The cost of fossil fuels is much higher than previously thought, according to a new study by the International Monetary Fund. The
global post-tax subsidy for energy, which accounts for the
environmental and health toll, will be an estimated $5.3 trillion in
2015, more than 6 percent of global GDP. The figure is more than double the IMF’s own post-tax subsidy analysis just a few years ago.
Credit: IMF
The
analysis defines post-tax subsidies as the difference between what the
consumer pays for energy and its true cost, including environmental and
health damages. It also includes a country’s sales tax rate that the
authors said should be levied at the point of consumption.
The IMF
researchers say the figure is higher than previous estimates because of
more refined country-level data on the effects of air pollution and
health outcomes of burning fossil fuels. Most of the increase is due to
the tracking of a greater range of air pollutants and a more detailed
assessment of mortality risks in individual countries.
Coal and
petroleum make up the most of the global post-tax energy subsidies.
Post-tax subsidies for coal will be nearly 4 percent of global GDP in
2015. Worldwide, coal is undercharged for its environmental impacts, the
study states, “yet no country really imposes meaningful taxes on coal
use from an environmental perspective.”
Most of the external costs
are felt locally, the authors argue, so any reform would accrue to the
local population in the form of benefits such as reduced mortality.
Eliminating the subsides altogether could reduce carbon-dioxide
emissions by more than 20 percent and cut premature global air pollution
deaths by 55 percent.
The study's call for reform is strongest
with regards to developing Asia and the Middle East. Developing Asia is
responsible for about half of global energy subsides, according to the
study. The IMF calls for global coordination on reducing subsidies, but
acknowledges that individual countries, such as India, Malaysia, Mexico,
Morocco, Thailand and Tunisia, have made strides. From 2011 to 2015,
global energy subsides have been cut by $190 billion.
Credit: IMF
Given
current low oil and natural gas prices, it's a good time to start
unpacking energy subsidies, the IMF argues. In the short term,
environmental taxes could be the most effective. But the politics are
messy. “Subsidy reform could potentially lead to a large
redistribution of welfare,” the authors state, “which may be why it has
proven to be so difficult in practice.”
http://theenergycollective.com/katherinetweed/2229591/imf-study-global-energy-subsidies-will-cost-53-trillion-2015