JUST IN: Nigeria, 169 Other Countries Spent $7trn On Fossil Fuel Subsidy In 2022–IMF

Global subsidy for fossil fuel rose to a record $7trn in 2022, according to a report published by the International Monetary Fund.

The IMF report published on Thursday revealed that subsidies for oil, coal and natural gas are costing the equivalent of 7.1 percent of global Gross Domestic Product.

The spike in subsidies was induced by the rise in energy prices caused by Russia’s invasion of Ukraine and the economic recovery following the COVID-19 pandemic.

According to the IMF, the amount was spent by 170 countries including Nigeria.

“As the world struggles to restrict global warming to 1.5 degrees celsius and parts of Asia, Europe and the United States swelter in extreme heat, subsidies for oil, coal and natural gas are costing the equivalent of 7.1 percent of global gross domestic product.

“That’s more than governments spend annually on education (4.3 percent of global income) and about two thirds of what they spend on healthcare (10.9 percent),” IMF said in the report.

The IMF said explicit subsidies have more than doubled since 2020 but are still 18 per cent of the total subsidies.

In 2021, countries spent $5.2trn on subsidies.

The IMF however, pushed for the removal of subsidies on fossil fuel but warned of the implications.

The IMF said, “Removing fuel subsidies can be tricky. Governments must design, communicate, and implement reforms clearly and carefully as part of a comprehensive policy package that underscore the benefits. A portion of the increased revenues should be used to compensate vulnerable households for higher energy prices.

“The remainder could be used to cut taxes on work and investment and fund public goods such as education, healthcare, and clean energy.”

According to the IMF, with the removal of explicit subsidies and imposed corrective taxes, fuel prices would increase.

“This would lead firms and households to consider environmental costs when making consumption and investment decisions.

“The result would be cutting global carbon-dioxide emissions significantly, cleaner air, less lung and heart disease, and more fiscal space for governments.

“We estimate that scrapping explicit and implicit fossil-fuel subsidies would prevent 1.6 million premature deaths annually, raise government revenues by $4.4trn, and put emissions on track toward reaching global warming targets. It would also redistribute income as fuel subsidies benefit rich households more than poor ones,” the IMF report added.