The International Monetary Fund has found that the Fossil Fuel industry benefits from $11 million in subsidies per minute. No, you didn’t read that wrong. $11M per minute.
Coal, oil, and gas were subsidized by $5.9 trillion in 2020. At a minimum, prices were 50% below their actual costs for 99% of coal, 52% of diesel, and 47% of natural gas. Two-thirds of the subsidies resulted from 5 countries, which happen to be the top-five carbon producers globally: China, the US, Russia, India, and Japan.
Without action, the IMF expects subsidies to rise to $6.4 trillion by 2025.
If fuel prices that reflected the actual cost were set, global carbon emissions would drop by over a third, helping the world meet its Paris Agreement targets.
With the COP26 summit approaching, IMF researchers believe there is no better time to call for fossil fuel price reform. They feel that ending these subsidies could prevent nearly a million deaths a year from dirty air while raising trillions of dollars for governments across the globe.
According to Ian Parry, the lead author of the IMF report, “Some countries are reluctant to raise energy prices because they think it will harm the poor. But holding down fossil fuel prices is a highly inefficient way to help the poor because most of the benefits accrue to wealthier households. It would be better to target resources towards helping poor and vulnerable people directly.”
“The IMF report is a sobering reading, pointing to one of the major defects of the global economy,” said Maria Pastukhova, at the thinktank e3g. “The IEA’s net-zero roadmap projects that $5T is necessary by 2030 to put the world on the pathway to a climate-safe world. It is maddening to realize the much-needed change could start happening now, if not for governments’ entanglement with the fossil fuels industry in so many major economies.”
Fifty countries have committed to achieving net-zero emissions by 2050. Many are using offsets and implementing new regulations.
Though the carbon credit industry is booming and technological advances are happening, meeting these goals is still a long way away. Removing the subsidies while further expanding the carbon markets and technological innovation can help improve the environment while sparking economic growth.
This report by IMF shows there is still much progress to be made.