London (TIP)- Global subsidies for fossil fuels rose by $2 trillion over the past two years to reach a record $7 trillion in 2022, according to new estimates from the International Monetary Fund.
The soaring costs, driven by post-pandemic consumption growth and by rising energy costs stemming from Russia‘s 2022 invasion of Ukraine, are straining budgets, adding to pollution and exacerbating global warming, the IMF said in a report. “Subsidies for oil, coal and natural gas are costing the equivalent of 7.1% of global gross domestic product,” the IMF said. “That’s more than governments spend annually on education (4.3% of global income) and about two thirds of what they spend on healthcare (10.9%).”
It warned that implicit subsidies – the cost of damage from air pollution and global warming – account for the bulk of the costs and are likely to keep rising.
A variety of nations in Africa and elsewhere in the developing world have cut fuel subsidies in recent years due in part to rising debt and borrowing costs. Wealthier nations, where energy consumption is higher, face less financial pressure to cut subsidy costs.
Explicit subsidy costs – what governments pay directly to keep electricity or pump prices artificially low – have more than doubled since 2020, to $1.3 trillion. The IMF said that these costs are likely to fall now that energy prices have eased, which it said was an ideal time to scrap subsidies. “Falling energy prices provide an opportune time to lock in pricing of carbon and local air pollution emissions without necessarily raising energy prices above recently experienced levels,” it said.
But an even bigger concern, the IMF said, are implicit subsidy costs, which are likely to keep rising as damage from a warming planet spreads. Consumers did not pay for over $5 trillion of environmental costs last year, the IMF said. Source: PTI