The Real Energy Welfare State: Fossil Fuels Have Always Been Subsidized
by Dan Roscoe, CEO of Roswall
Critics of renewable energy love to cry foul over subsidies. They claim wind and solar can’t stand on their own, that government support distorts the market, and that the clean energy transition is propped up by artificial incentives. But here’s what rarely gets said out loud: fossil fuels have been subsidized—heavily, consistently, and often invisibly—for more than a century.
If we want to have a serious conversation about energy market distortions, we need to start with the real energy welfare state: fossil fuels.
How Fossil Fuel Subsidies Created an Uneven Playing Field
The notion that fossil fuels have “earned” their dominance through market forces is a myth, and an incredibly successful one at that. From the early 20th century onward, governments have been essential partners in the rise of oil, gas, and coal. Public money built pipelines. Governments funded refineries. Exploration risk was reduced by tax incentives and loan guarantees. Even today, fossil fuel companies benefit from favorable policies that shield them from financial risk and public scrutiny.
Meanwhile, the environmental and health impacts of fossil fuel consumption—polluted air, warming oceans, and rising health care costs—are conveniently externalized, pushed onto taxpayers and future generations.
Subsidies aren’t always as obvious as a cheque from the government. They’re often woven into the regulatory and economic fabric of the energy system itself. They come in three main forms:
Production subsidies:
These include tax credits, royalty relief, and government-backed insurance for oil and gas projects—designed to lower the cost of extraction.
Consumption subsidies:
In many countries, governments artificially cap fuel prices or provide direct assistance for heating and electricity costs, encouraging fossil fuel consumption.
Hidden subsidies:
The most insidious form of support is the one we don’t see in a budget line—externalized costs. These include the economic damage from extreme weather, lost productivity due to air pollution, and the public health burden of fossil-fueled emissions.
The $7 Trillion Question: What Do Fossil Fuels Really Cost Us?
According to the International Monetary Fund (IMF), explicit subsidies for fossil fuels totalled roughly $1.5 trillion in 2022. But when you factor in the implicit subsidies—those hidden costs society bears without being reflected in fuel prices—the number balloons to an astonishing $7 trillion.
That’s nearly 7% of global GDP spent not on innovation or transition, but on keeping fossil fuels artificially competitive.
Who’s Paying the Most?
Oil-rich nations like Saudi Arabia, Venezuela, and Iran top the charts in consumption subsidies, keeping domestic fuel prices low to maintain political stability. But industrialized countries aren’t off the hook. The United States, China, and members of the European Union pour billions into fossil fuel production through tax structures, infrastructure support, and export credits.
It’s not just a problem of the past—it’s happening right now, in some of the world’s most advanced economies.
What the Fossil Fuel Industry Says—And What the Data Actually Shows
Industry advocates argue these subsidies are necessary to shield consumers from volatile energy prices. But the data tells a different story. The majority of fossil fuel subsidies benefit corporations, not everyday consumers. And by lowering the cost of dirty energy, they delay the uptake of clean technologies, lock in emissions, and increase long-term risks to our economy and climate.
The irony? The same critics who claim renewables can’t survive without help are ignoring that fossil fuels have thrived on it.
Comparing Apples to Oil Barrels: Renewables vs. Fossil Fuel Subsidies
Renewable energy has received support, especially over the past two decades, but nowhere near the scale or duration of fossil fuels. Most clean energy subsidies are time-limited, performance-based, and designed to correct an imbalance that fossil fuels created. This isn’t about picking winners—it’s about leveling the playing field.
Wind and solar power didn’t get a 100-year head start. They’ve had to compete in markets distorted by entrenched incumbents with built-in advantages.
So, what happens when fossil fuel subsidies are removed?
Some governments have begun to recognize the imbalance. Take Germany, which phased out hard coal subsidies while ramping up renewables. Canada is eliminating public support for unabated coal power. Norway is shifting away from oil incentives toward green innovation.
The result is cleaner air, better fiscal outcomes, and—perhaps most importantly—a more honest energy market.
Would Renewables Survive Without Subsidies?
The short answer is: yes. In many regions, wind and solar are already the cheapest sources of new electricity generation, even with minimal subsidies. If fossil fuel subsidies were phased out, the economics of clean energy would become even more compelling—and the transition would accelerate.
We’re not talking about propping up a fragile industry. We’re talking about unleashing one that’s already winning.
Every dollar spent subsidizing fossil fuels is a dollar not spent on grid modernization, storage, electrification, or clean innovation. As long as fossil fuels remain artificially cheap, investors and utilities have less incentive to adopt alternatives. The market signal is distorted.
Smart policy means phasing out fossil fuel subsidies gradually but decisively—protecting low-income households while minding climate targets—and redirecting funds toward clean, resilient, 21st-century energy systems. We also need carbon pricing to reflect the true environmental and social costs of fossil fuels.
A Fair Market, a Cleaner Future
The next time someone tells you renewable energy is only viable because of government support, ask them about the seven trillion dollar elephant in the room. Fossil fuels have always been the true recipients of handouts. They’re the original energy welfare state.
If we want a future built on competition, innovation, and sustainability, it’s time to end fossil fuel subsidies and invest in the technologies that will power tomorrow.
We must not keep subsidizing the past, so we may build a better future. Let’s choose wisely. Let’s choose clean.
—
Dan Roscoe is the CEO of Roswall Development, a renewable energy developer, and President of Renewall Energy, a renewable energy provider, both based in Halifax, Nova Scotia. His work is focused on building the infrastructure for a cleaner, smarter energy future across Canada and beyond.