Still Not Getting Energy Prices Right: A Global and Country Update of Fossil Fuel Subsidies

By Ian W.H. Parry, Simon Black, Nate Vernon-Lin

September 24, 2021

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Ian W.H. Parry, Simon Black, and Nate Vernon-Lin. Still Not Getting Energy Prices Right: A Global and Country Update of Fossil Fuel Subsidies, (USA: International Monetary Fund, 2021) accessed November 12, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

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.

Subject: Energy subsidies, Environment, Expenditure, Fuel prices, Greenhouse gas emissions, Non-renewable resources, Prices

Keywords: Climate change, Efficient fuel prices, Energy subsidies, Fossil fuel, Fossil fuel subsidies, Fossil fuel subsidy, Fuel prices, Fuel user price, Global, Greenhouse gas emissions, Local air pollution mortality, Non-renewable resources, Price reform, Revenue gains, Spreadsheet tools., Supply cost, Supply costs

Publication Details

Pages:

40
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2021/236
Stock No:

WPIEA2021236
ISBN:

9781513595405
ISSN:

1018-5941

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