Global energy subsidies, 2010–2017, showing trends in global pre-tax and post-tax fossil fuel subsidies. The post-tax fossil fuel subsidies are 15-20 times larger than pre-tax subsidies. Post-tax subsidies have been reasonably stable, varying between 5.4 and 6.5 percent of global GDP between 2010 and 2017. In nominal terms, global subsidies were $4.7 and $5.2 trillion for 2015 and 2017 respectively. The bottom line from Figure 2 is that there has not been a sharp increase in the pricing of environmental costs at the global level, despite some progress on fuel price reform and carbon pricing at the national level. Graphic: IMF
Global energy subsidies, 2010–2017, showing trends in global pre-tax and post-tax fossil fuel subsidies. The post-tax fossil fuel subsidies are 15-20 times larger than pre-tax subsidies. Post-tax subsidies have been reasonably stable, varying between 5.4 and 6.5 percent of global GDP between 2010 and 2017. In nominal terms, global subsidies were $4.7 and $5.2 trillion for 2015 and 2017 respectively. The bottom line from Figure 2 is that there has not been a sharp increase in the pricing of environmental costs at the global level, despite some progress on fuel price reform and carbon pricing at the national level. Graphic: IMF

By Nick Cunningham
12 May 2019

(OilPrice.com) – The world spent a staggering $4.7 trillion and $5.2 trillion on fossil fuel subsidies in 2015 and 2017, respectively, according to a new report [pdf] from the International Monetary Fund. That means that in 2017 the world spent a whopping 6.5 percent of global GDP just to subsidize the consumption of fossil fuels.

China was “by far, the largest subsidizer” in 2015 at $1.4 trillion, the IMF said. The U.S. came in second at $649 billion. In other words, the U.S. spent more on fossil fuel subsidies in 2015 than it did on the bloated Pentagon budget ($599 billion in 2015). Russia spent $551 billion, the EU spent $289 billion, and India spent $209 billion. Emerging markets in Asia accounted for 40 percent of the total while the industrialized world accounted for 27 percent, with smaller percentages found in other regions.

The subsidy figure the IMF uses incorporates a variety of supports for fossil fuels, including not pricing for local air pollution, climate change and environmental costs, as well as undercharging for consumption taxes and undercharging for supply costs.

Global energy subsidies by energy product, 2013–2017, showing the breakdown of subsidies by fuel product. In 2015, underpricing of supply costs for petroleum, natural gas, and electricity accounted for 32, 27, and 40 percent respectively of the global pre-tax subsidy. The decomposition of post-tax subsidies shows that coal is the most important fuel, accounting for 44 percent of the global subsidy in 2015, reflecting the underpricing of its large carbon and local air pollution costs. Petroleum is close behind, however, accounting for 41 percent of the global subsidy, largely reflecting the failure of excises on petroleum products to fully reflect environmental costs. Graphic: IMF
Global energy subsidies by energy product, 2013–2017, showing the breakdown of subsidies by fuel product. In 2015, underpricing of supply costs for petroleum, natural gas, and electricity accounted for 32, 27, and 40 percent respectively of the global pre-tax subsidy. The decomposition of post-tax subsidies shows that coal is the most important fuel, accounting for 44 percent of the global subsidy in 2015, reflecting the underpricing of its large carbon and local air pollution costs. Petroleum is close behind, however, accounting for 41 percent of the global subsidy, largely reflecting the failure of excises on petroleum products to fully reflect environmental costs. Graphic: IMF

By fuel, coal is receives the most largesse, account for 44 percent of the global total. Oil was shortly behind at 41 percent, and natural gas and electricity output received 10 percent and 4 percent, respectively.

There is a long list of reasons why slashing fossil fuel subsidies is not only a good idea, but very much needed. The climate crisis is worsening. Paying for wasteful consumption saps already cash-strapped governments of much needed funds for other needs. Local air pollution also negatively impacts human health, and in some cases, to very extreme levels. “Energy pricing reform therefore remains largely in countries own interest, given that about three quarters of the benefits are local,” the IMF said.

If fuel prices were set at “fully efficient levels” in 2015, global CO2 emissions would have been 28 percent lower, deaths from air pollution would have been 46 percent lower, and tax revenues would have been 3.8 percent of global GDP higher, the IMF said. [more]

Global Fossil Fuel Subsidies Hit $5.2 Trillion

Environmental gains from removing energy subsidies, 2015, showing the percent reductions in CO2 emissions and premature air pollution deaths—broken down by region and fuel product. Globally, the CO2 reduction is 28 percent, and varies regionally from 22 percent in E.D. Europe to 35 percent in CIS, and would represent a huge step towards meeting (or exceeding) countries’ Paris mitigation pledges. Around 80 percent of the CO2 reduction is due to the reduction in coal use. The reduction in premature global air pollution deaths is about 46 percent, ranging from 29 percent in LAC to 51 percent in CIS. Again, the reduction is dominated by coal (at nearly 85 percent) because of both the reduction in coal consumption and the assumed accompanying reduction in air emission rates. Graphic: IMF
Environmental gains from removing energy subsidies, 2015, showing the percent reductions in CO2 emissions and premature air pollution deaths—broken down by region and fuel product. Globally, the CO2 reduction is 28 percent, and varies regionally from 22 percent in Emerging and Developing (E.D.) Europe to 35 percent in Commonwealth of Independent States (CIS), and would represent a huge step towards meeting (or exceeding) countries’ Paris mitigation pledges. Around 80 percent of the CO2 reduction is due to the reduction in coal use. The reduction in premature global air pollution deaths is about 46 percent, ranging from 29 percent in LAC to 51 percent in CIS. Again, the reduction is dominated by coal (at nearly 85 percent) because of both the reduction in coal consumption and the assumed accompanying reduction in air emission rates. Graphic: IMF

ABSTRACT: This paper updates estimates of fossil fuel subsidies, defined as fuel consumption times the gap between existing and efficient prices (i.e., prices warranted by supply costs, environmental costs, and revenue considerations), for 191 countries. Globally, subsidies remained large at $4.7 trillion (6.3 percent of global GDP) in 2015 and are projected at $5.2 trillion (6.5 percent of GDP) in 2017. The largest subsidizers in 2015 were China ($1.4 trillion), United States ($649 billion), Russia ($551 billion), European Union ($289 billion), and India ($209 billion). About three quarters of global subsidies are due to domestic factors—energy pricing reform thus remains largely in countries’ own national interest—while coal and petroleum together account for 85 percent of global subsidies. Efficient fossil fuel pricing in 2015 would have lowered global carbon emissions by 28 percent and fossil fuel air pollution deaths by 46 percent, and increased government revenue by 3.8 percent of GDP.

Global Fossil Fuel Subsidies Remain Large: An Update Based on Country-Level Estimates