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13th Aug 2022

Coal, oil, gas subsidies higher than public health spending

Around 1.6 million premature deaths would be prevented annually if the world's governments stopped subsidising fossil fuels, a study by four researchers from the International Monetary Fund found.

The most relative gains could be made in eastern Europe and Turkey, where 60 percent of the people who die as a result of air pollution are estimated could be saved.

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The IMF study, published Monday (18 May), calculated the “true costs” of the widespread practice of giving tax benefits and other subsidies to companies in the fossil fuel industry (coal, oil, gas). It was a “shocking” figure, the authors themselves said: $5.3 trillion, or about €4.7 trillion.

The figure is higher than what governments worldwide spend on public health.

In their calculation, the researchers included “its supply costs and the damage that energy consumption inflicts on people and the environment”.

They argue that most of the costs of health and environmental problems that fossil fuels cause are not paid by the industry but by governments and its taxpayers.

The burning of fossil fuels contributes to air pollution, which in turn is estimated to cause around 400,000 people in the EU to die prematurely each year. The EU commission has put the annual economic costs of the health impacts of air pollution at between €330 and €940 billion for the EU.

According to the IMF researchers, governments in the EU account for $330 billion of fossil fuel subsidies – about €292 billion.

While renewable energy sources like wind power and solar are sometimes said to be only economically feasible when subsidised, the study argues that fossil fuel subsidies “discourage needed investments in energy efficiency, renewables, and energy infrastructure, and increase the vulnerability of countries to volatile international energy prices”.

Fossil fuels also contribute to climate change by emitting greenhouse gases. If the subsidies for oil, coal, and gas were to end, governments could reduce carbon emissions by more than 20 percent.

The authors caution, however, that their estimates “are based on plausible—but debatable—assumptions”.

Emissions trading scheme

The EU's flagship policy tool to reduce emissions of greenhouse gases is the emissions trading scheme (ETS). According to the Commission, the 11,000 power plants and manufacturing installations that are obliged to hand in carbon permits under the scheme, reduced their emissions by 4.5 percent in 2014.

The reduction “shows that economic growth and climate protection can go hand in hand”, climate commissioner Miguel Arias Canete said in a statement Monday (18 May).

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