The International Monetary Fund (IMF) has said global subsidies for fossil fuels increased by $2 trillion over the past two years to reach a record $7 trillion in 2022.

According to Reuters News Agency, the IMF, in a report, said the soaring costs, driven by post-pandemic consumption growth and rising energy costs stemming from Russia’s 2022 invasion of Ukraine, are straining budgets, adding to pollution and exacerbating global warming.

“Subsidies for oil, coal and natural gas are costing the equivalent of 7.1 percent of global gross domestic product. That is more than governments spend annually on education (4.3 percent of global income) and about two-thirds of what they spend on healthcare (10.9 percent),” the IMF said.

The Fund warned that implicit subsidies – the cost of damage from air pollution and global warming – account for the bulk of the costs and are likely to keep rising.

It will be recalled that a number of African countries, including Nigeria and elsewhere in the developing world have cut fuel subsidies in recent years due in part to rising debt and borrowing costs; wealthier nations, where energy consumption is higher, faceless financial pressure to cut subsidy costs.

The report states that explicit subsidy costs, what governments pay directly to keep electricity or pump prices artificially low, have more than doubled since 2020, to $1.3 trillion. The IMF said that these costs are likely to fall now that energy prices have eased, which it said was an ideal time to scrap subsidies.

“Falling energy prices provide an opportune time to lock in the pricing of carbon and local air pollution emissions without necessarily raising energy prices above recently experienced levels,” it said.

The IMF, however, said that an even bigger concern is implicit subsidy costs, which are likely to keep rising as damage from a warming planet spreads. Consumers did not pay for over $5 trillion of environmental costs last year.

“We estimate that scrapping explicit and implicit fossil fuel subsidies would prevent 1.6 million premature deaths annually, raise government revenues by $4.4 trillion, and put emissions on track toward reaching global warming targets,” the IMFsaid. (Nigerian Tribune)

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