The International Monetary Fund (IMF) has a new report out claiming that fossil fuel is “mispriced” and that eliminating subsidies to the fossil fuel industry and adding carbon taxes could cut greenhouse gases by 13 percent.
“Energy subsidies are pervasive and impose substantial fiscal and economic costs in most regions.
On a pre- tax basis, subsidies for petroleum products, electricity, natural gas, and coal reached $480 billion in 2011(0.7 percent of global GDP or 2 percent of total government revenues). The cost of subsidies is especially acute in oil exporters, which account for about two thirds of the total. On a post-tax basis which also factors in the negative externalities from energy consumption — subsidies are much higher at $1.9 trillion (2½ percent of global GDP or 8 percent of total government revenues). The advanced economies account for about 40 percent of the global post-tax total, while oil exporters account for about one third. Removing these subsidies could lead to a 13 percent decline in CO2 emissions and generate positive spillover effects by reducing global energy demand.”