The Hidden Subsidy of Fossil Fuels

“The IMF  report adds that there is actually another kind of subsidy, which it calls a post-tax subsidy. This subsidy reflects the difference between “actual consumer fuel prices” and the full societal and environmental costs of a fuel.”

A new report says that the world subsidized fossil fuels by $5.2 trillion in just one year. But that calculation is less tidy than it seems.


HAZIR REKA / REUTERS

Governments around the world spend an enormous amount of money every year making it cheaper for fossil-fuel companies to exhaust the planet. But they’re not spending nearly as much as a recent report may make it seem.

The International Monetary Fund recently updated its comprehensive report on global fossil-fuel subsidies. It arrives at a staggering conclusion: In 2017, the world subsidized fossil fuels by $5.2 trillion, equal to roughly 6.5 percent of global GDP. That’s up half a trillion dollars from 2015, when global subsidies stood at $4.7 trillion, according to the IMF. If governments had only accounted for these subsidies and priced fossil fuels at their “fully efficient levels” in 2015, then worldwide carbon emissions would have been 28 percent lower, and deaths due to toxic air pollution 46 percent lower.

The report suggests a morally grim situation: As the planet careens toward climate catastrophe, governments are forking over trillions of dollars—one-fifteenth of the global economy!—directly to oil, coal, and gas companies. But the challenge of combatting climate change through politics is much more difficult than some tidy math can make it seem. This calculation suggests that recalibration would be simple. If we only cut those subsidies, then carbon pollution would plunge, and we’d be much further along in addressing the climate challenge. MORE

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