Governments around the world will subsidise the cost of gas, coal and oil with a “shocking” $10million (£6million) a minute this year, a new study by economic experts has revealed.
The estimated figure, which the International Monetary Fund (IMF) has described as “extremely robust”, suggests that firms benefit from $5.3 trillion (£3.4 trillion) a year. That is more than the annual total worldwide governments spend on health care, according to World Health Organisation (WHO) statistics.
Researchers defined energy subsidies as the difference between what consumers pay for energy and its “true costs”, as firms do not pay the costs levied against governments by burning fossil fuels.
This sum factors in supply costs and the damage that energy consumption inflicts on people’s health and the environment, two senior IMF officials wrote in a blog post, entitled "Act Local, Save Global", launching the study on Monday.
Eco-friendly cities: in pictures
Eco-friendly cities: in pictures
1/10 1. Copenhagen, Denmark
55% of residents in the Danish capital cycle to work or school, and over 30% of public transport uses renewable fuel. The city is also aiming to be carbon-neutral by 2025.
2/10 2. Stockholm, Sweden
All trains in the Swedish capital run on renewable fuels, and buses run on a hybrid of ethanol and electricity. The city also has seven nature reserves which improve air quality.
3/10 3. Hamburg, Germany
The German city, which was the European Green Capital in 2011, uses 200,000 low-energy lamps across 400 public buildings. 3,000 hectares of state-owned parkland are also available for the million people who use them every week.
4/10 4. Vitoria-Gasteiz, Spain
There are over 130,000 trees and 90km of bicycle lanes in this northern city of Spain. Citizens also have access to 210 organic farming plots, and there is a public green space within 300 metres of every house.
5/10 5. Nantes, France
As the first city in France to re-introduce electric tramways, Nantes has set itself targets to reduce air pollution and carbon dioxide emissions. 15% of daily travels are undertaken on public transport, and only 11% of rubbish goes to landfill.
6/10 6. Bristol, UK
The birthplace of Banksy and this year’s European Green Capital, Bristol employs around 9000 people in its low carbon economy initiative. Additionally, 34% of the city is made up of green and blue open spaces and homes have become 25% more efficient over the last decade.
7/10 7. Ljubljana, Slovenia
The Slovenian capital has a pedestrian-only city-centre and 94% of residents take part in the organic waste collection system. With over 190km of cycle paths and almost all residents living less than 300m from public transport, the city has promoted environmentally-friendly ways of travelling.
8/10 8. Oslo, Norway
The Norweigan capital has the world’s most electric cars per capita, reducing emissions by 50% since 1991. With the aim to make public transport fossil fuel-free by 2020, the city’s authority is making sure residents are as eco-friendly as possible.
9/10 9. Brussels, Belgium
Best known for its beer and chocolate, the city which is home to the European Parliament, reduced CO2 emissions by 13,000 tonnes between 2007 and 2009. By 2018, it hopes to have reduced car traffic by 20% from its 2001 level.
10/10 10. Nijmegen, Netherlands
Located on the River Waal, this lesser-known Dutch city fuels its buses with biogas and citizen participation is encouraged through multiple green initiatives. Around 14,000 homes are heated using a network of waste heat, and the city aims to be energy neutral by 2040.
China will spend the most this year, and was responsible for over 40 per cent of the total amount as it relies heavily on coal, followed by the US at 13 per cent, while the EU will account for 6 per cent.
“These estimates are shocking,” experts Benedict Clements and Vitor Gaspar wrote in the post.
“Energy subsidies are both large and widespread. They are pervasive across advanced and developing countries," the added.
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The study urges world leaders to take action, and predicts that reforms of energy taxation and subsidies could have “enormous” impacts on fiscal, environmental, and welfare of countries by raising government revenue by $2.9trillion (£2 trillion), or 3.6 per cent of global GDP.
It added that changes would also have the potential to cut carbon emissions by 20 per cent, and halve pre-mature air pollutions deaths by more than half.
“The resources freed from subsidy reform could be used to meet critical public spending needs or reduce taxes that are choking economic growth,” Messrs Clements and Gaspar wrote.
Nicholas Stern, a climate economist at the London School of Economics, told The Guardian: “This very important analysis shatters the myth that fossil fuels are cheap by showing just how huge their real costs are. There is no justification for these enormous subsidies for fossil fuels, which distort markets and damages economies, particularly in poorer countries.”Reuse content