The energy transition
Fossil fuels’ economic, environmental and social burden Political leaders including Donald Trump argue that trying to achieve net-zero ‘hurts the domestic economy and costs a fortune’, while climate activists consider the expense worthwhile when weighed against the catastrophic damage unchecked climate change is likely to inflict. According to the data, global subsidies to the fossil fuels industry range between $500 billion to $1 trillion annually, but during highs of fossil fuel consumption during 2022, as a result of the Russian invasion of Ukraine, the IMF reported that fossil fuels received $7 trillion in subsidies (Ritchie, 2025). However, in 2022, only 18% of the total global subsidies involved in fossil fuels goes directly to fossil fuel companies, which in that year hit highs of $1.2 trillion. Then, an immense £5.7 trillion, which is 6% of global GDP, is spent yearly on ‘implicit’ subsidies which are essentially the negative externalities of fossil fuel production. This figure is broken down in Figure 3 below (Ritchie, 2025).
This graphic shows that explicit global subsidies to fossil fuel companies will hit maximum values of around $1 trillion, but when it comes to subsidizing the negative externalities that these fossil fuels cause, the real figure
Figure 3 – breakdown of fossil fuel subsidies in 2022
is astounding: over quadruple is spent on the impacts that fossil fuels cause than the actual fossil fuels themselves. Given this data, the estimated annual investment of between $3 trillion and $12 trillion for renewables seems far more reasonable, both financially and socially, if the funds that are spent on fossil fuels are redirected to climate initiatives. In addition, a Harvard University study, estimated that health related costs from fossil fuels from air pollution in 2021 for the US alone, amount to $820 billion annually and claim that fossil fuel air pollution is ‘responsible for 1 in 5 deaths worldwide’ (Miller 2021). Additionally, from a financial perspective, the global cost for this air pollution harm is between $2.9 trillion and $8.1 trillion per year, according to this research, and the economic damaged tied to CO2 emissions is between $50 and $200 per ton, with the US greenhouse gas emissions totalling 6,300 million tons in 2022 (Saliba et al., 2023). This perhaps highlights that, although at first glance fossil fuels deliver sizeable profits to businesses and governments, the underlying data would suggest that the economic impact that the CO2 emissions cause is in fact an enormous burden on a nation’s healthcare service and economy. Therefore, the ballpark figure of between $3 trillion and $12 trillion annual expenditure for reaching net-zero would replace a lot of the economic damage that fossil fuels currently cause. Could climate change be seen as an attractive business opportunity? In 2022, COP27, the United Nations Climate Change Conference, took place. For nearly three decades, the UN has been bringing together almost every country in the world to these global climate summits. COP27 was held in the wake of the catastrophic floods that took place in Pakistan, which incentivized countries to push for an agreement which established a fund to help lower-income countries (‘LICs’)
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