several countries have successfully implemented subsidy reforms. Indonesia has achieved 10.6% savings in public expenditure through three reforms since 1997.
India has reduced subsidies by 85% since 2013 while tripling renewable energy investments. Morocco, Saudi Arabia, and Ukraine have eliminated explicit subsidies, while Bangladesh and Sri Lanka have introduced gradual phaseout plans.
Removing subsidies could reduce global CO2 emissions by an estimated 5% by 2030 and make many oil and gas projects economically unviable.
The billions saved could support clean energy development and help vulnerable households during the transition. Benefits would include improved public health, enhanced energy security, job creation, and increased innovation in the renewable sector.
The Climate Change Committee estimates that reaching Net Zero by 2050 would cost less than 1% of GDP annually - significantly less than current fossil fuel subsidies.
However, in the latest National Determined Contributions, only 9 countries included subsidy reduction plans, with no G7 or G20 countries mentioning subsidies at all. In fact, G7 countries have increased tax subsidies for fossil fuels by 15% since first pledging to eliminate them.
The main barrier to reform appears to be political will.
Despite signing various international commitments, including the Glasgow Climate Pact and Paris Agreement, meaningful action remains elusive.
Meanwhile, UK energy industry profits have surged past £125 billion while 12 million households face fuel poverty. The solution requires a comprehensive approach to end all negative financial flows into fossil fuels, including tax reliefs, subsidies, loopholes, and investments.
The current system effectively subsidizes environmental destruction while undermining climate goals and public interests.