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IMF says energy subsidies are now US$5.3 trillion

WASHINGTON, DC: According to the International Monetary Fund (IMF), global energy subsidies increased from US$4.2 trillion in 2011 to US$5.3 trillion in 2015.

As a percent of world GDP, the subsidies rose from 5.8 percent in 2011 to 6.5 percent in 2015 and now exceed worldwide government health spending estimated by the World Health Organization at US$4.3 trillion.

The largest subsidies are in China (US$2.3 trillion), the United States (US$699 billion), Russia (US$335 billion), European Union (US$330 billion), India (US$277 billion), and Japan (US$157 billion).

Greenpeace Artic oilThe IMF claims in a new report this externality hides the true cost of energy consumption that includes supply costs and the damage that energy consumption inflicts on people and the environment. The report says eliminating energy subsidies would lower global carbon dioxide emissions by over 20 percent.

According to Victor Gaspar, IMF director of its Fiscal Affairs Department, the fiscal gain from energy subsidy reform would have been US$3.0 trillion in 2013 and US$2.9 trillion in 2015 – equal to 4.0 percent and 3.6 percent of global GDP respectively.

He said that increasing energy prices gradually and predictably to reflect their true costs would generate fiscal gains of about 3.5 percent of global GDP. Recently, several countries have narrowed the gap between domestic and international prices that resulted in a subsidy reduction of US$190 billion between 2011 and 2015.

Describing the current subsidy level as "shocking", Gaspar noted that because global energy prices have dropped significantly, there is a window of opportunity for countries to act ahead of the Paris 2015 UN climate conference.

According to a report in the Guardian newspaper, economist Nicholas Stern, author of the British government's 2006 landmark study Economics of Climate Change, said Shell and other hydrocarbon companies are "getting it wrong" on the potential of renewables technology and that people will insist on policies to hold global warming to 2 degrees Celsius.

Speaking at the May Climate Week conference in Paris, French Finance minister Michel Sapin said France will soon pass a law requiring institutional investors to disclose their carbon footprint. It will be a "game-changer" he declared and in line with government's need to "have a better understanding of climate emissions before allowing credit for any project".

He added the measure is also intended to help institutional investors "understand how their assets are exposed to climate change" in order to convince them to "decarbonize their portfolios". The new French law would facilitate divestment from fossil fuels to low carbon investments.

Meanwhile, as part of its campaign against Shell drilling in the Artic, Greenpeace asked British artists KennardPhillipps to create a new version (above) of the painting 'An Arctic Summer: Boring Through the Pack in Melville Bay' by William Bradford. It depicts an oil pipeline spill and rig explosion.

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