Global Fossil Fuel Subsidies Increased in 2022, Reaching a New Record High

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Adi Ahdiat 29/08/2023 15:19 WIB

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According to the IMF, the global value of fossil fuel subsidies increased in 2022, reaching a new record high.

Global Fossil Fuel Subsidies (2015-2022)

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Global Fossil Fuel Subsidies (2015-2022)

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According to the International Monetary Fund (IMF), the value of global fossil fuel subsidies reached US$7 trillion in 2022, an increase of approximately 18% compared to 2021, setting a new record high.

This figure includes subsidies for gasoline, diesel, kerosene, and other petroleum commodities; natural gas including LPG; coal; and fossil fuel-based electricity subsidies in 168 countries.

The US$7 trillion figure comprises "explicit subsidies" worth US$1.3 trillion and "implicit subsidies" worth US$5.7 trillion.

Explicit subsidies are direct government incentives that make the retail price of fuel cheaper than its supply price.

Implicit subsidies, on the other hand, are indirect incentives, such as reductions in consumption tax, exemptions from environmental taxes for fossil fuel users/industries, and so on.

In response to the increase in subsidies, the IMF urged countries to evaluate their energy policies to reduce air pollution and mitigate the climate crisis.

"Eliminating explicit subsidies for fossil fuels and implementing corrective taxes such as carbon taxes could reduce global carbon dioxide (CO2) emissions by up to 43% by 2030," said the IMF research team in its report, *IMF Fossil Fuel Subsidies Data: 2023 Update*.

"This is in line with efforts to keep global warming below 2 degrees Celsius," it continued.

However, the elimination of subsidies will lead to higher fuel prices, which could trigger socio-economic-political unrest in many countries.

Therefore, the IMF recommends that subsidy removal be accompanied by policies to protect low-income communities.

"Eliminating fuel subsidies can be a complex issue. Governments must carefully design, communicate, and implement fuel price reforms as part of a comprehensive policy package that prioritizes benefits," said the IMF team.

"Part of the government's revenue from higher energy prices should be used to compensate vulnerable households. The remainder can be used to cut taxes on labor and investment, and to fund other public sectors such as education, healthcare, and clean energy," they said.

Editor : Adi Ahdiat

"Disclosure: This is an AI-generated translation of the original article. We strive for accuracy, but please note that automated translations may contain errors or slight inconsistencies."

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Global Fossil Fuel Subsidies Increased in 2022, Reaching a New Record High

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