Introduction
In the ever-evolving discourse surrounding climate change and energy policy, few topics generate as much debate as the alleged subsidies for fossil fuels. Tilak Doshi’s incisive article sheds light on the International Monetary Fund’s (IMF) recent claims regarding these subsidies, offering a critical examination of the figures and the motivations behind them.
The IMF’s Eye-Catching Headline
Legacy media, with its penchant for sensationalism, recently paraded a headline that would give even the most seasoned energy analyst pause: “Fossil fuels being subsidised at rate of $13 million a minute, says IMF”. Citing a staggering $7 trillion in support for fossil fuels in 2022, the claim is audacious, especially when juxtaposed against global expenditures on education and military.
“For those of us who have not completely given up on tracking legacy media headlines on climate issues due to the sheer noise-to-signal ratio, there was one recently that made even the most skeptical take notice.”
https://www.forbes.com/sites/tilakdoshi/2023/09/06/energy-subsidy-shenanigans-the-green-imf-at-work/?sh=da9f26c4d89d
The Discrepancy in Estimates
The IMF’s figure starkly contrasts with estimates from other reputable institutions. The International Energy Agency (IEA) pegged global fossil fuel subsidies at a record $1.097 trillion in 2022, while the International Institute for Sustainable Development estimated them at $1.4 trillion for the G20 group.
“Why do these estimates vary? The differences in these estimates lie partly in varying methodologies employed to measure subsidies. They also reflect the inherently elastic nature of the subsidy concept.”
Understanding Subsidies: Not All Are Created Equal
Subsidies, in their essence, are government expenditures aimed at supporting specific sectors or demographics. They can be transparent, like price support for farmers, or opaque, favoring a particular industry or technology.
“A subsidy is government expenditure, in cash or kind (for example, a tax credit), in favor of households or firms as financial redistribution in the overall interest of the public.”
Deciphering the IMF’s “Subsidies”
The IMF’s classification of fossil fuel subsidies is intriguing. They differentiate between “explicit” subsidies, which refer to observable undercharging for fossil fuels, and “implicit” subsidies, which account for hypothesized costs of global warming and local air pollution.
“The fossil fuel subsidies identified by the IMF in its 2023 Update on Fossil Fuel Subsidies Data refer to “explicit” and “implicit” subsidies.”
The Flawed Logic of Implicit Subsidies
The IMF’s inclusion of “implicit” subsidies is a contentious point. By factoring in the costs of global warming, such as rising sea levels, extreme weather, and the spread of diseases, the IMF inflates the subsidy figure. However, this approach is problematic, as it doesn’t account for the positive externalities of fossil fuel use.
“While the IMF takes into account negative externalities in its measure of “efficient” fuel prices, it does not consider well-documented positive externalities of fossil fuel use in its report.”
The Greening Effect of Carbon Dioxide
One significant positive externality of increased carbon dioxide in the atmosphere is the greening of Earth’s vegetated lands. This phenomenon, which has been observed over the past 35 years, is largely attributed to rising levels of atmospheric carbon dioxide.
“An important example of the positive externality of carbon dioxide in the atmosphere is the significant greening of a quarter to half of Earth’s vegetated lands over the last 35 years largely due to rising levels of atmospheric carbon dioxide.”
The IMF’s Shift in Mandate
Historically, the IMF’s primary role was to maintain global financial stability. However, in recent years, the institution has expanded its purview to include climate change, aligning itself with the climate agendas of various governments.
“But what is an institution set up to act as a financial watchdog and first responder to countries in financial crisis doing dishing out advice on climate change?”
The Dangers of Overreach
The IMF’s foray into environmental policy is concerning. By delving into areas outside its expertise, the institution risks undermining its credibility and the efficiency of international capital markets.
“Climate policy is clearly beyond the scope of any financial regulator’s expertise. Given the uncertainty within the climate science community itself, there is no reason to believe that the IMF can have any greater understanding of climate risks.”
Conclusion
Tilak Doshi’s article offers a compelling critique of the IMF’s claims regarding fossil fuel subsidies. By highlighting the discrepancies in subsidy estimates and the flawed logic behind the IMF’s methodology, Doshi underscores the need for a more nuanced and informed discussion on energy policy.
more nuanced and informed discussion
nonsense – it is a fraud & should be called out as such
It is difficult to calculate government subsidies of fossil fuels, which vary a great deal from nation to nation.
In the US, we have about 40% of all lands are publicly owned, plus there are offshore areas that are controlled by the Federal government. The Federal and state governments lease some of those lands and offshore area for oil exploration and production. So the question is, are the fees charged for those leases comparable to what private land owners charge oil exploration and production companies, including charges for minerals (including oil and gas) extraction? It would take a pretty complicated economic study to determine if the governments are charging market rates or selling at a discount compared to private markets. Of course market values and prices change constantly.
Other countries run state owned oil production and refining enterprises rather than license private producers, and whatever it costs and whatever they sell the oil products for is much more difficult to put values on because of hidden costs and the fact that some nations openly subsidize oil and gas products.
It’s really an impossible thing to measure rationally.
The very definition of a subsidy has been blurred.
If a government gives money to manufacturers to produce a product or gives money to a buyer to purchase a product that is a clear subsidy.
In my mind depletion allowances are equivalent to depreciation allowed for all other industries including industrial wind or solar plants and are NOT subsidies. I could not tell from the article if the latter is included in their sum.
Of course “implicit” subsidies are nonsense.
“However, this approach is problematic, as it doesn’t account for the positive externalities of fossil fuel use”
Nope. Unlike the ff costs, communized upon the rest of us, there are no similar “external” benefits. The bennies of ff’s are realized entirely by the purchasers. Some are indirect, such as the income you get from driving to work, but none are actually “externaiized”. So, since they have already been “factored in” when the fossil fuels were purchased, they shouldn’t be 2 counted later.
Doshi’s article appears in Forbes. Forbes has a pay wall. Did anybody else without a pay wall publish it?
A subsidy is needed to get things going
A tax break kicks in when a licence and the development have been paid up front
Clearly chalk and cheese
In the Ag region where I live, farmers get a “refund” of some fuel taxes and a tax credit for others. Watermelons call these tax discounts a subsidy to the energy industry, when in reality it’s part of the overall plan to keep food costs as low as possible. The same watermelons also add fuel sales to the military and government fuel payments to supply diesel fuel to northern communities to their so-called subsidies. They are very creative with their lies.
“Legacy media, with its penchant for sensationalism”
Lol, I misread this initially as “Lunacy Media”. I like mine better.
The IMF is an evil institution that enslaves people with debt.
It shills for the world’s financial sector
It should be abolished, including the World Bank
We need apples to apples assessments of subsidies. A is not B. A tax deduction for capital depreciation is not the same as tax credit for purchasing an EV, for example.
Don’t fooled into thinking the tax credit is for consumers. It’s a subsidy for the manufacturers.
Yet another yadda yadda yadda conflating Tax Breaks with Subsidies
Tax Break: Money you don’t have to pay the government on earnings from work that has been done.
Subsidy: Money the Government pays you for doing No Work at all
Tax Breaks can be a benefit to society as they lower the tax burden in lieu of work benefiting society.
Subsidies are a drain on society as they are paid to businesses for doing nothing and could be better spent on societal benefits not given to parasitic businesses
Extinction Rebellion in the Netherlands is blocking the A12 motorway in The Hague on a daily basis now, demanding to stop fossil fuel “subsidies” where fuel taxes are government’s biggest cash cow.
The so called negative externalities are almost completely imaginary.
How can there be a “cost of increased storms” When there has been no increase in storms?
What makes you think the climate alarmists have any interest in a nuanced and informed discussion?
The leftoid econonuts always call every subidy an expense. I always ask Who wrote a check and to whom?
All too often the Green subsidies are the Gov’t writing a check, as well as a tax break or credit.
Oil/Gas is a tax subsidy and the Oil/Gas people are writing rather large checks to the Gov’t, and all too often without that “subsidy” the checks would not be written.
As always the myth of external costs. Truth is at every step of fossil fuel economy there are taxes. Taxes are anti-subsidies. If anyone can demonstrate “subsidies” in excess of those myriad and oft times crushing taxes then by all means show us.
Presumably the IMF thinks Saudi Arabia subsidises their oil industry with revenues from, err.., selling sand and camel dung?
Even the BBC used to assert that the black gold from under the North Sea saved UK government revenues in the 1980’s recession.
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“Implicit subsidies” to offset the “cost of global warming” are a
BIG FAT LIE.
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Fossil fuels are NOT causing any harmful “climate externalities.”
1. Any “global warming” observed is well within the bounds of natural variation.
2. CO2 lags surface temperature rise by a quarter cycle. Rise in CO2 does NOT “cause” warming to any meaningful degree.
3. There is no data proving human CO2 emissions cause any meaningful shifts in the climate zones of the earth.
IMF’s lying about fossil fuels reminded me of this:
Nice article but you are far to kind to these scoundrels. They are seriously endangering millions of people with net zero trash talk and lies about subsidies. They need to be challenged head on for the liars and cheats that they are. I recommend all fossil fuel and nuclear energy be blocked for their use, that goes for their offices, transportation and personal residences.
I am sure that someone could look up how much the big oil majors paid in tax last year and compare it to how much windfarm operators paid. And the calculation to enable a comparison.
First how about the benefit of fossil fuel plants providing power when the wind doesn’t blow or the sun doesn’t shine?
Are the “green” surcharges on fossil fuels included in the calculation? I will argue that those are in fact paying for the so-called damage from FF use.
It seems dishonest.
At the end of the day, IMF should self proclaim soviet supreme and rate political option and determine the best one.