Energy prices fail to include damages

GOVERNMENTS around the world charge prices for energy that do not account for its harmful environmental, health and other side effects, amounting to a $5.3 trillion (R62.3 trillion) “post-tax” subsidy this year, the International Monetary Fund (IMF) said in a report yesterday.

The IMF said China in particular failed to charge its more than 1 billion consumers for the pollution that comes from heavy use of fossil fuels, adding up to a $2.3 trillion subsidy this year.

The US was the secondbiggest offender, with an estimated $699 billion subsidy, followed by Russia, the EU, India and Japan.

The report comes as almost 200 nations are trying to work out a deal to combat global warming ahead of a summit in Paris in December. Getting rid of fossil fuel subsidies and setting policies to price carbon pollution are seen as key international measures that will help keep temperatures from rising.

The IMF has long urged governments to get rid of “pretax subsidies” that allow firms and households to buy coal, petrol or other fuel sources below their cost of supply.

Many governments, including Egypt, India, Indonesia and Jordan, had raised domestic prices to match those internationally, said the Washingtonbased institution charged with policing global economic and financial stability.

But the fund said it had turned its focus to the post-tax subsidies that mean prices fail to reflect costs like unfair tax advantages and deaths from pollution.

In its last study on the subject in 2013, the IMF estimated these post-tax subsidies amounted to $2 trillion in 2011, or 2.9 percent of the world’s gross domestic product (GDP).

With new data about the extent of environmental damage, the IMF says these subsidies totalled $4.9 trillion in 2013 and should rise to $5.3 trillion this year, or 6.5 percent of global GDP.