Fossil fuels consumed most of South Africa’s nearly R200bn in energy subsidies, report says

South Africa spent nearly R200bn on energy subsidies in 2025, with most of it going to fossil fuels, slowing down the country’s climate goals. The latest report by the Canada-based International Institute for Sustainable Development (IISD) finds that fossil fuel subsidies have tripled since 2018, despite South Africa committing to phase out and rationalise inefficient fuel subsidies. The report says in the 2025 financial year energy subsidies totalled R198bn, with direct support for fossil fuels amounting to R110bn — triple their level in 2018.

More than 30% of total energy subsidy costs in 2025 are linked to efforts to stabilise Eskom’s financial position, the IISD says. The institute is urging the country to reform its energy regimes to align with its just transition goals. To calculate energy subsidies in South Africa, the IISD used data on diesel fuel levy and Road Accident Fund levy refunds for specific sectors, as well as subsidies to the Petroleum Agency South Africa and bailouts to Eskom, among other measures.

“By Eskom bailouts, we refer to the amounts transferred to Eskom from the government that are converted to equity,” the report reads. “We have included these bailouts [both pre- and post-debt-relief arrangements from 2023] as subsidies because they are government transfers that confer a benefit, consistent with the World Trade Organisation definition we use in this report.” “The electricity sector — South Africa’s largest source of carbon emissions — remains fully exempt from the carbon tax, reflecting concerns that carbon pricing could further weaken Eskom’s balance sheet or drive up costs for consumers,” IISD said. “Our new analysis points to the need for a co-ordinated, time-bound roadmap to review existing subsidies, improve targeting and transparency, and guide decisions on reform, phase-out, or redesign. “Without a clearer framework, public spending risks reinforcing today’s system rather than supporting long-term energy security, affordability and a just transition.” The report notes that while the South African carbon tax is an important policy tool, due to the extensive exemptions most greenhouse gas emissions are not taxed.