Fossil fuels receive more government support than renewables

You’ve probably seen claims that climate change isn’t all that scientists say it is. Is climate change a ‘scam’ designed to benefit ‘certain industrial groups’? Are environmentalists ‘enriching themselves at the expense of taxpayers’ hard work’?

These sorts of claims say that climate policies are unnecessary – or that they have a nefarious hidden agenda, designed to benefit shadowy interests.

Something can be a ‘scam’ in many ways. In this article, we’ll examine one type of claim – that ‘climate change’ is just an excuse to transfer money to renewables.

This particular claim doesn’t hold up. When we look at the data, we find that governments usually spend more money supporting fossil fuels than on supporting the renewables intended to replace them. And we find that fossil fuels are themselves often the cause of high energy prices.

Governments spend far more supporting fossil fuels than on renewables

If climate change were an excuse to transfer wealth to people who stand to gain – people promoting solutions to it, like renewables – we might expect to see governments spending loads of money to support those people.

So, how much money do governments spend supporting renewables? By comparison, how much money do they spend supporting fossil fuels, like coal, oil, and gas, which cause climate change?

In 2023, the governments of the G20 countries spent more than three times as much money supporting fossil fuels ($535 billion) as they did on renewables ($168 billion), according to a report from the International Institute for Sustainable Development (IISD), a Canadian think tank. 

A few countries’ governments do spend more on supporting renewables than on fossil fuels, such as Germany, but IISD found these to be the exception (Figure 1).

The answer is clear: on a global scale, fossil fuels gain far more in taxpayers’ money than renewables do.

This situation doesn’t seem to have changed much over the past several years. In 2017, around the world, fossil fuels received 70% of all energy subsidies ($447 billion), while renewables received just 20% ($128 billion), according to a 2020 report from the International Renewable Energy Agency. Over the past decade, governments around the world have spent around $500 billion per year on fossil fuel subsidies.

‘Subsidies’ and ‘support’ for fossil fuels come in many forms: direct payments to companies, schemes that make vehicle fuel cheaper for drivers, tax breaks on fossil fuels, and other support programs. So, it’s difficult to measure their exact numbers. (For example, estimates of how much the U.S. government spends on fossil fuel subsidies range from $10 to 50 billion per year.) 

However, most analysts agree that, around the world, governments spend far more on supporting fossil fuels than on supporting renewables. Even if investment in renewables is growing, much of that investment comes from the private sector rather than from governments, and fossil fuels are still far more influential as far as governments are concerned.

Some developing countries – particularly those who produce a lot of oil themselves – spend double-digit percentages of their GDP just to support fossil fuels, such as on vehicle fuel subsidies. Some countries spend more to support fossil fuels than on social safety nets for their citizens.

Judging from these numbers, the idea that ‘those promoting environmentalism are enriching themselves at the expense of taxpayers’ hard work’ doesn’t really hold water.

Fossil fuels can spike energy prices

You’ll sometimes see reports saying they’re “setting the record straight” or that renewables are “raising consumer costs and undermining economies”, while claiming that renewables actually get a lot more public support than fossil fuels. 

It’s worth noting the claims we’ve linked are from sources that have received funding from fossil fuel interests or openly campaigned against renewable development. These don’t represent the views of most people who study energy prices.

But they show another common theme of claims that climate change is a ‘scam’: that renewables force customers to pay more for their energy. Would customers pay less if they used fossil fuels instead?

There is no one answer. Energy supplies and electricity grids vary from country to country. It’s certainly possible for renewables to increase the price of energy, depending on how the market is set up. For example, if governments implement levies to raise money for renewable energy, then they can increase costs.

But in the last several years, we’ve seen some clear examples of high energy costs that are clearly caused by fossil fuel prices.

According to a 2023 study, while fossil fuels generated 34% just of Europe’s electricity in 2021, fossil fuel prices set the price of electricity 58% of the time between 2015 and 2021^[1]. In some countries, such as the United Kingdom, the price of electricity was almost entirely dependent on the price of fossil fuels.

Fossil fuel prices are very volatile. Even if they are cheap one day, they can rise around the world the next. We’re seeing this now, thanks to the war in Iran. We saw this in 2022, when natural gas prices in particular spiked after the Russian invasion of Ukraine. We see that this was the primary cause of raising electricity costs in Germany (Figure 2).

And as we’ve covered in a past insight, electric grids with more renewables don’t necessarily generate more expensive electricity. For example, when we look at U.S. states, some of the states with the cheapest electricity are actually states in the middle of the country that are heavily dependent on wind energy for their electricity.

Despite this, renewables often get the blame for making electricity more expensive. Why is that? As we’ll cover in a moment, fossil fuel interests are known sources of disinformation.

We know that climate change is real, not ‘manufactured’

You’ve heard scientists say climate change is a result of burning fossil fuels, adding CO2 to Earth’s atmosphere. We know without any doubt that this is the case^[2].

It’s a natural part of science to question established results, but this has held up to decades to such questioning. Scientists are certain that Earth’s climate is warming at rates unprecedented in the planet’s recent past. Scientists know that climate change is already exacerbating droughts, fires, and storms and placing humans at risk^[3].

So why is it controversial? One reason is that fossil fuel interests have spent decades downplaying climate change.

It’s well-recorded that fossil fuel companies, and organizations funded by fossil fuel interests, spread disinformation and try to block climate policies. 

And their targets have spread from climate science to climate solutions, like renewables, which might replace fossil fuels. Researchers have mapped networks, in the U.S., by which fossil fuel interests support groups that oppose the development of wind turbines.

It’s worth keeping this in mind – when you see claims that climate change is a ‘scam’, there is a chance you are really seeing the results of fossil fuel interests at work.

References

• 1 – Zakeri et al. (2023) The role of natural gas in setting electricity prices in Europe. Energy Reports.
• 2 – Zhong and Haigh (2013) The greenhouse effect and carbon dioxide. Royal Meteorological Society Weather.
• 3 – IPCC (2021).Sixth Assessment Report.