IMF urges energy subsidy reform
The International Monetary Fund (IMF) has released a new paper urging world governments to reform their subsidy programs affecting products ranging from coal to gasoline.
The paper argues that subsidies are ineffective at keeping prices low, while alternatives could be introduced to both protect consumers and the environment.
Director of the IMF’s Fiscal Affairs Department, Carlo Cottarelli, said that subsidies are rarely high enough to account for all the adverse effects of energy consumption, including environmental pressures.
“Based on a new database for 176 countries, we estimate that subsidies in 2011 amounted to $1.9 trillion, the equivalent of about 2½ percent of world GDP, or 8 percent of all government revenues,” Mr Cottarelli said.
“Since energy subsidies are pervasive and costly for governments to maintain, we see scope for reform not only in emerging market and developing countries, but also in advanced economies.”
The top three subsidizers across the world are the United States at $502 billion, China at $279 billion, and Russia at $116 billion.
“Clearly, when a country embarks on subsidy reform, there is a need to be mindful of possible adverse effects on the poor, and mitigating measures to protect the poor have to be built into the reform plan. This applies to all countries,” Mr Cottarelli said.
The full report can be found here