IMF says: Fossil fuel subsidies costing global economy $2 trillion

According to the International Monetary Fund subsidies are masking the true cost of fossil fuel. “…When you factor in implicit subsidies from the failure to charge for pollution, climate change and other externalities, the post-tax cost comes in at closer to $2 trillion – equivalent to about 2.9 per cent of global GDP, or 8.5 per cent of government revenues.”

Cons of subsidies according to Sophie Vorrath:

  • Divert government resources
  • Stifle incentives for greater efficiencies and innovation
  • Government reforms might appear to be a daunting challenge

So naturally the next logical step for goverments moving towards a low-carbon environment would be “reducing or eliminating fossil fuel subsidies – and properly pricing energy to account for environmental impacts”. — Sophie Vorrath

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