Fossil fuel tax subsidies, the opposite of a carbon tax, tilt the field to dirtier fuels against cleaner alternatives and demonstrate populist democracy. No politician wants discomforted voters at home or at the pump, hence G-20 countries, per Bloomberg, offered direct subsidies worth more than $3.3 trillion between 2015 and 2019 on coal, oil, gas and fossil-fuel-fired power.
The pandemic reduced demand and prices and offered governments an opportunity to reduce subsidies, but the reduced prices are an economic stimulus, are popular and improve reelection chances.
Governments will this year explicitly under-price energy relative to supply costs by nearly $600 trillion. The implicit under-price relative to social costs to health and environment could be 10 times that.
Eliminating explicit subsidies by 2025 would reduce global carbon dioxide emissions by 36 percent, increase global tax revenues by 3.8 percent on GDP, and global warming might even track toward 1.5 degree Celsius above pre-industrial levels per IMF estimates.
