International Monetary Fund (IMF) in its recent report titledAct Local, Solve Global: The $5.3 Trillion Energy Subsidy Problem has voiced alarm about energy subsidies across the world.
The report has clearly mentioned that theenergy subsidies across the world are expected to reach 5.3 trillion dollars in 2015, more than government health spending.
Key facts from report
- The rising subsidy figures are among the largest negative factors for economic growth which is piling up adverse effects on efficiency, growth and inequality.
- 2015 energy subsidies will represent 6.5 per cent of the global economy, likely exceeding government health spending across the world.
- China is the largest spender on energy subsidies and spends around 2.3 trillion dollars a year, followed by the United States at 699 billion dollars and Russia at 335 billion dollars.
- While India spends 277 billion dollars, Japan spends 157 billion dollars and European Union (EU) spends around 330 billion dollars.
- Overall energy subsidies had more than doubled since 2011 which had amounted to 2 trillion dollars i.e. 2.9 percent of the world’s gross domestic product.
- It has damaging effects on air quality and health, such as premature deaths due to global warming.
- By getting energy prices right can help national governments achieve their goals not only for the environment but also for inclusive growth and sound public finances.
Definition of energy subsidies: The IMF report defined energy subsidies as the difference between the amount of money consumers pay for energy and its true costs, plus a country’s normal sales or value-added tax rate.
In addition, the true costs include environmental effects like carbon emissions that lead to global warming and the health effects.