Global Energy Subsidies Are Big—About US$5 Trillion Big

2019-03-27T17:14:00-04:00May 18, 2015|

By Sanjeev Gupta and Michael Keen

(Versions in 中文, Français, 日本語Русский and Español)

In their blog, Ben Clements and Vitor Gaspar make the points that global energy subsidies are still very substantial, that there is a strong need for reform in many countries, and that now is a great time to do it. This blog sets out what we mean by “energy subsidies,” provides details on their estimation, and explains how they continue to be high despite the recent drop in international energy prices (Chart 1).

Slide1

Our latest update of global energy subsidies shows that “pre-tax” subsidies—which occur when people and businesses pay less than it costs to supply the energy—are smaller than a few years back. But “post-tax” subsidies—which add to pre-tax subsidies an amount that reflects the environmental, health and other damage that energy use causes and the benefit from favorable VAT or sales tax treatment—remain extremely high, and indeed are now well above our previous estimates.

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Carbon Pricing: Good for You, Good for the Planet

2017-04-14T01:54:55-04:00September 17, 2014|

By Ian Parry

The time has come to end hand wringing on climate strategy, particularly controlling carbon dioxide (CO2) emissions.  We need an approach that builds on national self-interest and spurs a race to the top in low-carbon energy solutions. Our findings here at the IMF—that carbon pricing is practical, raises revenue that permits tax reductions in other areas, and is often in countries’ own interests—should strike a chord at the United Nations Climate Summit in New York next week. Let me explain how.

Ever since the 1992 Earth Summit, policymakers have struggled to agree on an international regime for controlling emissions, but with limited success. Presently, only around 12 percent of global emissions are covered by pricing programs, such as taxes on the carbon content of fossil fuels or permit trading programs that put a price on emissions. Reducing CO2 emissions is widely seen as a classic “free-rider” problem. Why should an individual country suffer the cost of cutting its emissions when the benefits largely accrue to other countries and, given the long life of emissions and the gradual adjustment of the climate […]

Too Much At Stake: Moving Ahead with Energy Price Reforms

2017-04-14T01:58:09-04:00July 31, 2014|

By Ian Parry

(Versions in Español中文, 日本語Français, and Русский)

Energy plays a critical role in the functioning of modern economies. At the same time, it’s at the heart of many of today’s pressing environmental concerns—from global warming (predicted to reach around 3–4 degrees Celsius by the end of the century) and outdoor air pollution (causing over three million premature deaths a year) to traffic gridlock in urban centers. In a new IMF book, we look at precisely how policymakers can strike the right balance between the substantial economic benefits of energy use and its harmful environmental side effects.

These environmental impacts have macroeconomic implications, and with its expertise in tax design and administration, the IMF can offer sound advice on how energy tax systems can be designed to ensure energy prices fully reflect adverse environmental impacts.

We do this by developing a sensible and reasonably simple way to quantify environmental damages and applying it, in over 150 countries, to show what these environmental damages are likely to imply for efficient taxes on coal, natural […]

Paying the Price for the Future We Want

2017-04-15T14:06:59-04:00June 19, 2012|

One area where the IMF can help to promote sustainable development is by “getting the prices right.” Getting appropriate pricing means, for example, making sure that companies and individuals pay the true cost of polluting our planet. The best way to come up with the true costs is through fiscal instruments, such as environmental taxes or emissions trading systems where governments sell pollution rights, to reflect environmental damages in the prices we pay for energy, food, driving our cars, and so on. Getting the prices right should form the centerpiece of policies to promote green, or environmentally sustainable, development.
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