The fiscal cost of government support for fossil fuels fell by around one third in 2023 to USD 1.1 trillion, reflecting largely a decline in energy supply costs from 2022. Yet, with many measures supporting production or consumption of fossil fuels still in place, this fiscal cost remains elevated relative to its historical average. Moreover, direct budgetary transfers for fossil fuels and low fossil fuel excise rates weakened the economic incentives to decarbonise measured by Net Effective carbon rates (Net ECR) compared with 2021 levels. The high fiscal cost of government support for fossil fuels and low Net ECR highlight the challenges of staying on track with net zero commitments. Going forward, reforms should focus on better targeting those most in need and phasing out inefficient support for fossil fuels as soon as possible to enable the release of much-needed resources for the net zero transition and energy efficiency innovation.