An IMF working paper, How Large Are Global Energy Subsidies?, paints a picture of energy subsidies at global and regional levels by focusing on post-tax subsidies. These arise when consumer prices are below supply costs plus a tax to reflect environmental damage and an additional tax applied to all consumption goods to raise government revenues. The paper says that such post-tax energy subsidies are much higher than previously estimated and are projected to remain high.
A comment in the Guardian, says that fossil fuel companies benefit from global subsidies of $5.3tn a year, because polluters are not paying the costs imposed on governments by the burning of coal, oil and gas. These include the harm caused to local populations by air pollution as well as to people across the globe affected by the floods, droughts and storms being driven by climate change. China is the most egregious contributor to this problem through its massive use of coal.
Whilst the problem seems clear, what to do about it is less obvious in the sense that what is politically possible seems limited. The prize is considerable though. As the Guardian notes, "the need for subsidies for renewable energy – a relatively tiny $120bn a year – would also disappear, if fossil fuel prices reflected the full cost of their impacts."
Thus, in the UK, we might imagine an additional (and hypothecated) tax on all carbon-based fuels with the finance raised going to fund health programmes. But who is going to vote for this? And which party is going to propose that we do so? Before any of that, we need an imaginative and wide-ranging educational programme that helps people understand the issues. That doesn't seem politically possible either. It looks as if we shall need to proceed one school and community at a time.
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