Fossil Fuel Subsidies - IMF

[rufuspollock]

Main page: https://www.imf.org/en/Topics/climate-change/energy-subsidies

2021 report: https://www.imf.org/en/Publications/WP/Issues/2021/09/23/Still-Not-Getting-Energy-Prices-Right-A-Global-and-Country-Update-of-Fossil-Fuel-Subsidies-466004

Excerpts

There's a reason reform doesn't happen ...

https://www.imf.org/en/Topics/climate-change/energy-subsidies

Reform Efforts

In 2009, the Group of 20 advanced and emerging market economies called for a phase out of inefficient fossil fuel subsidies in all countries and reaffirmed this again in 2012.

Despite the potential gains, many countries have had difficulty reforming subsidies. When reforms are made, prices increase, and this has often led to widespread public protests.

The absence of public support for subsidy reform is in part due to a lack of confidence in the ability of governments to shift the resulting budgetary savings to programs that would compensate the poor and middle class for the higher energy prices they face.

This problem is particularly challenging in oil-exporting countries, where subsidies are seen as a mechanism to distribute the benefits of natural resource endowments to their populations and where the capacity to administer targeted social programs is typically limited.

Governments are also often concerned that higher energy prices will contribute to a higher rate of inflation and adversely affect their competitiveness. Subsidy reform can also be complex when it includes efforts to reduce inefficiencies and production costs, as is often the case for the electricity sector.

Measuring Fossil Fuel Subsidies

When defining fossil fuel subsidies, it is important to distinguish between consumer and producer subsidies. Within consumer subsidies it is also useful to distinguish between pre-tax and post-tax consumer subsidies since differences in estimates in the literature most often reflect a different focus on these subsidies.

Pre-tax consumer subsidies exist when energy consumers pay prices that are below the costs incurred to supply them with this energy. For internationally traded energy products, like natural gas and petroleum products, the supply cost used to calculate subsidies is the international price adjusted for distribution and transportation costs. Where the energy product is non-traded, like electricity, the supply cost is the price at which the domestic producer recovers costs, including a normal return to capital.

Post-tax consumer subsidies exist if consumer prices for energy are below supply costs plus the efficient levels of taxation. The efficient level of taxation includes two components. First, energy should be taxed the same way as any other consumer product. Second, some energy products contribute to local pollution, traffic congestion and accidents, and global warming—efficient taxation requires that the price of energy should reflect these adverse effects on society. In most countries, taxes on energy fall far short of the efficient levels.

Producer subsidies exist when producers receive either direct or indirect support that increases their profitability above what it otherwise would be. This support can take many forms, including receiving a price for the output above the supply cost, paying a price for inputs below supply costs, or receiving a direct transfer from the budget. In practice, producer subsidies tend to substantially smaller in magnitude than consumer subsidies.

Still Not Getting Energy Prices Right: A Global and Country Update of Fossil Fuel Subsidies - IMF report Sep 2021

https://www.imf.org/en/Publications/WP/Issues/2021/09/23/Still-Not-Getting-Energy-Prices-Right-A-Global-and-Country-Update-of-Fossil-Fuel-Subsidies-466004

This paper provides a comprehensive global, regional, and country-level update of: (i) efficient fossil fuel prices to reflect their full private and social costs; and (ii) subsidies implied by mispricing fuels. The methodology improves over previous IMF analyses through more sophisticated estimation of costs and impacts of reform. Globally, fossil fuel subsidies were $5.9 trillion in 2020 or about 6.8 percent of GDP, and are expected to rise to 7.4 percent of GDP in 2025. Just 8 percent of the 2020 subsidy reflects undercharging for supply costs (explicit subsidies) and 92 percent for undercharging for environmental costs and foregone consumption taxes (implicit subsidies). Efficient fuel pricing in 2025 would reduce global carbon dioxide emissions 36 percent below baseline levels, which is in line with keeping global warming to 1.5 degrees, while raising revenues worth 3.8 percent of global GDP and preventing 0.9 million local air pollution deaths. Accompanying spreadsheets provide detailed results for 191 countries.

OK, so explicit subsidies are around ~$500 bn a year or around 0.6% of global GDP.

Data

Says spreadsheets are available but couldn't find them and they are referenced in fn 8 on p.9:

8 See www.imf.org/en/Topics/climate-change/energy-subsidies and https://www.imf.org/- /media/Files/Topics/Environment/energy-subsidies/fuel-subsidies-template-2021.ashx

A couple of steps later and we find them here at this link: https://www.imf.org/-/media/Files/Topics/Environment/energy-subsidies/fuel-subsidies-template-2021-updated-131021.ashx cached - fuel-subsidies-template-2021-updated-131021.xlsx (5.9bm)

Key tables and figures are embedded in PDF e.g.

Rant on data presentation

Images are actually unreadable on the web! https://www.imf.org/en/Topics/climate-change/energy-subsidies#Energy%20Subsidies