Fossil Fuel Subsidies in 2021 | Social Justice Ireland

The latest Central Statistics Office data on Fossil Fuel Subsidies shows that these subsidies were estimated at €2.9 billion in 2021, a 16 per cent increase on 2020 when fossil fuel subsidies were €2.5 billion. In 2019, fossil fuels subsidies amounted to €3.2 billion. The reductions in 2020 and 2021 compared with 2019 were mainly due to the fall in consumption of aviation fuel during the COVID-19 pandemic. Comparing the amount raised in energy taxes with expenditure on fossil fuel subsidies and expenditure on environmental subsidies aimed at protecting the air and climate and reducing fossil fuel use the CSO found that in 2021, €3.2 billion was raised in energy taxes, €0.7 billion was spent on environmental subsidies related to energy and air emissions, and fossil fuel subsidies were €2.9 billion.

Key findings:

Fossil fuel subsidies were estimated at €2.9 billion in 2021, a 16 per cent increase on 2020 when fossil fuel subsidies were €2.5 billion. In 2019, fossil fuels subsidies amounted to €3.2 billion. The reductions in 2020 and 2021 compared with 2019 were mainly due to the fall in consumption of aviation fuel during the COVID-19 pandemic.
Direct fossil fuel subsidies accounted for 10% of total fossil fuel subsidies in 2021 while indirect subsidies such as tax expenditures accounted for 90%.
Figures from other CSO Environment releases show that in 2021, €3.2 billion was raised in energy taxes and €0.7 billion was spent on environmental subsidies related to energy and air emissions, while fossil fuel subsidies were €2.9 billion.
In 2021, consumers of petrol paid an average effective rate of €269 per tonne of carbon dioxide emitted, up from €267 in 2020.
The average effective carbon rate on road diesel was €196 per tonne of carbon dioxide in 2021, while the average effective carbon rate for marked gas oil used in agriculture and fishing was €43 per tonne of carbon dioxide in 2021.
Carbon dioxide emissions from jet kerosene were charged at €3 per tonne in 2021. Commercial aviation is exempt from Excise tax but airline operators must purchase emission permits for flights covered by the EU Emissions Trading Scheme (EU-ETS).
In 2021, net energy taxes on petrol were 63 cent per litre while net energy taxes on road diesel were 53 cent per litre.

Revenue foregone

Aviation Fuel: Jet kerosene used for commercial aviation is exempt from excise and carbon taxes. Using the excise duty for heavy oil used for air navigation as a benchmark, the amount of revenue forgone on jet kerosene in 2021 due to the tax exemption was estimated at €273 million. This compares with €634 million in 2019, before the pandemic.

Road diesel: Using the petrol excise duty rate as a benchmark, we estimated the amount of revenue forgone on road diesel in 2021 due to a lower excise duty rate as €395 million, compared with €368 million in 2020 and €427 million in 2019.

Effective Carbon Rates

The highest average effective carbon rate per tonne of carbon dioxide in 2021 was €269 for petrol, up from €267 in 2020. The average effective carbon rate for road diesel was 27% lower at €196 per tonne of carbon dioxide due to the lower excise duty rate applied to this fuel. The average effective carbon rate for marked gas oil, sometimes referred to as ‘green diesel’, used in agriculture, forestry and fishing was €43 per tonne of carbon dioxide. Average effective carbon rates for most fuels were higher in 2021 than in 2020, mainly due to increases in both carbon tax and the price of EU-ETS.

In the case of jet kerosene and the electricity generation sector, the increased rate was due to a rise in the price of emission permits under the EU-ETS, while a higher PSO levy in 2021 compared with 2020 was the reason for the increase in the effective carbon rate on electricity consumption. Although the rate of carbon tax on aviation gasoline rose in 2021 this was more than offset by an increase in excise repayments resulting in a fall in the effective carbon rate from €187 to €177 per tonne of carbon dioxide.

Average Effective Carbon Rates by Sector 2020 - 2021

Fossil Fuel Subsidies over time

Fossil fuel subsidies were estimated at €2.9 billion in 2021. In 2000 - the first year of the series - total fossil fuel subsidies were estimated at €1.5 billion in value. This increased to €3.1 billion in 2008. Between 2009 and 2016 the value was estimated as between €2.7 billion and €2.9 billion. Total fossil fuel subsidies increased in value in 2017 and 2018, reaching the highest value of the series at €3.3 billion in current prices in 2018. In 2020 fossil fuel subsidies fell to €2.5 billion, with the reduction in transport fossil fuel consumption due to the COVID-19 pandemic accounting for the decrease. The 2021 figure was a 16% increase on 2020. Direct fossil fuel subsidies accounted for 10% of total fossil fuel subsidies in 2021 while indirect subsidies arising from tax expenditures, price supports and other government revenue forgone accounted for 90%.

Energy Taxes and Fossil Fuel Subsidies

Comparing the amount raised in energy taxes with expenditure on fossil fuel subsidies and expenditure on environmental subsidies aimed at protecting the air and climate and reducing fossil fuel use the CSO found that in 2021, €3.2 billion was raised in energy taxes, €0.7 billion was spent on environmental subsidies related to energy and air emissions, and fossil fuel subsidies were €2.9 billion.