IMF calls for end to energy subsidies
(UpstreamOnline) – A new report from the International Monetary Fund calls for industrialised countries to rein in the subsidies given to for fossil fuel producers and exporters.
Energy subsidies totalled $1.9 trillion in 2011, the IMF said. While the goal of the subsidies is to keep energy prices low for consumers, they also accounted for 2.5% of global gross domestic product, or about 8% of all government revenue.
In the report titled Energy Subsidy Reform – Lessons and Implications, economists looked at a database of 176 countries and analysed ways to reform energy subsidies using case studies of 22 countries.
“The paper shows that for some countries the fiscal weight of energy subsidies is growing so large that budget deficits are becoming unmanageable and threaten the stability of the economy,” Reuters quoted IMF First Deputy Director David Lipton as saying.
Reliable way to improve revenues and lower CO2 emissions
The US was the biggest energy subsidiser, giving away about $501 billion in assistance to companies. China and Russia came in second and third at $279 billion and $116 billion, respectively.
And instead of helping poorer consumers, the IMF said, these subsidies end up taking away money that might otherwise be spent on civil infrastructure, education and health care. As such, the subsidies end up benefitting wealthier people more, since those people consume more energy.
Energy subsidies also encourage greater consumption of dirty fossil fuels and make cleaner technologies like renewable energy more expensive and less competitive.
“Removing these subsidies could lead to a 13% decline in CO2 emissions and generate positive spillover effects by reducing global energy demand,” the report said.
For economies such as the US, scrapping subsidies for fossil fuels could also add revenue into cash-strapped government coffers, the IMF said.
Bombshell IMF Study: United States Is World’s Number One Fossil Fuel Subsidizer
(ClimateProgress) – The most significant finding is that most of the problem — a little over $1 trillion worth — is the failure to properly price carbon pollution. Global warming is the ultimate example of a “negative externality” — a market failure in which one market actor enjoys the benefits of an exchange while another actor pays the costs.
When we burn gasoline to power our cars or coal-fired electricity to run our homes, we enjoy the benefits of that energy use. But someone else — a farmer facing increased drought, coastal populations facing rising seas, or the global poor facing food supply disruptions — shoulders the burden of the added carbon pollution we’re dumping into the atmosphere. It’s the global ecological equivalent of tapping into your neighbor’s electrical wiring so that they wind up paying your utility bill.
- FP story by Steven D. – Great American Drought Continues
- My recent diary – Arctic Ice Vulnerable In Summer 2013 vs. Record Ice Growth
