What does it really cost us to keep using fossil fuel energy?

Real cost of fossil fuel subsidies revealed in IMF report

£400 a year is what every Briton pays towards fossil fuel subsidies covering a whole range of areas, including environment damage and pollution mitigation, health effects and climate change, according to a new International Monetary Fund (IMF) study. 

The sum is an estimate arrived at by the IMF in its latest study. Overall, the IFM estimates the cost of subsidising the use of fossil fuels reached £26bn in the UK in 2015, approximately 1.4 per cent of the country’s economic output.

Compared to other economies, this number is relatively low. Globally, fossil fuel subsidies reached $5.3 trillion (£3.4 trillion) in 2015, or 6.5 per cent of global economic output, the IMF said. The highest subsidy level can be seen in countries that set their tax rates too low, not reflecting the real damage associated with the use of fossil fuels.

The number one subsidiser in terms of the amount of money paid is China. Ukraine has the highest contribution based on the percentage of the GDP while Qatar is highest in per capita terms.

The IFM states that eliminating the subsidies would cut deaths related to fossil fuel use by 50 per cent and reduce carbon emissions by a fifth. Phasing out the subsidies would also help generate revenue that could be used to cut other taxes, the organisation said.

Although G20 countries pledged to phase out support for fossil fuels already in 2009, the amount paid towards the polluting resource is actually continuing to rise.

The study was praised by renewable energy proponents who have seen governmental support for the new clean technology in the UK fading on the pretext of reducing bills for consumers.

Compared to the £26bn for fossil fuels in the UK in 2015, renewable energy received only £3.5bn over the course of 2014 and 2015. This equates to around £54 per person.

"The IMF is right to turn the spotlight on the billions of pounds in subsidies which the UK's fossil fuel sector continues to enjoy at the expense of all of us,” said Maf Smith, deputy chief executive of industry body RenewableUK.

"Although there's been a great deal of scrutiny about the cost of renewable energy, the price that all British taxpayers are still being forced to pay to the oil, coal and gas industries - decades after they became well-established - is eye-watering.”

Will Vooght, head of innovation at renewable electricity company Good Energy commented: "This shows the staggering true cost that British people have to pay to prop up an old-fashioned energy system hooked on fossil fuels.

"At the same time, the Government is focusing its efforts on slashing its relatively modest support for clean, renewable energy like wind and solar."

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