Global fossil fuel subsidies will reach a record $7 trillion by 2022, equivalent to more than 7% of global gross domestic product, the IMF said.
These subsidies are financial support provided by the government to make it cheaper to produce or buy fossil fuels such as oil, gas and coal.
Subsidies for coal, oil and gas in 2022 exceed spending by governments around the world on education and account for two-thirds of healthcare spending.
according to IMF report Governments extended support to consumers and businesses as global energy prices soared as Russia invaded Ukraine and the economy rebounded from the COVID-19 pandemic, reports showed on Thursday.
The IMF report comes as the world experiences the warmest average monthly temperatures on record.
When fossil fuels are burned, they release harmful pollutants that contribute to global warming and exacerbate extreme weather events. They also pollute the air with toxins that damage our respiratory systems and other vital organs, killing millions of people every year.
According to the report, by fuel products, low-price subsidies for petroleum products accounted for nearly half of subsidies, coal subsidies accounted for 30%, and natural gas subsidies nearly 20% (the rest were low-price subsidies for electricity).
By region, East Asia and the Pacific account for nearly half of global subsidies, according to the International Monetary Fund.
Meanwhile, in absolute country terms, China will make the largest contribution to total subsidies in 2022 ($2.2 trillion), followed by the U.S. ($760 billion), Russia ($420 billion), India ($350 billion) and Europe Union ($310 billion).
The bulk of the global subsidies accounted for in the study are what the IMF calls implicit subsidies, which occur when governments do not adequately charge for the environmental damage caused by burning fossil fuels.
Such damage includes air pollution and climate change, the effects of which are expected to intensify due to increased consumption of fossil fuels in developing countries.
The IMF said explicit subsidies, which means consumers pay less than the cost of supplying fossil fuels, have tripled since 2020, from $0.5 trillion to $1.5 trillion in 2022.
The graph is similar to Canadian think tank estimatesThe G20, the world’s largest economy, will provide a record $1.4 trillion in public funding for fossil fuels in 2022, despite pledges to cut spending, the International Institute for Sustainable Development reported Wednesday.
This includes investments by state-owned enterprises and loans by public financial institutions.
The G20 countries, which account for 80% of global carbon emissions, committed to phasing out “inefficient” fossil fuel subsidies in 2009.
Overhauling fossil fuel prices by removing explicit fuel subsidies and imposing corrective taxes such as a carbon tax would cut global carbon dioxide emissions by 43% by 2030 from business-as-usual levels (compared to 2019 levels), the IMF said. 34% reduction).
It added that this would be consistent with limiting global warming to “well below” 2 degrees Celsius and closer to 1.5 degrees Celsius.
“Underpricing fossil fuels means that governments forego a valuable source of much-needed revenue and hurt distributional and poverty reduction objectives, as most of the benefits of underpricing go to wealthier households,” the IMF report said. .”
“Given the damage caused by climate change and the large number of premature deaths (4.5 million per year) from fossil fuel air pollution, the gap between effective fuel prices and current fuel prices is often large.”
The International Monetary Fund says fuel price reforms will prevent an estimated 1.6 million premature deaths a year from local air pollution by 2030.
Edited by Mike Fern and Tai Junkang.