Twelve years after G-20 nations pledged to phase out publicly funded fossil fuel subsidies, 81 countries doled out more than $375 billion in such aid in 2020.

However, government support for oil, coal, natural gas and end-user electricity dropped 29% in 2020 as energy use and mobility decreased during the pandemic, the Organisation for Economic Co-operation and Development and the International Energy Agency reported Nov. 2. Even so, nations are far from meeting the goal they set in 2009 to abolish fossil fuel subsidies, the agencies said.

The U.S. netted an estimated $8.9 billion in taxpayer-funded subsidies in 2020, down from $9.6 billion in 2019 that capped a steady rise since 2016. The largest share of subsidies in the U.S. and globally goes to the oil sector.

Large organizations such as the OECD, the IEA and the International Monetary Fund have been encouraging nations for years to end support for companies that produce and sell fuels that put renewable sources at a disadvantage and contribute to climate change.

In late October, investors managing more than $52 trillion in assets urged nations to phase out the use of fossil fuel subsidies and coal-fired power plants. Such actions would help countries meet the goal of the Paris Agreement on climate change to keep global temperatures from rising past 1.5 degrees Celsius above preindustrial times, the investors said.

President Joe Biden's fiscal 2022 budget also called for eliminating some fossil fuel subsidies, as did members of the Democrats' progressive caucus this year. In the House version of the Build Back Better plan, domestic subsidies have been retained while two tax subsidies benefiting companies engaged in overseas oil and gas production totaling about $86 billion in subsidies were axed.

Reforming the international tax subsidies has been high on the priority list of progressive Democrats and environmental groups as they continue to push for the elimination of all such subsidies in the federal bill. Without subsidies, the energy transition would be faster, they said.

"The most important thing is creating a more just and equitable tax code that raises the revenue we need and doesn't give fossil fuel companies a pass," said Ross Lukas, a program manager with Friends of the Earth who focuses on subsidies and the federal budget. "Domestic fossil fuel subsidies are absolutely essential for the oil and gas industry, and repealing them would yield significant and immediate climate dividends."

The research group Stockholm Environment Institute concluded in a recent study that 16 subsidies and regulatory exemptions benefiting the U.S. oil and gas industry can deliver a rate of return from new oil fields that is 68% higher than without subsidies, based on 2019 market prices. Some of those subsidies date back more than 100 years.

The issue of subsidies has led to infighting among Democrats in recent months. Sen. Joe Manchin, D-W.Va., has been arguing for including carbon capture on coal plants and natural gas facilities in clean energy tax credits, while the party's climate champions fought such provisions. A moderate swing vote in the evenly divided Senate, Manchin is seeking to protect industry in his fossil fuel-heavy and economically struggling state.

The OECD and IEA warned Nov. 2 that with rising energy prices, policymakers may become less willing to reform subsidies and pricing for fossil fuels, further delaying the shift to cleaner energy sources. he OECD and IEA warned Nov. 2 that with rising energy prices, policymakers may become less willing to reform subsidies and pricing for fossil fuels, further delaying a shift to cleaner energy sources. Defenders of fossil fuel subsidies, on the other hand, note that the renewable energy industry also receives billions in support every year and assert that maintaining support for both creates a level playing field.