New IMF Report Lifts the Veil From Energy Subsidies

by RP Siegel
May 26, 2015 9:00 AM ET
Campaign: CSR Blogs


A lot of people who don’t like change say that renewables are only economical because of government subsidies. First of all, even as prices continue to fall, there are already a number of places where renewables are cost-competitive without any subsidies. Second, what most people do not realize is the extent to which conventional fossil fuels are subsidized. A recent report from the International Monetary Fund (IMF) sheds light on this.

They key findings of the study, as summarized on their website are as follows:

“First, post-tax energy subsidies are dramatically higher than previously estimated, and projected to remain high despite the sharp decline in international energy prices. Second, the vast majority of energy subsidies reflect domestic externalities, so countries should move ahead with energy subsidy reform unilaterally in their own interests. Third, the potential fiscal, environmental and welfare impacts of energy subsidy reform are substantial. Using the fiscal dividend to lower distortionary taxes or increase productive public spending could further improve welfare and economic growth.”

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Image credit: Adam Harvey: Flickr Creative Commons