6.5% of global GDP spent subsidising fossil fuels, or $12m every minute

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PV Magazine

Analysis of the subsidies steered towards the fossil fuel industry has revealed that a massive $US5.3 trillion ($A6.7 trillion) was paid to coal, gas and other finite resources in 2015 – up from $US4.9 trillion in 2013, according to a report published in the journal World Development.

By assessing the total impact of fossil fuels, and where their growth and adoption is supported, the authors found that 6.5% of the world's GDP still props up these sources. Source: PV Magazine

By assessing the total impact of fossil fuels, and where their growth and adoption is supported, the authors found that 6.5% of the world’s GDP still props up these sources. Source: PV Magazine

The report’s authors work at the International Monetary Fund (IMF) and specialize in quantifying accuracy when it comes to subsidy payments that are often hidden from plain view. The subsidies equate to $A18 billion a day, or $A12 million a minute.

The cost analysis looked beyond typical payments normally considered a direct subsidy, and examined also the other social and environmental costs that the world must bear in order to keep fossil fuels viable.

The authors stated that they looked at “not only supply costs but also (most importantly) environmental costs like global warming trends and deaths from air pollution and taxes applied to consumer goods in general”.

According to the authors of the report, such a broader view is justified and accurate because it “reflects the gap between consumer prices and economically efficient prices”.

Direct, measurable subsidies for fossil fuels – grouped in the report as ‘pre-tax’ – amounted to 0.7% of global GDP in 2013, but when the wider view is taken – ie, applying the authors’ broader understanding of what constitutes a subsidy – then that figure rose to 6.5% global GDP in 2013 and has remained there until 2015 (latest data available).

By fuel type, petroleum and coal were the largest recipients of subsidies, the report found, with the China ($1.8 trillion in subsidies), the U.S. ($0.6 trillion) and Russia ($0.3 trillion) the three top subsidizers by nation.

According to the authors’ reading of the data, the European Union (EU) collectively subsidizes less than half the amount that the U.S. does.

The report concludes that by eliminating these subsidies altogether the world could lower its carbon emissions by 21%, reduce air pollution deaths directly attributable to the burning of fossil fuels by 55%, and raise social welfare by 2.2% of global GDP.

Source: PV Magazine. Reproduced with permission.  

  • Joe

    What is the chance that the numbers can be broken done for individual countries. Then all the ant RE wankers here can face up to ‘The Inconvenient Truth’ about subsidies.

  • JonathanMaddox

    This figure is nonsensically huge. Gross World Product is on the order of $75 trillion, and the energy industry as a whole has gross revenues of $6.4 trillion. Less than 10% of GWP is spent on energy … and you’re saying way over half of that is subsidies. I don’t think so.

    • They did at least break out the subsidy payments of $0.6 Billion USD which is more relevant.

      I agree inflating the numbers so dilutes their credibility. They’d be better off simply counting direct subsidies and stopping there.

      • Catprog

        If I take resources that people are using for free and they can no longer use as much is that a subsidy?

        • JonathanMaddox

          If we’re talking about guesstimates of the the monetary value of the atmosphere as a carbon sink, and the costs of other pollution and other unpaid externalities, it’s a huge cost which nobody pays any money for. It’s definitely not part of gross world product. I don’t think “subsidy” is the right word to use, it gives the wrong idea.

    • Jens Stubbe

      Contrary the number is actually put too low.

      The external cost of burning coal to produce electricity is generally set at 20cent/kWh and is of cause rising fast as more people and more property and more expensive property is exposed to the toxic pollution.

      Every single person living on the earth experience reduced average lifetime and increased health problems whereof one scary consequence is that the global average intelligence quotient is reduced many centuries into the future due to the added exposure to heavy metals and in particular mercury from burning fossil fuels and in particular coal.

      The really big cost is however the uncertainty about the habitability of large parts of the globe for both the animals and species presently living and humans.

      Right now we have this strange situation that RE practical gets no subsidies and the price of RE drops double digit every year while the subsidies for FF skyrocket every year.

      • JonathanMaddox

        Certainly health care costs are quantifiable dollar expenses, but the business of expressing things like “ecosystem services” and “quality-of-life-years” in dollar terms sits very uneasily with me. Not least because nobody is actually paying them. This “subsidy” is not a government subsidy, nor a tax, nor anything remotely resembling a fiscal measure or a financial expense.

        • Jens Stubbe

          It is very definitively a financial expense. You are paying health insurance and insurance of your property based upon the risk associated with both and the cost associated with mitigating the damage caused to either your health or your property.

          As for the IQ problem it is widely recognized and you can demonstrate it very easily with lab animals.

          As for the cost there is an almost linear connection between your lifetime expectancy and IQ as well as with income.

          These cost only associated with burning fossil fuels and principally with burning coal are very real to you and your family whether you like it or not.

  • Paul W.

    According to the strapline, “IMF says subsidies to global fossil fuel industry reached $A6.7 trillion in 2015 – or $A18 billion a day, or $A12 million a minute”. As far as I can tell, the IMF as an organisation has not endorsed this research paper, and given its contentious and speculative contents, I wouldn’t expect them to do so. The way the story has been reported here just looks like green sensationalism. I want to support renewables, but I think this kind of reporting just provides ammunition for the opposition.

  • Aidan Alexander

    What’s the equivalent % for renewables for comparison? The fossil fuels stat isn’t as useful by itself