Fossil fuel subsidies cost $5.3 trillion annually!

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Fossil fuel subsidies cost $5.3 trillion annually: from Ec0mento.com

May 28, 2015 |

Fossil fuel subsidies cost $5.3 trillion annually
Fossil fuel subsidies cost $ 5.3 trillion a year or $10,000,000 a minute. That’s according to a new study by the International Monetary Fund that calculates the cost of air pollution on global health and the financial impact of floods, storms and droughts due to climate change. The IMF calls the findings “shocking”.

Nicholas Stern, a noted climate economist at the London School of Economics, said: “This very important analysis shatters the myth that fossil fuels are cheap by showing just how huge their real costs are. There is no justification for these enormous subsidies for fossil fuels, which distort markets and damages economies, particularly in poorer countries.”

Whereas some argue that severing our connection to fossil fuels would cripple the world economy, the IMF says quite the opposite would happen. It compares the cost of burning fossil fuels to an enormous tax that prevents economic growth. Removing that burden would breathe new life into economies around the world, especially in poorer, underdeveloped countries.

China is the perfect example of a country that keeps fossil fuel prices artificially low. It relies heavily on coal in the mistaken belief that cheap electricity is essential to keep its economy expanding. But its massive CO2 emissions – which are nearly half those of all other nations combined – are slowly strangling its citizens and saddling the country with enormous health care costs. The number one consideration for China’s citizens when it comes to where they want to live is access to air that is safe to breathe for themselves and their children.

Vitor Gaspar, the IMF’s head of fiscal affairs says, “Energy prices remain woefully below levels that reflect their true costs.” In April, the president of the World Bank, Jim Yong Kim, told The Guardian it was crazy that governments were still driving the use of coal, oil and gas by providing subsidies. “We need to get rid of fossil fuel subsidies now,” he said.

If fossil fuel prices included their true costs to society, they would be much more expensive and that would trigger a rapid transition to renewable energy. David Coady, the IMF official in charge of the report told The Guardian, “If we get the pricing of fossil fuels right, the argument for subsidies for renewable energy will disappear. Renewable energy would all of a sudden become a much more attractive option.”

The IMF’s Gaspar sums it up best. “By acting local, and in their own best interest, [nations] can contribute significantly to the solution of a global challenge,” he says. “The path forward is clear: act local, solve global.”

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