Posted on 05/20/2015 5:04:54 AM PDT by thackney
BIG mistakes in economic policymaking abound. But it would be hard to find a worse one than energy subsidies. Recent research has shown that they enrich middlemen, depress economic output and help the rich, who use lots of energy, more than they do the poor.
But now a new working paper by the International Monetary Fund highlights another cost too: damage to the environment. Including this, the authors reckon that the total drag on the global economy caused by fuel subsidies now amounts to a stonking $5.3 trillion each year, or 6% of global GDP—more than world spends on health care. Poorer countries dole out the largest amount of subsidies; some spend up to 18% of their GDP a year on them. The lion’s share goes to coal, the most polluting fuel. By contrast renewable-energy subsidies, mainly given out in the rich world, amount to a mere $120 billion. And they would vanish if fossil fuels were taxed properly.
Defining subsidies is tricky. The simplest measure is the amount of taxpayers’ money used directly to keep a price artificially low. A broader one includes the costs borne by others, such as pollution, and exemptions from taxes. The IMF uses the wider definition to reach its $5.3 trillion figure. Seen more narrowly, the cost would be $333 billion. But this is only lower than last year because of falling oil prices.
A previous study in 2013 reckoned that the overall damage, including environmental costs, was $2 trillion. The much higher estimate released this week reflects more thorough study of the other health and environmental costs of subsidising fossil fuels. These include the costs of congestion and premature deaths caused by poor air quality, the long-term impact of global warming and the effects of extreme weather such as floods and storms. It estimates the long-term damage done by a tonne of CO2, for example, at $42. Many green-minded people think that figure (borrowed from the American government) is too low. But some economists argue that the inclusion of hypothetical climate-change costs is too sweeping.
Abrupt change is unlikely—making coal users pay its full cost would mean doubling prices. Subsidies attract a tenacious and vocal lobby. But the fall in the oil-price has provided a chance to cut subsidies. India, for example, has recently stopped using handouts to reduce the price of diesel. Egypt, Indonesia and Thailand are also reforming their subsidies. Ending them altogether, and taxing fossil fuels properly, the IMF reckons, would halve the number of deaths from outdoor air pollution, cut carbon-dioxide emissions by a fifth and save up to $2.9 trillion. It would also leave governments with lots of room to cut taxes, or increase spending on more useful things.
I hate the leftist rag “Economist.” I thought this article was going to say how wrong it was for the Feds to force those of us in Flyover country pay the huge home heating fuel oil subsidies for East Coast states. that’s just wrong on so many levels.
Oldplayer
I’m not a fan of subsidies, but this article is HorseHockey. Not even worthy of a freshman college term paper. No offset is accounted for economic activity related to energy post production as it relates to quality of life or availability of energy for manufacturing and industry and the associated economic impact. Just a screed.
And just what subsidies would those be? I'd like to get me some of them.
Whoa, waitaminute! I thought that was all from tobacco and second hand smoke and third hand smoke and even reading print ads for cigarettes...
They're double-dipping again! (yes, I'm being sarcastic!)
The figure 5.2 Trillion, or whatever it is, was pulled out of their asses.
Climate Change is the gateway drug to global government which is another word for tyranny.
I am always suspicious when I see obvious errors in articles.
In this one, the graphs show Energy.
Electricity is not an energy. It is a byproduct of energy, whether oil, coal, gas, wind, solar or hydro.
Seems the author is trying to steer audience to a way of thinking of an agenda.
Subsidies are just bad, period.
They hide the true cost of whatever is being subsidized, skewing the market in all directions. John Q Public does not know the true cost of anything, and therefore cannot make informed decisions of where to invest, what to buy, and how to plan for the future.
The same can be said of oil, coal, natgas etc. They store energy but they are not energy themselves. They have to be burned or otherwise transformed to capture and utilize the energy embodied in them.
A large amount of these “subsidies” relate to failure to pay carbon taxes. For many reasons, this seems like a bogus way to calculate subsidies. It certainly does not reflect direct payments to lower the prices of fuel.
Ok, I’ll ask the question: which comes first, electricity or all the others you mentioned?
Electricity is the capture of energy, not energy itself (unless it is lightening). All energy existing in the universe, most notably for Earth, the sun. But is stored in various ways. For example, food is stored solar energy, but it is not until we or animals eat the food that it is converted to energy.
There is a disconnect somewhere.
the original posted graph shows Energy.
The maker’s intent is to show what amount of Energy for various countries.
It is clear that is not taking things down to subparticle basis as u seem to be doing.
My post was to clarify that used Electricity MUST come from another source. I do not think any of these countries rely on a mechanism to collect lightening strikes for energy utilization needs.
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