IMF: global energy subsidies to reach $5.3tr fuelling climate change
Government subsidies will reach US$5.3 trillion in 2015 leading to increased pollution and climate change according to the International Monetary Fund
Global subsidies of fossil fuels will reach US$5.3 trillion this year, leading to increased pollution and climate change, according to an estimate published on Monday by International Monetary Fund (IMF).
The figure is equivalent to global spending on public health, according to a new study.
The IMF estimate takes into account the gap between what businesses and consumers pay for energy and the “true cost” when environmental effects are considered.
The $5.3tn cost of government energy subsidies that the IMF economists arrived at is equivalent to 6.5 per cent of global economic output.
The new study has put more emphasis on environmental factors than previous research and laid much of the blame on the world’s biggest economies.
The research found that China is the biggest subsidy offender, accounting for $2.3tn —more than 40 per cent — of the total due to its reliance on fossil fuels and chronic air pollution.
The United States will spend an estimated $699bn in 2015, making up 13 per cent of the total, while the EU will account for 6 per cent of the total with $330bn.
The findings show that Russia, India and Japan are also high on the list of subsidy culprits.
Benedict Clements and Vitor Gaspar, two senior IMF officials, said: “These estimates are shocking...They have global relevance” and the findings represent “one of the largest negative externalities ever estimated”.
The findings show that if the subsidies were eliminated this year it would increase global government revenues by $2.9tn, slash global carbon emissions by about 20 per cent and reduce by more than half the estimated 1 million people who die premature deaths from air pollution.
More than half the total, or $2.7tn, came from an estimate of the cost of “local pollution”, while a further $1.3tn was attributed to the price of global warming.
The study comes in the build up to the COP21 U.N. Climate Change Conference when nearly 200 states are expected to finalise a global climate deal Paris in December.
Eliminating fossil fuel subsidies and setting effective carbon pricing policies are seen as key measures that would help keep global average temperatures from rising above the 2°C pre-industrial level that the Intergovernmental Panel on Climate Change (IPCC) has warned would cause dangerous climate change.
The IMF has urged governments for years to get rid of "pre-tax subsidies" that allow companies and consumers to buy coal, gasoline or other fuel below their cost of supply but the Fund is now focusing on post-tax subsidies that mean prices fail to reflect costs like unfair tax advantages and pollution related deaths.