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IMF calls to get rid of $2 Trillion fossil fuel subsidies

While the world is tackling global warming, almost $2 trillion was spent in fossil fuel subsidies in 2011. A study by the IMF claims ending subsidies could lower carbon dioxide emissions by 13%.

The survey argues the subsidies reinforce inequality by disproportionately benefiting the wealthiest, largest consumers of energy. Getting rid of them could ease pressure on budgets and decrease global carbon emissions.

“Subsidies cause overconsumption of petroleum products, coal, and natural gas, and reduce incentives for investment in energy efficiency and renewable energy,” the report reads.”This over-consumption in turn aggravates global warming and worsens local pollution.”

According to the report, energy subsidies come in two very different flavors – direct subsidies for consumption and inappropriate taxing of fossil fuels in order to take account of the air pollution and climate damage they cause.

In 2011, governments around the world spent some $480 billion to lower the price of petroleum, natural gas, coal, and electricity for their citizens. Some countries, particularly in North Africa and the Middle East, regularly spend more on subsidizing fossil fuels than on education and public health combined.

Scrapping all these direct subsidies could lower the global greenhouse-gas emissions by up to 2 percent, the report argues.

The other part of the report offers even more opportunities for tackling global warming. Standard economic models show fossils should be taxed at $25 per ton of carbon dioxide. But the failure to price these fossil fuels correctly amounts to a subsidy of some $1.4 trillion worldwide.

Eliminating these energy tax subsidies worldwide would reduce carbon dioxide emissions by 4.5 billion tons – a 13 percent reduction, the IMF study says.


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