The energy sector has historically accounted for a relatively small share of government budgets, averaging around 1% in most countries. Over the past five years, however, government spending on energy has doubled compared with 2019 levels, reaching around 1.4% of total direct government expenditure in 2025. Levels have varied by country, with some reaching up to 5% of general expenditure. Although spending fell from its peak in 2023, disbursements in 2024 and 2025 remained significantly higher than in the 2010s, reaching respectively around USD 370 billion and USD 405 billion. Other economic sectors saw more modest growth: spending on areas such as health and social protection rose broadly in line with general total expenditure, by around 1.4 times over the same period, compared with more than doubling for energy.

Energy provisions in national plans following the Covid-19 pandemic played a fundamental role in this growth, including the United States’ Inflation Reduction Act, the European Union’s Recovery and Resilience Facility and Japan’s Green Transformation Policy. Since 2020, governments have earmarked close to USD 2 trillion to support clean energy transitions in the coming years. As of 2025, USD 1.6 trillion has been disbursed under these recovery packages.

The largest share of government spending on energy has flowed to power generation and grid infrastructure, more than doubling since 2015 and reaching USD 135 billion in 2025. Recent years, however, have seen declines in spending locally, largely driven by shifts towards market-based mechanisms, with more than ten countries launching capacity auctions for solar PV and wind over the past five years. Notably, China reduced its renewables subsidies and phased out feed-in tariffs for new projects in 2025. Similarly, Germany’s corresponding budget position was paused in 2022 and 2023 due to high electricity prices, and the United States enacted legislation in July 2025 to end its solar and wind tax credits for new projects starting in 2026. In contrast, the United Kingdom allocated an all-time high allocation to the Low Carbon Contracts Company, managing the contract-for-difference in the country, with USD 56 billion in 2025 alone.

Since 2015, government spending in the buildings sector has grown sixfold to reach USD 56 billion in 2025, largely directed towards energy efficiency retrofits and space heating electrification. Key programmes include Italy’s Superbonus (USD 24 billion since 2021), the United States’ tax credits for residential energy efficiency property (USD 39 billion since 2015), Germany’s building efficiency and renewable energy programme (USD 56 billion since 2021) and China’s trade-in programme for appliances (USD 12.9 billion in 2025).

Support for low-emissions passenger cars increased 15-fold within a decade, reaching USD 40 billion in 2025. The largest disbursements in 2025 came from China’s trade-in programme (USD 21 billion) and purchase tax credit (USD 2 billion), France’s ecological bonus (USD 1.5 billion) and the United States’ clean vehicle tax credit (USD 9.5 billion) and refuelling property tax credit (USD 360 million).

Spending on industrial programmes, including provisions for energy technologies and critical mineral mining, rose from around USD 11 billion in 2015 to USD 26 billion in 2025. China led global expenditure from 2015 to 2021, averaging USD 4.8 billion annually for mining. Japan’s Green Transformation programme for critical material and battery supply chain resilience totalled USD 25 billion from 2022 to 2025, while the United States introduced advanced manufacturing investment and production tax credits amounting to USD 9.4 billion since 2022. In July 2025, India launched the Assistance in Deploying Energy Efficient Technologies in Industries and Establishments programme to accelerate industrial energy efficiency through subventions, with an initial budget of around USD 120 million.

Finally, spending on mass and alternative transit programmes remained significant, rising to USD 82 billion in 2025 from USD 47 billion in 2015. Major programmes included China’s Railway Construction Design (USD 110 billion since 2015), the United Kingdom’s High Speed Two (about USD 60 billion since 2015) and the United States’ Transit Formula Grants for urban public transport (USD 114 billion since 2015).

Short-term affordability measures played a key role in the surge in government energy expenditure in response to the 2022 energy crisis. The highest spending on energy affordability measures was in the United Kingdom, at a cumulative USD 61 billion in 2022 and 2023, followed by Germany (USD 46 billion) and Japan (USD 45 billion). These measures, mainly short-term consumer subsidies to help offset high oil, electricity and gas prices, accounted for 20‑30% of government energy spending in 2022 (USD 119 billion) and 2023 (USD 101 billion).

Overall, budget revisions in 2025 reduced projected energy spending through the end of the decade by an average of USD 110 billion annually, compared with earlier plans. Despite this, total allocations remain more than double their levels at the end of the last decade, with most countries still maintaining higher energy spending and some even increasing it further.

Government spending has played an undeniable role in the rise of global energy investment across all sectors. The IEA’s World Energy Investment series tracks annual energy investment by sector and region. Global energy investment rose from around USD 2.5 trillion in 2019 to an estimated USD 3.3 trillion in 2025, strongly aligning with the surge in government spending directed towards energy investment. However, the relationship between spending and actual investment is complex, influenced by market dynamics, technology trends, consumer preferences and investor appetite. Energy efficiency investment in the buildings, industry and transport sectors is closely tied to government support. For example, recent incentives for electric vehicle purchases have closely tracked rising electric vehicle sales in many markets. Conversely, in the power sector, a shift towards more market-based support in view of declining costs for solar and wind technologies has helped decouple government spending from capacity growth over the past four years. This partly explains why investment in low-emissions power generation has continued to rise even as government spending has stabilised.

Policy design is a key determinant of how effectively government spending achieves its intended outcomes. Comparing disbursements with initial budgets can provide insights into how programmes are designed and help governments calibrate eligibility and targeting requirements. Since 2015, governments have, on average, exceeded planned energy budgets by 8% annually. About half of this overspend was due to emergency affordability support measures introduced during the 2022 energy crisis to support end users with electricity, fuel and gas bills, while underspending in other sectors has gradually increased in recent years.