IMF calls to get rid of $2tn fossil fuel subsidies
While the world is tackling global warming, almost $2 trillion was spent in fossil fuel subsidies in 2011. A study by the IMF claims ending subsidies could lower carbon dioxide emissions by 13%.
The survey argues the subsidies reinforce inequality by
disproportionately benefiting the wealthiest, largest consumers of
energy. Getting rid of them could ease pressure on budgets and
decrease global carbon emissions.
"Subsidies cause overconsumption of petroleum products, coal,
and natural gas, and reduce incentives for investment in energy
efficiency and renewable energy," the report reads."This
over-consumption in turn aggravates global warming and worsens
local pollution."
According to the report, energy subsidies come in two very
different flavors - direct subsidies for consumption and
inappropriate taxing of fossil fuels in order to take account of
the air pollution and climate damage they cause.
In 2011, governments around the world spent some $480 billion to
lower the price of petroleum, natural gas, coal, and electricity
for their citizens. Some countries, particularly in North Africa
and the Middle East, regularly spend more on subsidizing fossil
fuels than on education and public health combined.
Scrapping all these direct subsidies could lower the global
greenhouse-gas emissions by up to 2 percent, the report argues.
The other part of the report offers even more opportunities for
tackling global warming. Standard economic models show fossils
should be taxed at $25 per ton of carbon dioxide. But the failure
to price these fossil fuels correctly amounts to a subsidy of some
$1.4 trillion worldwide.
Eliminating these energy tax subsidies worldwide would reduce
carbon dioxide emissions by 4.5 billion tons – a 13 percent
reduction, the IMF study says.
However, the elimination of such subsidies would increase the cost
of energy, which critics say would disproportionately affect
lower-income households.
"It doesn’t bother Barbra Streisand if her electricity bill goes
up, but it sure affects people who are worried about their jobs
going away," Dan Kish, senior vice president for policy at the
pro-free-market Institute for Energy Research in Washington, told
the Christian Science Monitor.
The problem could be solved by conditional cash transfer programs
to low-income groups though, or by keeping energy subsidies for
items heavily used by the poor.
“This IMF study makes the point very clearly that containing
energy costs, particularly for the poor can readily be done without
these distorting subsidies that only preserve the status quo,
impede research and innovation, and support an energy mix that is
detrimental to local communities and the global environment,”
the Christian Science Monitor quotes Daniel Kammen, director of the
Renewable and Appropriate Energy Laboratory at the University of
California, Berkeley, as saying.