Laser Talk – The IMF, Carbon Pricing and Explicit and Implicit Fossil Fuels Subsidies

Laser Talk – The IMF, Carbon Pricing and Explicit and Implicit Fossil Fuels Subsidies

Here are two terms that anyone who wants to preserve a stable climate needs to know: explicit fossil fuel subsidies and implicit fossil fuel subsidies.

Explicit fossil fuel subsidies from governments directly reduce the price of fossil fuels, thus making it attractive to investors and consumers to buy. Implicit fossil fuel subsidies are the costs taxpayers and insurance are paying for the air pollution and climate impacts experienced because of dirty fossil fuels.

On August 24, 2023, the International Monetary Fund (IMF) released a report. The conclusion of this report was that subsidies for oil, coal, and natural gas cost the equivalent of 7.1%  of global gross domestic product.

Explicit subsidies have more than doubled since 2020 but are still only 18% of the total subsidy amount, while nearly 60% is due to implicit subsidies.

Here is a hopeful conclusion from the report: “Full fossil fuel price reform would reduce global carbon dioxide emissions to an estimated 43 percent below baseline levels in 2030 (in line with keeping global warming to 1.5-2C), while raising revenues worth 3.6 % of global GDP and preventing 1.6 million local air pollution deaths per year.”

Making polluters pay (a.k.a carbon pricing) offers us the exact tool needed to ensure this price reform. In fact, the IMF Managing Director Kristalina Georgieva at the Paris Summit in June said, “Our analysis shows that without a carbon price, there is no chance that we will meet the 1.5 degrees Celsius target by 2030. We will miss it.”

After a summer of record fires in Canada, Europe, and elsewhere, it is obvious that the impacts of climate change are no longer just a concern for future generations, but are a very real threat at our doorstep. We must listen to the experts and cooperate to strengthen our essential climate policies, like carbon pricing, going forward.

IMF Subsidies Report August 2023