The IMF’s Huge Miscalculation of Energy Subsidies
"Criticizing countries like India and China (or Kiribati) for the $424 billion spent on real subsidies is unlikely to attract the attention of rich world elites. To implicate developed country governments and create outrage, the IMF adds everything that they believe should be included in the cost of fossil fuels, and say that by not including these costs in the price of fuel, countries are “subsidizing” fossil fuels. "
"So what’s included in this outsized re-definition? First, the IMF comes up with a price-tag of $2.3 trillion for air pollution. Burning coal is incredibly polluting, so the IMF claims coal is subsidized because it doesn’t pay for all the air pollution it causes. "
"The IMF calculates that China’s coal air pollution costs $720 billion per year. This is a vast exaggeration: two recent studies show China’s total air pollution costs $27-38 billion, or one-twentieth as much. And this is the cost for all air pollution, with another study showing less than half can be blamed on coal. So, the IMF has claimed that coal air pollution is 40 times costlier than it is, and then mislabeled this as a “subsidy”.
Next, the IMF claims that gasoline and diesel-driven cars cause a huge amount of congestion and traffic accidents. Sure they do – but so do electric vehicles. This is an argument for congestion charges and better road design, safety measures and speed limit enforcement. The absurdity is revealed when we realize that according to this logic, governments could reduce their fossil fuel “subsidies” by building more roads.
The authors go on to claim that every nation should implement a consistent VAT across all products. Because they don’t, the IMF counts “missing” VAT in countries like the USA as a subsidy. Not only is this an even more bizarre definition of “subsidy”, but it suggests the IMF’s political views on taxation should overrule the decisions of democratically elected governments.
Finally, the authors claim there’s a whopping cost of more than $1.3 trillion from global warming. They are correct that climate change has a real cost and should be included in the price of fossil fuels. That doesn’t make it a subsidy though – and it’s very odd they use a carbon tax more than five-times higher than the best estimate for the real world.
In trying to give grist to environmental campaigners in the West, the IMF’s politically motivated report distracts from the important issue of encouraging the world to dismantle the $424 billion left in fossil fuel subsidies. It might not generate as many headlines, but the IMF should be in the business of careful and sensible economics."
https://www.forbes.com/sites/bjornlomborg/2020/01/17/the-imfs-huge-miscalculatio...
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