Governments around the world spend more each year on fossil fuel subsidies than they do on health care.
That’s the startling new revelation made by the International Monetary Fund (IMF) this week, in which it estimates the world’s fossil fuel companies benefit from global subsidies of $5.3tr (£3.42tr, A$6.7tr) a year – equating to an astounding $10m per minute every day.
IMF has called for an end to the subsidies, outlining the benefits of eliminating post-tax energy subsidies in their IMF Working Paper/May 2015 – How Large Are Global Energy Subsidies.
Environmental benefits outlined in the report include a global reduction of C02 of more than 20% and the reduction in premature global air deaths by 55%.
The report also highlighted the massive economic gains of eliminating the subsidies, with a global welfare gain of more than $1.8tr (2.2% of global GDP in 2015)
The fiscal benefits from removing energy subsidies were also highlighted in the IMF report, with global gains estimated at about $2.9tr (3.6% of global GDP) for 2015.
The most heavily subsidized products post-tax were summarised, with coal amounting for 3.9% of global GDP in 2015, followed by petroleum (1.8%) natural gas (0.6%) and electricity (0.2%)
The enormity of the subsidies spent on fossil fuel companies meant that the IMF official in charge of the report, David Coady, had to double check the organisations initial estimate.
“When the ($5.3 trillon) number came out at first, we thought we had better double check this,” he said. “[But] it is the true cost associated with fossil fuel subsidies.”
The IMF report suggested a trend in the rise of global post-tax energy subsidies (from an estimate of $4.2 trillion in 2011 to $5.3 trillion in 2015) meant that energy subsidy reform is as urgent as ever.
One of the reports main conclusions was that low international energy prices provided a window of opportunity for countries to eliminate pre-tax subsidies and raise energy taxes as the public opposition to reform is likely to be somewhat muted.
Barack Obama and the G20 nations called for an end to fossil fuel subsidies in 2009, but little progress has been made. In April, the president of the World Bank, Jim Yong Kim, told the Guardian that 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.
In the US, presidential hopeful Bernie Sanders and Minnesota congressman Keith Ellison recently proposed the “End Polluter Welfare Act” – a bill that seeks to end the federal subsidies provided to major players in the fossil fuel industry.
Oil Change International reports that in 2014 alone, US taxpayers provided $21bn for fossil fuel exploration and production — in a year in which the total profit from the sector was estimated at $257bn and the five largest oil companies posted profits of more than $89bn.
Oil Change International reported that fossil fuel industry lobbying expenditure and contributions to the US Congress amounted to over $326m in the 113th Congress (2013-14).
A Guardian investigation of three specific projects, run by Shell, ExxonMobil and Marathon Petroleum, has revealed that the subsidises were all granted by politicians who received significant campaign contributions from the fossil fuel industry.