How Large Are Global Energy Subsidies?

IMF Working Papers, May 18, 2015

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This paper provides a comprehensive, updated picture of energy subsidies at the global and regional levels.
It focuses on the broad notion of post-tax energy subsidies, which arise when consumer prices are below supply costs plus a tax to reflect environmental damage and an additional tax applied to all consumption goods to raise government revenues.
Post-tax energy subsidies are dramatically higher than previously estimated, and are projected to remain high.
These subsidies primarily reflect under-pricing from a domestic (rather than global) perspective, so even unilateral price reform is in countries’ own interests.
The potential fiscal, environmental and welfare impacts of energy subsidy reform are substantial.

Post-tax energy subsidies are substantially larger than earlier estimates.
The subsidy concept used: consumer price < supply cost + environmental damage tax + general consumption tax.
Under-pricing is mainly a domestic issue, implying national-level gains from unilateral reform.

Post-tax energy subsidies are projected to remain high (phrase preserved from source).
Fiscal, environmental, and welfare impacts from subsidy reform are described as substantial.

Unilateral price reform can be in a country’s own interest because under-pricing primarily reflects domestic perspectives.
Addressing post-tax subsidies requires accounting for supply costs, externality (environmental) costs, and general consumption taxation.