Despite concerns over security of supply and climate change, fossil fuels continue to dominate the global energy supply, accounting for approximately 80% of the total energy supply. In 2024, the value of the global fossil fuels market was $7.9 trillion. However, only around 17% of coal, 25% of natural gas and 67% of oil and oil products are traded internationally, with an approximate combined value of over $2.5 trillion. The EU is particularly dependent, importing in 2023 95% of the oil it consumes, 90% of the natural gas and 40.8% of solid fuel, at a total cost of €449 billion.
longer-term supply trends such as shale gas developments in North America or falls in demand most recently from China. Importing countries can do little but accept the global price, with the consequence that a significant portion of their national economic security and balance of payments could be impacted by circumstances largely beyond their control.
“Importing countries can do little but accept the global price, with the consequence that a significant portion of their national economic security and balance of payments could be impacted by circumstances largely beyond their control.”
Geopolitical instability drives fossil fuel company profits
During periods of international tension or shocks, the price of fossil fuels rises rapidly, despite relatively stable production costs. As a consequence, global shocks often boost fossil fuel profits - Russia’s 2022 invasion of Ukraine brought in hundreds of billions in profit.
Reuters reported that the profits of six major oil companies (Shell, BP, TotalEnergies, Chevron, Exxon, and Equinor) doubled, with top Western oil companies paying out a record $110 billion in dividends to their shareholders.
An independent analysis commissioned by T&E [1] looks more closely at the profits of the oil and gas companies in Europe, concluding that the profits of fossil fuel companies in the EU in 2022 exceeded €104 billion, a 45% increase from the previous year. They then fell by 21% in 2023, but remained significant at over €82 billion.
Higher costs to consumers
Following Russia’s invasion, higher fuel prices were passed onto the consumers:
The average household electricity price, which is often determined by the price of natural gas in the EU rose from €23.5 per 100 kWh in the second half of 2021 to €28.4 per 100 kWh in the second half of 2022. This 21% increase was the highest level ever recorded by Eurostat.
At the same time, the average household gas price increased from €7.80 per 100 kWh to €11.40 per 100 kWh over the same period, representing a 46% increase.
In 2022, EU member states experienced some of the highest rises in petrol and diesel prices on record. Across the EU by mid-2022, diesel prices were up 45%, and petrol increased by 36%.
Energy prices for residential customers in July 2025 have fallen somewhat, but remain above those of 2021, with electricity at €25.27 per 100 kWh and gas at €10.79 per 100 kWh.
Need for Government Subsidy
In response to higher global energy prices, governments sought to mitigate the impact on residential and industrial consumers through various measures, including tax reductions and fee waivers, temporary tax exemptions for consumers, price caps, lump sum support, and voucher allocations to final consumers. Some countries also implemented regulated prices.
The European Commission estimates that in 2022, total energy subsidies in the EU rose to €397 billion, up from €213 billion the previous year. In 2022, the total subsidy to fossil fuels increased to €136 billion, of which €58 billion went to oil consumers and €49 billion to natural gas consumers. A further €121 billion went to what the EU Commission labelled ‘all energies’, where ‘energy was produced from a mix of both fossil fuel and low carbon sources or from an unknown source’.
There was a subsequent sharp increase in government subsidies at the household level, with subsidies rising from €34 billion to €109 billion in 2022 - almost identical to the profits of the oil and gas sector that year, which were estimated at €104 billion, as in T&E commissioned analysis.
However, what is under-reported is that the energy industry itself received an increase in subsidies to €112 billion in 2022, in addition to its excessive profits. In 2023, these subsidies fell to €92 billion. Over the three year period 2021 to 2023 the average annual subsidies received by the energy industry was in excess of €103 billion. The term ‘energy industry’ here encompasses energy extraction, conversion, refining, infrastructure, transmission, distribution, storage, waste management, and also retail.
Limited contribution from the Fossil Industry
In response to the higher profits of fossil fuel companies and the need for increased government subsidies, the EU introduced a regulation aimed at creating a ‘solidarity contribution’ (also known as a windfall tax). This aimed to target profits exceeding 20% above the average annual taxable profits from 2018 to 2021. The rate was set at 33% of these “excess profits”. An assessment by the European Commission calculated that total revenue collection was in the order of €28 billion during the fiscal years of 2022 and 2023.
However, the temporary nature of this measure has proved contentious. While the solidarity contribution was designed to expire after 2023, several Member States—including the Czech Republic, Hungary, Lithuania, Spain, and Slovakia—have extended their windfall taxes beyond the original timeline, with some extensions running until 2027. The UK has taken this further, extending its windfall tax to 2030. Meanwhile, the broader debate continues: less than half (43%) of fossil fuel subsidies across the EU are scheduled to end before 2025, with 48% having either no end-date or one set after 2030—undermining the EU's stated commitment to phase out fossil fuel subsidies in line with its 2050 climate neutrality goals.
Who will pay the hidden costs of fossil fuel use ?
In a market economy, incorporating environmental externalities into the cost of goods is a crucial tool for mitigating environmental harm and preventing market distortions. The International Monetary Fund (IMF) has estimated that global subsidies to fossil fuel in 2022 totalled €7 trillion, of which 60% were due to failure to fully financially account for their environmental impacts, particularly climate change and local air pollution and in the undercharging of the market price of energy.
In 2005, the EU Emissions Trading System (ETS) introduced a market price for CO2 emissions from the power sector, parts of the transport sector and the industrial sector. This has driven innovation and behaviour change that has reduced greenhouse gas emissions and raised over €230 billion.
90% of these revenues are kept by the member states that generate them and around 10% is distributed to the least wealthy countries for solidarity purposes. In 2024 alone, nearly €39 billion was raised. At least half of the revenues are to be used for climate and energy purposes. Currently, the ETS covers around one-third of the EU’s GHG emissions.
The EU has now agreed that it is important that the remaining sources of CO2 should also be priced. ETS2 will be introduced in 2027, and its scope will include buildings and road transport and small industries, more directly impacting householders with gas, coal, or oil heating and the drivers of petrol and diesel cars, as energy providers are expected to pass on the CO2 costs to consumers.
T&E has estimated that in the first six years of the scheme, ETS2 could raise €300 billion, so nearly €50 billion a year. The ETS2 is slightly smaller than the original ETS and will cover just under one-third of the EU’s GHG emissions.
Polluters must pay
Without intervention and planning, consumers face a double hit: ongoing and excessive profits from fossil fuel suppliers (and their supply chains), as well as bearing the cost of the environmental impact of the fuels they consume. Without available alternatives, the costs to consumers will be unmanageable for some and socially and politically unacceptable for others.
A joined-up strategy is needed, one that taxes the profits of fossil fuel producers, importers, processors, and sellers and/or reduces or ends fossil fuel subsidies. The EU should reintroduce an additional tax on fossil fuel company profits, including potentially a Corporate tax pollution top-up or a shareholder pollution top-up tax. This should be levied and used in conjunction with revenues from the ETS 1 and 2 to support the most socially disadvantaged segments of society with their bills, while also facilitating the introduction of measures to accelerate the reduction of emissions.
In total the revenues from ETS I (€39 billion in 2024), along with predicted revenue from ETS II (approximately €50 billion) could be combined with a percentage from the excess profits from the fossil companies in the EU (of €83 billion in 2023) to provide significant resources for both supporting investments in the energy transitions and supporting those consumers most impacted.
The EU faces a clear policy choice: either phase out fossil fuel subsidies or impose sustained taxes on excessive profits—but the current approach of maintaining in excess of €100 billion in annual fossil fuel subsidies while allowing the temporary windfall tax to expire leaves consumers bearing the double burden of subsidy costs and inflated energy prices. As the 2024 Energy Subsidies Report confirms, less than half of EU fossil fuel subsidies are scheduled to end before 2025, with 48% having no end-date or one set after 2030. This policy incoherence not only contradicts the EU's climate commitments but imposes unnecessary costs on consumers who ultimately finance both the subsidies through their taxes and the excessive profits through their energy bills. A joined-up strategy is essential—one that either eliminates subsidies to fossil fuel companies or reintroduces a sustained tax on fossil fuel company profits, such as a Corporate Pollution Tax or Shareholder Pollution Top-up Tax.
Such revenues, combined with proceeds from ETS 1 and ETS 2 (totalling approximately €89 billion annually), could support socially disadvantaged consumers with their energy bills while accelerating emissions reductions. Imposing such taxes would signal to fossil fuel companies that their long-term sustainability depends on investing in alternative energy sources and services, ultimately reducing both the EU's and energy companies' vulnerability to global energy shocks, minimizing the risk of stranded assets, and improving economic stability for all.
Methodological note
[1] An independent study was commissioned by T&E, carried out by PwC Belgium, which estimated the net profits of companies operating in the fossil fuel value chain in the EU for the years 2021, 2022, and 2023. The analysis was based on a sample of 31 oil, 53 natural gas, and 30 coal companies, which, according to PwC, represented in 2022 approximately 54% of the oil market, 79% of the natural gas market, and 42% of the coal market on a volume basis. Results were then extrapolated to the EU using volume data to estimate the overall picture.
Estimates were primarily derived from publicly available company financial statements, corporate websites, and intelligence sources such as Factiva and Forbes. Where possible, additional data were obtained from national regulatory databases. In cases where company-level data were incomplete or unavailable, revenues were estimated by multiplying traded volumes by average unit prices and applying the group’s net profit margin at the most detailed level available. Adjustments were made to avoid double-counting in vertically integrated operations and to account for intersegment sales.
Given the variations in company reporting practices, segmentation of activities, and data availability, these figures provide an approximation rather than a precise measurement of profits. As the methodology relies on assumptions and extrapolation, the aggregated results should be considered as an indicative as opposed to precise assessment of the total profits generated along the EU fossil fuel value chain.
