The EU spent 184 billion Euros on energy subsidies in 2021

Under the Regulation on the Governance of the Energy Union, EU Member States must phase out fossil fuel subsidies to meet the EU’s climate goals. The phase-out date is 2050; however, talks are underway within the EU to set an earlier end date. Additionally, in November 2021, the Glasgow Climate Pact, adopted by UN member nations, called for the phasing out inefficient fossil fuel subsidies.  To monitor how effectively Member States are phasing out these subsidies, the EU has conducted a study annually since 2020 in which fossil fuel subsidy data is acquired from its member states. The EU then produces a report that includes data on how much each member state spends on fossil fuel subsidies and which sectors are being subsidized most heavily.

The most recent study was performed in 2022 and analyzed data collected in 2021. In 2021, the EU spent €184 billion on energy subsidies, which include fossil fuels, nuclear energy, and renewables, with €39 billion being attributable to fossil fuel subsidies. This marked a significant drop from 2020 when the EU spent €50 billion on fossil fuel subsidies. The primary sectors where fossil fuel subsidies are utilized in the EU are transport, industry, energy, and agriculture.

The amount of fossil fuel subsidies spent in the transport sector in the EU 2021 was €10 billion, which marks a decrease from the €10.5 billion spent in 2020. In the industry sector, the EU spent approximately €13.5 billion on fossil fuel subsidies in 2021, a marked increase from the €12 billion it spent on subsidies in 2020. In the energy sector, the EU spent approximately €14 billion on fossil fuel subsidies in 2021, significantly less than the €15.5 billion the EU spent in 2020. The amount of money spent on fossil fuel subsidies in the agriculture sector stayed consistent between 2020 and 2021, with the EU spending €6 billion in both years.

In its study, the EU found that the amount of fossil fuel subsidies spent on households by its member states increased slightly between 2020 and 2021. EU member states collectively spent approximately €4 billion on fossil fuel subsidies in 2021 and approximately €3.5 billion on these subsidies in 2020. However, while the data for 2022 has not yet been collected, this figure will likely jump between 2021 and 2022, given the subsidy plans that Germany, Austria, and other EU governments put in place to mitigate the effects of energy shortages caused by Russia’s war on Ukraine.

The study also found that EU member states’ subsidies on oil and petroleum have continued to rise over the past six years, with the amount spent on these subsidies increasing by €0.8 billion between 2020 and 2021. On the other hand, the amount that EU member states spent on coal subsidies decreased between 2015-2020, primarily due to the decreased use of solid fuels in sectors like industry. However, the amount spent on coal subsidies in 2021 increased by €0.6 billion compared to 2020.

While it initially seemed promising that EU member states would continue to reduce their fossil fuel subsidies starting in 2022, Russia’s war on Ukraine largely altered many of the member states’ approaches to meeting domestic energy needs. In January 2022, EU auditors stated that the European Commission confirmed that it would adopt legislation in 2022 outlining rules regarding how member states must report their progress towards phasing out fossil fuels. The European Commission stated that these new rules would apply beginning in 2023, which auditors noted would be useful in decreasing EU greenhouse gas emissions since numerous polluting energy sources had a tax advantage compared to carbon-efficient energy sources.

However, following Russia’s invasion of Ukraine, the EU presented its REPowerEU plan in May 2022. While this plan primarily focused on increasing the clean energy supply in the EU, its recognition of the need to phase out fossil fuels imports from Russia has also led to short-term increases in EU member states’ fossil fuel subsidies, as member states have struggled to ensure that energy prices stay affordable for households. Russia’s invasion of Ukraine has also caused EU member states to temporarily bring coal-based and oil-based power generation back online to meet domestic energy needs.

Thus, moving forward, it will be increasingly crucial for the EU to implement policies that disincentivize fossil fuel subsidies and provide financial support for developing renewable energy technologies.


This Post was submitted by Climate Scorecard European Union Manager Brittany Demogenes

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