How large are global energy subsidies?

The issue of energy subsidy and taxation reform remains high on the international policy agenda reflecting the need for countries to pledge carbon reductions ahead of the Paris 2015 United Nations climate conference. A new study by staff at the Fiscal Affairs Department of the International Monetary Fund (IMF) provides a comprehensive, updated picture of energy subsidies at the global and regional levels. It focuses on the broad notion of energy subsidies, which captures the failure to charge for the environmental damage from energy consumption as well as to tax energy consumption in the same way as other consumption goods to raise government revenues.

On May 18, Vitor Gaspar, director of the IMF’s Fiscal Affairs Department, presented the key findings of the study. First, 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. A panel discussion followed and included a question and answer session with the audience.

Download presentation slides.

 Follow the discussion @BrookingsEcon or #EnergySubsidies.