A new report from the IMF, based on “extremely robust” modelling, states that fossil fuel companies are benefitting from global subsidies of $5.3 trillion a year. Equating to $10 million per minute, this is more than the WHO estimates for global health spend, and represents 6.5% of global GDP.
The IMF is one of the world’s most respected financial institutions. It has said that ending subsidies for fossil fuels would cut global carbon emissions by 20%.
Another consequence of removing fossil fuel subsidies would be that the need for subsidies for renewable energy – a relatively tiny $120 billion a year – would also disappear, if fossil fuel prices reflected the full cost of their impacts.
These are some interesting statistics in the accompanying blog on the IMF economy Forum:
"The number for 2015 is more than double the US$2 trillion we had previously estimated for 2011. Over half of the increase is explained by more refined country-level evidence on the damaging effects of energy consumption on air quality and health."
"These “true costs” of energy consumption include its supply costs and the damage that energy consumption inflicts on people and the environment. These damages, in turn, come from carbon emissions and hence global warming; the health effects of air pollution; and the effects on traffic congestion, traffic accidents, and road damage. Most of these externalities are borne by local populations, with the global warming component of energy subsidies only a fourth of the total (Chart 1)"
Chart 2 shows the share of energy subsidies in advanced and emerging economies, with substantial subsidies from India ($277 billion) and European Union ($330billion).
The fiscal gains from subsidy reform are sizeable, and the benefits—for example, from reduced pollution—would overwhelmingly accrue to local populations.
Resource Spotted by Kat Campbell.