| WASHINGTON, March 27
WASHINGTON, March 27 Developing and
industrialized countries should rein in energy subsidies that
totaled $1.9 trillion in 2011 to ease budgetary pressures and
free up resources for public spending in areas such as education
and health care, International Monetary Fund economists said in
a research paper published on Wednesday.
In the paper, "Energy Subsidy Reform - Lessons and
Implications," the economists looked at a database of 176
countries and analyzed ways to reform energy subsidies by
examining case studies done in 22 countries.
In 2011, energy subsidies intended to keep energy prices low
for consumers accounted for 2.5 percent of global GDP, or 8
percent of all government revenue, the IMF said.
"The paper shows that for some countries the fiscal weight
of energy subsidies is growing so large that budget deficits are
becoming unmanageable and threaten the stability of the
economy," IMF First Deputy Director David Lipton said in a
speech on Wednesday.
The paper said that subsidies are expensive for governments,
and instead of helping consumers, they detract from increased
investment in infrastructure, education and health care, which
would help the poor more directly.
Subsidies have been a counterproductive way to help the poor
because the rich, who consume more energy, benefit most from
them, the IMF said. The richest 20 percent of households in low-
and middle-income countries received six times more in fuel
subsidies than the lowest 20 percent.
According to IMF research, 20 countries have pre-tax energy
subsidies that exceed 5 percent of GDP. The top three global
subsidizers are the United States at $502 billion, China at $279
billion, and Russia at $116 billion.
For advanced economies, such as the United States, removing
subsidies for fossil fuels could inject much needed revenue into
cash-strapped government coffers, the IMF said.
"Insufficient energy taxation, including in the largest
economy in the world, the United States, is a problem not only
for the environment, but many advanced economies are in need of
additional resources to support the effort to lower public debt,
which is very high now in those economies," said Carlo
Cottarelli, director of the IMF's fiscal affairs department.
Over the longer term, reforming energy subsidies could spur
stronger economic growth because it would encourage a more
efficient distribution of resources, and encourage investment in
energy efficient alternative technologies, Lipton said.
The world's largest economies, the Group of 20, agreed to
phase out subsidies for oil and other carbon dioxide-spewing
fossil fuels in the "medium term" ahead of the U.N. climate
change summit in Copenhagen in 2009, but have made little
progress thus far.
At the summit, world leaders agreed to reduce global
greenhouse gas emissions by 50 percent by 2050.
Eliminating pre-tax subsidies would reduce global carbon
dioxide emissions by 1-2 percent, what Lipton calls "a
significant first step in reducing emissions by delivering about
15-30 percent of the Copenhagen Accord's goal.