Do fossil fuels get $7 trillion in subsidies?
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Thanks for doing loading the more or less podcast with the program. That takes a long, hard look at some of the numbers in the news, and i'm solid. mcDonald. World leaders have been meeting at court twenty nine in as a ba yjan as part of the international effort to tackle climate change.

One thing they could do, according to a state that repeated across the internet, would be to stop spending a huge amount of money, seven trillion dollars per year, on subsidizing fossil fuels. This seven trillion dollar subsidy figure has been used by world leaders, climate change campaigners, reported on by news outlets and repeated by the U. N.

But he said, a good number. Tom calls has been having a look at this one high home. Hey, s let's start at the start. Where does the seven trillion dollar number come from?

So this comes from a report by the I M F, the international monetary fund, a big U. N. Finance agency.

And it's an estimates of fossil fuel subsidies in twenty two. Technically, it's from an M F working paper. So IT represents the view of the authors, not the I M F.

And to be clear here, seven trillion U. S. Dollars is a really huge amount of money, maybe seven percent of the entire global economy. And the I M saying that governments around the world are spending that huge amount of money on subsidizing the fossil fuel industry. At the same time as some of those governments are saying they're committed to fight climate change.

Well, kind of sort of I mean, this whole thing basically comes down to what you mean by the term subsidy. okay.

So let's to find IT. How about we say it's the money that governments are paying out in some way, either to fossil will produce themselves or to make coal, gas, petrol and diesel cheap E R R. consumers. So i'm thinking if direct count out tax breaks that kind of thing, you know like farming subsidies, but for fuel.

then no, no, there are not seven trillion dollars of that. yeah. So one part of the M F.

Report deals with what they call explicit subsidies, which are basically the kind of thing you just described. They reckon there about one point three trillion U S. Dollars of those kind of subsidies in twenty twenty two.

right? That's quite a lot lower, but still a very big number. What kinds of subsidies are we talking about here? Huge hand out to big oil, not directly.

I've been talking about these numbers with Angela picture yellow from the international institute for sustainable development, which runs tracker of fossil fuel subsidies. That includes the I M. F. figures. SHE says the subsidies almost all on the consumer side.

yes. So for the I M F explicit subsidies, we see that, for example, for twenty twenty two, only three percent of the total explicit subsidies where producer subsidies, while the remaining ninety seven percent was what we call consumer subsidies.

By the way, consumer here includes businesses, cheap er field for Larry drivers and farmers and what have you and not just individual householders, but not big oil or big coal of anything like that. And IT turns out that big coal actually received hardly any of these explicit subsidies, only nine billion of the one point three trillion, less than one percent in terms of what those subsidies are. Well, the answer to that makes more sense. When you know how the I M F calculate them.

The I M F numbers are worked out in what we could call a top down. We the subsidies are calculated based on this, what we call a Price gap approach. So based on a difference between the let a supply cost broadly speaking, and the final and user Price.

In twenty twenty two, russia invited you caine, and energy Prices shot up. European governments and others paid out billions of dollars in direct payments to push household energy bills down. And in the I M F calculation, the difference between the market Price and the Price paid by consumers is the explicit subsidy.

The same is true in places like saudi arabia, a iran and russia. When the government run oil and gas companies decide to set the Price for petrol, disease and gas way below the market rate. This happens whether there's an energy crisis or not.

And so these countries are big subsidizes by this method. The china comes out way on top of the I M. F. analyst. Okay.

but I don't really live in a petri state. And when I feel like my car, I pay tax on that fuel IT doesn't feel like it's subsidized .

and it's not in the I M analysis, the retail Price for petro 和 gasoline in the U。 K. Is way above the market Price precisely because of the additional taxes. Tax is taken into account in their analysis.

So 2t was a pretty big ear for subsidies because of the energy crisis。 Have they gone down since then?

Yeah, this was a record year and they've come down significantly. The mf haven't released more recent numbers, but hot off the press, another international acronym, organize, the oecd has just released their numbers for twenty twenty three and their figure, which is good for a rough comparison, down by a third.

Okay, so there's the answer. There aren't seven trillion U. S. Dollars of fossil fuel subsidies. How most people understand that term? This maybe a trillion, but i'm still curious that seven trillion number, what does that actually represent?

yes. So okay. We've been talking about what the I M F called an explicit subsidy, and you may in the ocd just call a subsidy.

But the M F add on to that number a calculation for they could implicit subsidies. His net version. At one of the coauthors of the M F paper.

we take economic perspective on what the cost of consuming possible, so this cost is composed of the traditional notion of the the market Price, but also the cost imposed on society of consuming the cost fuel such as, uh, higher global temperatures and and more global warming damages local air pollution, congestion, road road accidents.

These external costs are quite hard to get your head around for climate change. They worked IT out by adding a carbon Price of around seventy five dollars to every turn of carbon produced. This seventy five dollars doesn't represent the literal cost of repairing damage called by climate change. It's an estimate of the Price you'd needs to charge in order to keep global temperatures from rising above two degrees. This adds up to about a third of the total, just over two trillion dollars.

OK. Stay with me here.

Another big external cost of fossil fuels, air pollution, which harms people's health and leads to earlier deaths. They put this into monetary terms, not by working out the cost to health services, but by using an estimate of how much in dollar terms people value their own health and survival. That number adds up pretty fast to another two training or so. Then there's a chunk for the cost of roads, congestion, accidents and maintenance. Another trillion.

So the I M. F. Research is the saying that all government should increase the Price we all pay for fossil fuels to account for these costs. And because they mostly don't, that counts as an implicit subsidy.

Yes, that is what this term is talking about.

IT doesn't sound very subsidy to me. I mean, IT really .

depends how you look at IT. It's definitely not money that can be easily moved around by governments from one thing to another, something like a farming subsidy. But IT is a legitimate attempt to figure out what an accurate Price for fossil fuels would look like if all the damage they calls is accounted for.

He is night again. These external costs are just as real as the the market Price because there are also things that people are willing to pay to reduce. So when postal fuel Prices are below the true costs on their account for as a subsidy, because people that are consuming fast appeals are not paying for the ball social cost of consuming the product.

Thanks, tom. 这 that's IT for this week， but be sure to send us in the email. If you've seen a number in the news, you think we should take a look cat finders at more or less at B, B, C, 到 C， O, dot, U, K, until next time. goodbye.