Fossil fuel companies will benefit to the tune of $5.3 trillion in 2015 from government energy subsidies. That's more than all the world's governments spend on health care, according to new IMF (International Monetary Fund) research.
IMF's new estimate of post-tax energy subsidies reveals that federal fossil-fuel subsidies “are dramatically higher than previously estimated, and are projected to remain high.” The results are contained in an IMF working paper entitled, "How Large are Global Energy Subsidies?"
Coming in advance of this year's United Nations climate change conference in Paris this December, IMF's estimate highlights the potential for governments to significantly reduce greenhouse gas emissions by eliminating fossil fuel subsidies. Fearing strong opposition from fossil fuel companies and their constituents, government leaders have yet to act decisively to end fossil fuel subsidies -- despite ongoing calls from a wide range of public- and private-sector organizations, however.
Commenting on IMF's study, Lord Nicholas Stern, climate economist at the London School of Economics, told the Guardian: “This very important analysis shatters the myth that fossil fuels are cheap by showing just how huge their real costs are. There is no justification for these enormous subsidies for fossil fuels, which distort markets and damages economies, particularly in poorer countries.”
IMF report authors highlight the costs society bears as a result of fossil fuel subsidies:
2014 was the hottest year on record, according to the world's national climate research organizations, and the first three months of 2015 has put global mean temperature on course to set a new annual record. The main driver, human-caused greenhouse gas emissions, continue to rise despite best efforts to curtail them.
Governments, and societies globally, stand to benefit greatly were fossil-fuel subsidies to be eliminated, IMF concluded. “These subsidies primarily reflect under-pricing from a domestic (rather than global) perspective, so even unilateral price reform is in countries’ own interests,” according to IMF's report. “The potential fiscal, environmental and welfare impacts of energy subsidy reform are substantial.”
According to IMF's report, eliminating fossil fuel subsidies would result in a 20 percent reduction of GHG emissions worldwide. “Ending the subsidies would also slash the number of premature deaths from outdoor air pollution by 50 percent – about 1.6 million lives a year,” according to the Guardian's report.
Image credits: 1), 2) IMF, "How Large are Global Energy Subsidies?"; 3) UN
Featured image: Flickr/Tim Evanson
An experienced, independent journalist, editor and researcher, Andrew has crisscrossed the globe while reporting on sustainability, corporate social responsibility, social and environmental entrepreneurship, renewable energy, energy efficiency and clean technology. He studied geology at CU, Boulder, has an MBA in finance from Pace University, and completed a certificate program in international governance for biodiversity at UN University in Japan.