China tops IMF list of US$5.3t in global energy subsidies

[SHANGHAI] China is the biggest contributor to global energy subsidies that the International Monetary Fund estimates at US$5.3 trillion, equivalent to 6.5 per cent of the world's gross domestic product.

China tops the list in dollar terms, the Ukraine as a percentage of gross domestic product and Qatar as measured per capita, the IMF said in a July 17 report. Most of what the IMF classifies as subsidies are taxes set too low to account for environmental and health costs caused by pollution, especially in countries with high coal use and populations exposed to emissions.

"Most energy subsidies arise from the failure to adequately charge for the cost of domestic environmental damage," the IMF said in the report. "The fiscal, environmental, and welfare impacts of energy subsidy reform are potentially enormous." Chinese Premier Li Keqiang in March last year publicly tagged pollution as a major problem, saying the nation will fight smog with the same determination it battled poverty. China, at US$2.23 trillion, accounted for more than 40 per cent of total subsidies in dollar terms, followed by the US and Russia, according to the IMF.

Estimates for global energy subsidies in 2011 have been revised to US$4.2 trillion, more than double the US$2 trillion the IMF published in 2013, after factoring in new World Health Organization estimates on harm to health from pollution exposure, the study said.

"Eliminating global energy subsidies could reduce deaths related to fossil-fuel emissions by over 50 per cent and fossil-fuel related carbon emissions by over 20 per cent," the IMF said in the report.

BLOOMBERG