# Fossil-fuel subsidies **Fossil-fuel subsidies** are government policies that lower the effective price of coal, oil, or gas — either for consumers (for example, holding retail fuel or electricity prices below market levels) or for producers (through tax breaks and support for extraction). In the welfare graph they act as a *driver*: a policy force that shifts incentives across the energy system rather than a single event. ## Mechanism A subsidy works by changing relative prices. When fossil energy is made artificially cheap, households and firms consume more of it than they otherwise would, and the cost advantage of cleaner alternatives is partly offset. The same support can also keep marginal fossil production viable that an unsubsidised market would retire. The effect is therefore felt twice: in higher fossil consumption today and in a slower shift toward alternatives over time. ## Dynamics and scope The scale of subsidies varies sharply between countries and over time, often rising when global fuel prices spike and governments shield consumers from the increase. This makes the driver cyclical as well as structural: reform is politically hardest exactly when prices are high and the subsidy is most expensive. ## Uncertainty and what it affects Estimates of the global total differ widely, chiefly because they disagree on whether to count the unpriced environmental and health costs of burning fossil fuels alongside direct fiscal support. Narrow measures are smaller than the broadest "implicit" ones, and both are legitimate depending on the question. ## Dated facts - 2026: Prabowo says Indonesia will go ahead with a B50 biodiesel blend this year. https://factrail.ai/facts/id-prabowo-b50-energy-2026. Sources: https://www.reuters.com/sustainability/climate-energy/indonesia-go-ahead-with-b50-biodiesel-mix-this-year-president-says-2026-03-30/, https://www.setneg.go.id/. - 2025: Budi95 sets citizen RON95 at RM1.99 a litre and a two-tier pump. https://factrail.ai/facts/my-anwar-budi95-2025. Sources: https://www.straitstimes.com/asia/se-asia/malaysia-to-lower-price-of-subsidised-ron95-fuel-from-sept-30-anwar-says, https://www.pmo.gov.my/. - 2025: Environment Minister Watt gives final EPBC approval to the North West Shelf extension. https://factrail.ai/facts/au-nws-2025. Sources: https://www.reuters.com/business/energy/australia-approves-woodsides-north-west-shelf-lng-project-extension-2025-05-28/, https://minister.dcceew.gov.au/watt/media-releases/media-statement-north-west-shelf-project-extension-final-decision. - Interior Department curtails federal offshore-wind leasing and approvals in 2025. https://factrail.ai/facts/energy-fact-burgum-offshore-wind-halt-2025. - 2025: RP4 electricity tariffs start with a higher base rate and monthly fuel adjustment. https://factrail.ai/facts/my-anwar-electricity-2025. Sources: https://themalaysianreserve.com/2025/06/30/tnb-insulated-as-new-electricity-tariff-kicks-in-from-july/, https://www.st.gov.my/jadual-elektrik-baharu-lebih-236-juta-pengguna-domestik-semenanjung-nikmati-kadar-lebih-adil. - 2025: Energy Secretary Wright orders DOE to prioritize fossil fuels and reject net-zero. https://factrail.ai/facts/energy-fact-wright-energy-dominance-order-2025. - 2024: Peninsular diesel floats to about RM3.35 a litre under targeted subsidies. https://factrail.ai/facts/my-anwar-diesel-2024. Sources: https://www.reuters.com/markets/commodities/malaysia-cut-diesel-subsidies-targets-852-million-annual-savings-pm-says-2024-05-21/, https://www.mof.gov.my/portal/en/news/press-citations/diesel-subsidy-savings-will-be-redirected-through-public-transport-str-pm. - 2023: COP28 adopts the UAE Consensus in Dubai. https://factrail.ai/facts/ae-cop28-uae-consensus-2023. Sources: https://www.reuters.com/business/environment/cop28-deal-signals-beginning-end-fossil-fuels-era-2023-12-13/, https://unfccc.int/cop28. - 2023: The government publishes the National Energy Transition Roadmap. https://factrail.ai/facts/my-anwar-netr-2023. Sources: https://www.reuters.com/sustainability/malaysia-unveils-energy-transition-roadmap-2023-08-11/, https://ekonomi.gov.my/. - 2023: Ruto’s government expands a subsidised-fertilizer programme for smallholders. https://factrail.ai/facts/ke-fertilizer-subsidy-2023. Sources: https://www.reuters.com/world/africa/kenya-fertilizer-subsidy-smallholders-2023/, https://www.president.go.ke/. - 2023: Kishida government extends energy-price subsidies. https://factrail.ai/facts/jp-kishida-energy-subsidy-2023. Sources: https://www.reuters.com/world/asia-pacific/japan-extends-energy-subsidies-kishida-2023-01-16/, https://www.meti.go.jp/. - 2022: World Cup stadiums run industrial air-conditioning in a desert summer calendar. https://factrail.ai/facts/qa-world-cup-climate-ac-2022. Sources: https://www.reuters.com/lifestyle/sports/qatar-world-cup-stadium-air-conditioning-2022/, https://www.qatar2022.qa/. ## Methodology https://factrail.ai/methodology Canonical: https://factrail.ai/drivers/energy-fossil-fuel-subsidies