Judging by the way many people discuss the energy transition, we are engaged in a fight between green ideologues in government and academia on the one hand, and a more realistic private sector that recognizes the innate superiority of fossil fuels on the other.
Follow the money, and you will see precisely the opposite picture. The share of private energy investment going into oil, gas and coal has slumped from about 50% to 28% since 2015, according an International Energy Agency (IEA) database. The public sector, meanwhile, still invests most of its money in dirty power—53%, down more marginally from 67% a decade ago.
That actually understates quite how bad things are, because the state does not just fund carbon-based energy by investing in its production. It also pumps out subsidies to make it artificially cheap. That encourages us to use more polluting energy, and deters us from making the switch to cleaner, more affordable alternatives.
That state support is likely to rise to the highest level since 2022 this year. With the war in the Strait of Hormuz pushing up the cost of oil and gas, one of the first responses of many governments has been to cut taxes and lift their support for gasoline, diesel and LPG.
The cost of these measures looks set to rise to about $1.1 trillion this year, according to a study brought out last week by the United Nations Development Programme. If crude averages $110 a barrel over the full year, it could climb as high as $1.43 trillion. That is almost as much as was spent on such subsidies during the year the Ukraine war started in 2022.
Whatever the final figure, the amount of government cash support pumped into the fossil fuel system this year will be running close to the amount that both public and private investors were prepared to invest in it. It is an extraordinary situation for an industry that claims to be governed by capitalist laws of supply and demand, rather than statist central planning.
One might expect such behaviour from the Trump administration, which has directed $700 million of US public money to revive coal mining and another $1 billion as a sort of anti-subsidy to encourage TotalEnergies and its co-investors to quit offshore wind leases and spend money on oil and gas instead.
What’s more shocking, some 10 years after the 2015 Paris Agreement on climate change, is that it is far more widespread than that. In the European Union, normally seen as a bastion of green policymaking, subsidies for fossil fuels in 2024 came to €97 billion, well above the €76 billion that went to renewables.
Or take the UK. If you want to warm your home with a heat pump using its 68% clean grid, you will be paying an effective carbon price on every kilowatt-hour, thanks to wrinkles in the way electricity is priced. If you use a boiler and 100% dirty gas, you will not pay a cent for your emissions. That is one reason it has been so hard to convince householders that a switch to heat pumps makes financial sense.
Subsidies for clean energy do exist, to be sure, but they are not anywhere close to the numbers the state spends on fossil fuels. A separate IEA database tracking more than 1,000 government energy spending policies introduced since 2020 found just $480 billion for low-carbon power, plus another $618 billion for cleaner transport such as electric vehicles. “Energy affordability”—most of it money used to lower the cost of oil, gas and electricity—sucked up a third of the total, at $939 billion.
If you combine the value of public investment and public subsidies, about 59% of all money spent on the fossil fuel system came from taxpayers in 2015. By 2025, that had climbed to 68% and spiked as high as 78% in 2022.
This support is so pervasive that in most places we do not even notice or question it. That has to change. Governments must stop throwing sand in the gears of the energy transition. Far from reducing as the climate emergency intensifies and heatwaves claim thousands of lives, they have been doubling down on counterproductive support for polluting fuels, while loading tariffs and regulations onto clean energy.
As the economist Friedrich Hayek argued, the best guide to the future is not the directives of central planners, but the myriad spending decisions of a private sector that responds to price signals in the real world. Right now, that private sector is pumping more and more of its money into an energy system of the future, while the state mounts a rearguard operation to prop up the past.
It’s well past time for us to stop using taxpayer money to feather-bed a dying fossil economy. Let the free market speak and we will finally unleash the potential of clean energy. ©Bloomberg
The author is a Bloomberg Opinion columnist covering climate change and energy.