The IMF identifies the $5,200,000,000,000 that we spend every year on fossil fuel subsidies

The IMF identifies the $5,200,000,000,000 that we spend every year on fossil fuel subsidies

  • What they mean by underpricing is our failure to include in the price of fossil fuels the costs of the damage we know that burning them is doing to our country and to the world.
  • When we buy fossil fuels, or when we buy electricity generated by burning fossil fuels, or products made using that electricity, we’re not really paying the full price.
  • In their paper, the IMF notes that though a number of countries have carbon taxes or emissions trading schemes, in practice these have fallen well short of what is required.
  • Pricing carbon means, in a carbon-based economy, that the prices of just about everything are going to rise, and particularly the prices of electricity and gas.
  • With there being so many ways in which a country can price carbon, and the carbon price can be very different for different goods, it becomes difficult to determine what the correct border tariff is.
  • What carbon emissions were produced in making that toy and what price, if any, has already been paid on those emissions? China is bringing in an Emissions Trading Scheme, so a price may already have been paid and any border adjustment ought to take that into account, but to get agreement between China and the UK on what that price ought to be is likely to be fraught.
  • A possible alternative to border carbon adjustments is for a number of high-emitting nations to agree on a minimum carbon price and in doing so avoid imposing carbon tariffs on one another.