Nicholas Stern writes: The world is starting to realise that fossil fuels are not cheap. It is increasingly clear that oil, coal and gas have huge hidden costs that are omitted from prices, and they are therefore heavily subsidised.
The latest evidence about how expensive fossil fuels really are has been provided this week by the International Monetary Fund (IMF), an organisation that monitors the progress of the world’s economy. It estimates that oil, coal and gas will receive US$5.3tn in subsidies this year around the world. That is the equivalent of 6.3% of global GDP. The IMF correctly argues that the damages and costs caused by fossil fuels, through impacts such as air pollution, congestion, traffic accidents and climate change, should be treated as subsidies if they are not included in the prices paid for oil, coal and gas.
The increase from previous estimates is due to a number of factors, particularly a deepening understanding of the immense costs of air pollution. The unpriced costs of fossil fuels are in addition to, and much greater than, the direct financial support for fossil fuels through, for instance, tax breaks for oil and gas exploration and subsidies for consumers. The IMF points out that coal receives the biggest subsidies worldwide, and has the largest negative impact on human health through the pollution that it causes. [Continue reading…]