## Fuel for Thought: Ditch the Subsidies

_IMF Blog, August 14, 2019_

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**Canonical URL:** [Fuel for Thought: Ditch the Subsidies](https://www.imf.org/en/blogs/articles/2019/08/14/fuel-for-thought-ditch-the-subsidies)

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## Bibliographic details
- Authors: The Editors
- Published: August 14, 2019

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### Key finding: potential fiscal gains from removing fossil fuel subsidies
- Removing fossil fuel subsidies could gain up to 4 percent of global GDP in additional resources over the medium term.
- Fossil fuel subsidies are defined broadly to include:
  - government funding to artificially reduce the price of energy below cost: 0.4 percent of global GDP
  - under taxation of fuel consumption: 6.1 percent of global GDP
- Total subsidies, by this definition, amount to 6.5 percent of GDP globally.

### Rationale and distributional note
- Energy consumption contributes to global warming, local pollution, increased traffic congestion and more accidents.
- These subsidies typically benefit the rich more than the poor.

### Policy implications and priorities
- Resources freed by removing subsidies can be redirected to growth-enhancing investment:
  - pensions, education, healthcare
  - better infrastructure (classrooms, hospitals, roads)
  - technology and climate change mitigation
- Reallocating spending to these priorities can:
  - help raise long-term economic growth
  - reduce the burden of high public debt
  - spread economic benefits more widely within and across countries
  - help restore public trust in institutions necessary for economic stability

### Upcoming IMF work
- The IMF’s Fiscal Monitor in April 2019 emphasizes that government policies on taxes and spending should adapt and shift to growth-enhancing investment.
- In October the IMF will publish the next Fiscal Monitor that will focus on climate change.

*Source: The Editors, August 14, 2019 — "Fuel for Thought: Ditch the Subsidies" (Chart of the Week, Climate change)*

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## References

- [climate change](https://blogs.imf.org/2019/05/03/getting-real-on-meeting-paris-climate-change-commitments/)
- [Fiscal Monitor](https://blogs.imf.org/2019/04/10/high-debt-hampers-countries-response-to-a-fast-changing-global-economy/)
- [https://www.imf.org/wp-content/uploads/2019/08/Subsidies-COTW-eng-march-26-fm1-3.jpg](https://www.imf.org/wp-content/uploads/2019/08/Subsidies-COTW-eng-march-26-fm1-3.jpg)
- [Fiscal Monitor](https://www.imf.org/en/publications/fm)

_Source: https://www.imf.org/en/blogs/articles/2019/08/14/fuel-for-thought-ditch-the-subsidies_