SDG 7: Affordable and Clean Energy | SDG 12: Responsible Consumption and Production | SDG 13: Climate Action
Ministry of Finance | Ministry of Petroleum and Natural Gas | Ministry of New and Renewable Energy
The OECD Inventory of Support Measures for Fossil Fuels 2025 reports that global government support for fossil fuels fell by approximately 11% to USD 916.3 billion in 2024. This decline reflects the reduction and phasing out of emergency measures introduced during the 2022 energy price peak and a stabilization of energy supply costs. Despite this drop, the total fiscal cost remains elevated relative to historical averages, with 84.2% of 2024 support directed toward fossil fuel consumption.
Key strategic findings and policy levers include:
Sectoral Shifts: Transportation has emerged as the leading sector for support, reaching USD 113.6 billion in 2024, while the residential sector saw a sharp 28.7% decline in fiscal costs.
Phase-out of Emergency Aid: The number of emergency support measures fell from 284 in 2022 to 192 in 2024, indicating a transition toward more stable pricing regimes.
Efficiency and Equity: Approximately 71.4% of fossil fuel consumption support remains untargeted, disproportionately benefiting higher-income households and weakening price signals for the energy transition.
Net Effective Carbon Rates (Net ECR): Direct budgetary transfers and low excise rates have weakened decarbonisation incentives, causing the average Net ECR to decrease from EUR 18.6/tCO2e in 2021 to EUR 14.9/tCO2e in 2023.
What is the “Net Effective Carbon Rate” (Net ECR) and why does it matter? The Net Effective Carbon Rate is a comprehensive metric that measures the total price signal for carbon emissions by combining explicit carbon taxes and emissions trading system (ETS) permit prices with fuel excise taxes, then subtracting direct budgetary transfers that lower pre-tax fossil fuel prices. It serves as a vital indicator of the actual economic incentive for firms and households to decarbonise, as high subsidies can effectively create a “negative” carbon price that offsets environmental regulations.
Policy Relevance
The report's core recommendation is to make support measures better targeted and temporary, phasing out inefficient ones to free fiscal resources for clean energy transitions and net-zero goals. For India, which is explicitly included in the OECD-IEA combined estimates, the findings highlight a critical fiscal challenge: reconciling energy affordability with the Viksit Bharat @2047 sustainability goals. The report’s emphasis on shifting from untargeted subsidies to direct income support aligns with India’s increasing use of Direct Benefit Transfer (DBT) in the petroleum sector. Furthermore, with transportation support rising globally, India’s Ministry of Petroleum and Natural Gas faces pressure to rationalize fuel taxes to ensure that short-term fiscal relief does not undermine long-term investments in green hydrogen and EV infrastructure.
Follow the full news here: OECD Inventory of Support Measures for Fossil Fuels