Fossil fuel use has a hidden bill. The IMF puts it at a whopping $6.7 trillion a year, nearly $13 million every minute. Hidden but not invisible.
Hear the phrase ‘fossil fuel subsidies’ and you’d be forgiven for picturing governments handing out financial favours to oil and gas giants. That’s sometimes the case, but it's a small part of a more costly story.
The International Monetary Fund (IMF) estimates that fossil fuels were underpriced by about $7.4 trillion in 2024, equivalent to 6.4% of global GDP. That’s more than twice what the world spends on the military and three times what was invested in clean energy in 2025.
Explicit subsidies: $725 billion
These are the conventional subsidies; that is, government support that makes fossil fuels cheaper to produce or consume. Most benefit consumers, not producers. Think subsidised petrol, cheaper cooking fuels or government interventions to protect households from skyrocketing energy bills.
During the 2022 energy crisis, for instance, explicit fossil fuel subsidies spiked as governments spent liberally to protect consumers from extortionate energy prices after Russia's invasion of Ukraine. The trouble with blanket subsidies? They cost a fortune, and the biggest benefits often go to those who use the most energy.
Implicit subsidies: $6.7 trillion
These are the hidden costs, the ones that fossil fuel prices fail to reflect. Economists call most of these negative externalities: harms imposed on other people that aren't included in the original price tag of the product being sold. Kind of like a restaurant that charges you for the starter but sends the bill for the main, dessert and drinks to someone else's table.
The IMF identifies four main types of implicit subsidies:
- Air pollution: The biggest hidden cost. Burning fossil fuels releases pollution that shortens lives and burdens health systems. The Lancet Countdown data explorer estimates that fossil-fuel-related outdoor air pollution caused 2.8 million premature deaths in 2023.
- Climate damage: Fossil fuel emissions drive global heating, intensifying heatwaves, floods, droughts and other impacts. The bill is distributed unevenly across borders and time.
- Road impacts: Mainly congestion, accidents and road damage. These costs aren't fully reflected in fuel prices. Electric vehicles contribute too, but the IMF accounts for them when calculating the true cost of fossil fuel use.
- Forgone tax revenue: Fossil fuels are often taxed below normal consumption tax rates, leaving governments with less revenue than they would have otherwise collected.
$14 million every minute
Back in 2015, The Guardian reported that fossil fuels were receiving subsidies equivalent to $10 million a minute.
Fast-forward to 2024 and the hidden costs mount up to over $12 million a minute. Include those explicit subsidies and it's $14 million a minute.
But the vast majority of that huge figure represents estimated societal damage, converted using sophisticated economic models and assumptions. As Hannah Ritchie writes, there isn't a $7.4 trillion pot of public money lying around that could be redirected to renewables or electrification.
Levelling the playing field
Completely removing explicit subsidies would be a monumental first step, but even that would still only address about one-tenth of the problem. Tackling the implicit subsidies side of the ledger would be harder still. It would mean simultaneously slashing pollution, putting a proper price on carbon emissions and air pollution, accounting for road-related costs and making cleaner alternatives more affordable.
Willing governments could help internalise these externalities with judicious policy, bringing more of the true costs of fossil fuels into the prices consumers pay, while changing the incentives so that we seek out cost-effective alternatives.
Fossil fuels look cheaper than they truly are. That’s because their downstream costs are picked up by other people, in other places, at other times.
