Petroleum Product Subsidies: Costly, Inequitable, and On the Rise
IMF Staff Position Notes, February 25, 2010
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Bibliographic details
- Authors: John M. Piotrowski, David Coady, Justin Tyson, Rolando Ossowski, Robert Gillingham, Shamsuddin Tareq
- Published: February 25, 2010
- Series: IMF Staff Position Notes
- DOI: https://doi.org/10.5089/9781455239108.004
Summary and central argument
- Petroleum product subsidies have again started to increase with the rebound in international prices.
- Reforming the policy framework for setting petroleum product prices is necessary to reduce the fiscal burden of these subsidies and to address climate change.
Key findings and historical developments
- Between 2003 and mid-2008, global consumer subsidies for petroleum products are estimated to have increased more than eightfold, from $57 billion to $490 billion.
- Subsidies decreased to $136 billion by mid-2009.
- Subsidies are projected to increase to $237 billion by end-2010 (or nearly 0.3 percent of global GDP).
- Tax-inclusive subsidies, reflecting sub-optimal taxation of petroleum products, are projected to increase to $733 billion, or 1.0 percent of global GDP.
- G-20 countries account for over 70 percent of tax-inclusive subsidies.
Distributional and environmental impacts
- Halving tax-inclusive subsidies could:
- Reduce projected fiscal deficits in subsidizing countries by one-sixth.
- Reduce greenhouse emissions by around 15 percent.
- Subsidy reform strategies should contain measures to mitigate the impact of higher prices on the poorest groups.
Policy recommendations and implications
- Reform the policy framework for setting petroleum product prices to:
- Reduce the fiscal burden of subsidies.
- Address climate change by lowering greenhouse emissions linked to petroleum consumption.
- Design mitigation measures to protect the poorest groups from higher consumer prices during subsidy reform.
Publication metadata (selected)
- Authors: John M. Piotrowski, David Coady, Justin Tyson, Rolando Ossowski, Robert Gillingham, Shamsuddin Tareq
- Publication date: February 25, 2010
- Series: Staff Position Note No. 2010/005
- Pages: 20
- DOI: https://doi.org/10.5089/9781455239108.004
- ISBN: 9781455239108
- ISSN: 2617-6742
Source: Petroleum Product Subsidies: Costly, Inequitable, and On the Rise (IMF Staff Position Note No. 2010/005).
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