WORLD’S OLD ENERGY SUBSIDIES DRIVE CLIMATE CHANGE

IMF: Want to fight climate change? Get rid of $1.9 trillion in energy subsidies.

Brad Plumer, March 27, 2013 (Washington Post)

“…[T]he simplest way to tackle global warming…[is making] sure that fossil fuels are priced properly and not subsidized…[according to Energy Subsidy Reform: Lessons and Implications from] the International Monetary Fund, which argues that the world ‘misprices’ fossil fuels to the tune of some $1.9 trillion per year…Eliminating these subsidies, the IMF argues, and replacing them with appropriate carbon taxes could cut global greenhouse-gas emissions by 13 percent, curtail air pollution, and shore up the finances of many poorer countries now in debt trouble…

“…[In 2011, there was] $480 billion in direct subsidies for consumption…[of] petroleum, natural gas, coal, and electricity for their citizens…[most] in developing nations, particularly in North Africa and the Middle East…The report argues that these subsidies are crowding out other useful public spending in these countries and depressing private investment in the energy sector…[G]lobal greenhouse-gas emissions would fall by up to 2 percent if all of these direct subsidies were scrapped…”

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“…[‘Externalities’ like the air pollution and climate damage CO2-emitting energies cause, which standard economic models value at about $25 per ton of carbon dioxide, result in] a subsidy of some $1.4 trillion worldwide…[C]ountries that subsidize fossil fuels most heavily are the United States ($502 billion per year), China ($279 billion per year), and Russia ($116 billion)…Correcting for all of this mispricing would reduce global greenhouse-gas emissions by around 13 percent, the IMF says.

“…[But the] United States and Russia are very far from considering a carbon tax, while the Chinese government is mulling over an extremely modest and fragmented carbon-pricing scheme…[I]n poorer countries, scrapping these direct subsidies tends to be extremely contentious…22 countries that have successfully managed to reduce or scrap their direct subsidies…[They] need to be phased out slowly and be paired with measures to mitigate the impact on the poor…[but] should be doable, since energy subsidies tend to…go to the top one-fifth of the population…”

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