- September 2, 2023
- Posted by: Art Berman
- Category: The Petroleum Truth Report
The IMF’s media release on fossil fuel subsidies is a big lie.
The International Monetary Fund (IMF) claimed that 2022 fossil fuel subsidies were $7 trillion in its IMF Fossil Fuel Subsidies Data: 2023 Update released last week. Although the report implied that much of this was not money given directly to fossil fuel companies, the explanation was confusing at best and misleading at worst.
That doesn’t really matter because its news release and ensuing media reports stated that $7 trillion was a gift to an industry that is destroying the planet.
I do not want to defend the fossil fuel industry but the IMF’s message is opportunistic, political, journalistically dishonest and more appropriate to Fox News than to an international opinion leader and supposedly honest broker.
Only $1.3 trillion (23%) of $7 trillion in government fossil fuel support is really a subsidy—what the IMF calls “explicit” subsidies—and only $51 billion (4%) of that goes directly to support fossil fuel companies (Figure 2). $5.7 trillion (77%) are “externalities” for environmental damage & under-pricing—what the IMF calls “implicit” subsidies.
The IMF news release shown in Figure 1 went on to say that
“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).”
Figure 3 puts that hyperbolic statement in perspective. The 2022 $1.3 trillion “explicit” subsidy was 1.3% of world GDP. The $51 billion true subsidy to fossil fuel companies was 0.0001% of world GDP.
More detailed data for U.S. provides further clues about how subsidies are distributed. Renewable energy accounted for 53% of 2022 U.S. subsidies compared to 11% for fossil fuels (Figure 4). Energy conservation accounted for 34%.
Critically, 77% of all 2022 subsidies were in the form of tax credits.
This is quite a different picture than the IMF report and media headlines suggest.
There is little doubt that fossil fuels are the principal source of carbon emissions. Nor should we excuse the intentional efforts by companies to conceal early knowledge of these dangers from the public.
Neither should we excuse the IMF’s intentional effort to blame fossil fuel companies for subsidies that they do not receive. Ninety-six percent of the “explicit” subsidies in 2022 went to help consumers bear the strain of higher fossil fuel prices. Should they be criticized for taking money from education and healthcare as the IMF falsely implies that fossil fuel companies did?
Our global economy is more than 80% dependent of fossil fuels. All economic players for the last 200 years are accountable for that. The IMF report implies that fossil fuel companies are solely responsible for climate change when we’re all to blame for not only using their products but demanding them in ever greater volumes and at lower prices.
Lisi Krall recently observed in a podcast with Nate Hagens that,
“We have a system that’s been in play in various forms for 10,000 years…Fossil fuel did not create capitalism…We can’t manage to have the expansionary kind of [economic] dynamic that we have going on now without fossil fuels.”
Blaming fossil fuel companies for climate change is a childish form of behavior that does nothing to help clarify our present planetary predicament.