The International Monetary Fund has urged nations to slash their $US1.9 trillion ($1.8 trillion) in annual energy subsidies because they increase inequality, boost greenhouse gas emissions and limit investment in the renewable energy industry.
While many nations use energy subsidies to shield consumers from rising prices, benefits tend to be grabbed by higher-income households. The outlays also sap funds available for bigger improvements to assist the wellbeing of the poor, such as health and education spending.
“Subsidies cause over-consumption of petroleum products, coal, and natural gas, and reduce incentives for investment in energy efficiency and renewable energy,” the IMF said. “This over-consumption in turn aggravates global warming and worsens local pollution.”
The removal of fossil-fuel subsidies would cut carbon dioxide emissions by 4.5 billion tonnes – or about eight times Australia’s annual emissions. Sulphur dioxide pollution would also drop by 13 million tonnes if the subsidies ended.
The Fund listed the top three energy subsidisers as the United States ($US502 billion), China ($US279 billion), and Russia ($US116 billion).
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