Education
Concern as UNDP projects global fossil fuel subsidies will climb to $1.1tr in 2026 – EnviroNews
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As 350.org, Fuel Poverty Action and coalition partners on Wednesday, July 1, 2026, demonstrate against rising energy prices outside the Department for Energy Security and Net Zero, a new report from the UN Development Programme (UNDP) lays bare the true scale of the fossil fuel subsidy crisis: governments worldwide are on course to spend $1.1 trillion propping up the fossil fuel industry in 2026, a figure that could rise to $1.43 trillion if oil prices reach $110 a barrel.
The UNDP report, Military Escalation in the Middle East: Cushioning the Global Shock, finds that governments have responded to conflict-driven oil price spikes by expanding fossil fuel subsidies, price caps and tax rebates. While these measures offer short-term relief, they are consuming public budgets that should be building schools, hospitals and clean energy infrastructure. Many developing countries entered the latest crisis already burdened by rising debt, and fossil fuel handouts to keep prices artificially low are depleting public budgets and increasing their risk of debt distress.
The report warns that mounting energy costs are squeezing already strained public finances across low and middle-income countries.
“Money that should be building schools, hospitals, and clean energy systems is being used simply to keep economies afloat,” said UNDP Administrator, Alexander De Croo.
Many developing countries entered the latest crisis already burdened by rising debt. Nearly half of the world’s poorest countries are either in debt distress or at high risk of it, while interest payments continue to consume a growing share of government budgets.
This year, the median developing economy is expected to spend 9.5 per cent of government revenue servicing debt, double the share a decade ago and the highest level in 25 years.
UNDP warns that diverting scarce public funds toward fossil fuel subsidies risks slowing progress toward the 17 Sustainable Development Goals (SDGs) while locking countries into more carbon-intensive energy systems.
Mr. De Croo said developing countries should not have to sacrifice long-term development to respond to a crisis beyond their control.
“No country should have to sacrifice its future development to manage a crisis it did not create,” he said.
He called for easier access to international financing and faster investment in renewable energy, arguing that expanding clean energy would both strengthen energy security and reduce vulnerability to future geopolitical shocks.
“The crisis has made one thing clear,” he said. “Energy security and the energy transition are no longer separate agendas. They are one and the same.”
Anne Jellema, Executive Director of 350.org, said: “The $1.1 trillion that governments are pouring into fossil fuel subsidies this year is not a safety net, it is a ransom payment. Every dollar spent shielding the fossil fuel industry from the consequences of its own price volatility is a dollar not spent on the clean energy systems that can bring costs down for good.
“We need a phase out to end public subsidies for fossil fuel companies, and a permanent windfall tax on fossil fuel profits. Not a one-off levy, but a permanent, legislated mechanism that redirects the extraordinary profits of an industry driving this crisis into the just transition every country needs. That means affordable clean energy, retrofitted homes, and funding to protect people from the extreme weather unleashed by fossil pollution.”
