IMF Report Calls for Governments to Drop $1.9 Trillion Energy Subsidies

The International Monetary Fund (IMF) has just released a report covering a study into energy subsidies around the world and how much they cost governments. They analysed 176 countries and concluded that global energy subsidies cost the governments $1.9 trillion and discourage private investment in the sector. They even suggest that getting rid of all energy subsidies could force people to be more efficient with their energy consumption, leading to a 13 percent reduction in carbon dioxide emissions.

Carlo Cottarelli, the director of fiscal affairs at the IMF, told reporters that “energy subsidies are large and they’re harmful. They lead to excessive consumption of energy, they absorb public-sector resources that could be used for more useful purposes, and they benefit the rich more than the poor.”

The IMF has long tried to persuade member countries that they should at least cut back on energy subsidies, and now hope that this report will give them the useful ammunition that they need to make a stronger case. Policy makers are often reluctant to reduce subsidies and allow energy prices to grow, and the IMF claims that this has led some developing nations to cut back on public health and education in order to supply decent energy subsidies.

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Cottarelli not only suggests that subsidies should be removed, but that in many developed countries energy is not taxed enough, which again is denying other areas of the economy that might benefit from the increased revenue earned by the government.

According to the report the US is the biggest subsidiser, paying out $502 billion in 2011; China and Russia followed close behind.

By. Joao Peixe of Oilprice.com