IMF Correctly Castigates Fossil Fuel Subsidies, Ignores Own Role in Climate Crisis

I’m sure that you are aware, dear readers, that the fossil fuel industry has always been at the receiving end of various forms of government assistance. Wars for oil, cops crushing protests, car-based infrastructure, and then there are the subsidies. Subsidy discourse underwent an interesting change maybe a decade ago, as opposition to renewable subsidies was easy to rebut by pointing to fossil fuel subsidies, many of which take the form of enormous tax breaks. I started seeing more and more people claim that they weren’t really subsidies, because all taxation is theft, and so a tax break was just letting them keep more of their own money. A subsidy, they say, is when the government cuts a check!

The reality is that tax breaks are absolutely subsidies, they’re just the most efficient way to go about handing them out. Rather than the cost of cutting and verifying checks, transferring the money (yes, that stuff actually does take at least some labor and resources), you just knock some money off of what the corporations have to pay. The net effect is identical to cutting a check, though it wouldn’t shock me if doing it this way was always a bit of a shell game to hide just how much support the federal government gives to fossil fuel corporations:

Fossil fuels benefited from record subsidies of $13m (£10.3m) a minute in 2022, according to the International Monetary Fund, despite being the primary cause of the climate crisis.

The IMF analysis found the total subsidies for oil, gas and coal in 2022 were $7tn (£5.5tn). That is equivalent to 7% of global GDP and almost double what the world spends on education. Countries have pledged to phase out subsidies for years to ensure the price of fossil fuels reflects their true environmental costs, but have achieved little to date.

Explicit subsidies, which cut the price of fuels for consumers, doubled in 2022 as countries responded to the higher energy prices resulting from Russia’s war in Ukraine. Rich households benefited far more from these than poor ones, the IMF said. Implicit subsidies, which represent the “enormous” costs of the damage caused by fossil fuels through climate change and air pollution, made up 80% of the total.

Ending the subsidies should be the centrepiece of climate action, the IMF said, and would put the world on track to restrict global heating to below 2C, as well as preventing 1.6 million air pollution deaths a year and increasing government revenues by trillions of dollars. The researchers acknowledged that subsidy reform was politically difficult, but said carefully designed policies that supported poorer households could work, especially if coordinated internationally.

Now, those who would make the earlier argument about tax breaks probably also wouldn’t like the inclusion of the costs incurred by pollution and climate change. Let us assume, for a moment, that their objection is in good faith. We’ve known for well over a century that by increasing greenhouse gas levels in the atmosphere, we were warming our planet. Fossil fuel corporations knew how quickly the problem was moving, and how dangerous it was, and they lied about it. They actively worked to bring about the disasters that governments and the people pay for. They’ve also been perfectly aware of the dangers of the air pollution caused by their products, and lied about that as well. As this nurse said of the US, “We don’t have safety nets for our poor in this country, we have a greased chute. And at the very bottom of that greased chute of poverty, is a trip to your local emergency room.” USians also pay in terms of higher insurance premiums because of fossil fuel use, while tiny-minded assholes on TV rant about the “public health crisis” of obesity. Even in countries that do have real safety nets, they are still absorbing all the costs incurred by fossil fuel products.

If a toy company was poisoning children, they’d get fined for that. If any normal product is seriously dangerous, it gets recalled. With fossil fuels? The world just eats the costs. We all, together, pay for worse cardiovascular health, and extreme weather events, and problems for fetal and childhood development, and the list goes on, and on, and on. No, it’s very clear that by consistently paying for the vast and growing harm done by the use of fossil fuels, we are, without question, subsidizing that industry.

The costs of all of that together, according to the IMF, came to thirteen million dollar per minute in 2022, and as long as the planet keeps warming, and the fossil fuel industry is allowed to continue operating, that number is only going to get higher.

Now – the IMF is not, in my view, a good organization. Its primary role seems to be getting former colonies into debt traps to keep them from advancing – the economic counterpart to the CIA’s assassinations and coup-mongering. They are also a big part of how the world runs right now, and they spend a fair amount of time crunching numbers. I’m inclined to agree with them on this, but as a rule, I think it’s good to view them with skepticism. While it is important to end fossil fuel subsidies (and to end the industry overall), the IMF is far from blameless, and will have to end many of their own practices if we want a real response to climate change:

One of the biggest factors preventing governments in the Global South from taking climate action is barely discussed at conferences and debates meant to find solutions to the planet’s existential crisis.

It is time for us to talk about debt. Especially now, with the Spring Meetings of the World Bank and the International Monetary Fund (IMF) held recently and economic policy options for Global South countries under the spotlight. If we want countries to have the freedom to take action that is in their interests, we must understand that the World Bank, the IMF and private banks based in wealthy countries are preventing climate progress.

How? Because of their unhealthy obsession with debt repayments from the Global South at any cost.

This extortionate debt which hangs over the heads of many countries is forcing them to make difficult choices in order to pay that debt back. Indonesia, for example, is paying back loans equivalent to more than 40 percent of its gross domestic product (GDP), a key factor leading it to cut down rainforests to make way for money-making palm oil plantations. The need to repay external debt worth more than 80 percent of GDP has also been a factor in Brazil’s prioritising of soybean exports over the protection of the Amazon. And an external debt equivalent to 101 percent of GDP is why Mozambique has been trying to expand its coal and gas production in recent years.

This type of external debt almost always needs to be repaid in US dollars or other foreign currencies. So even when countries would benefit from supporting smallholder farmers, agroecology and small and medium-sized businesses, many have been forced to shape their economies around destructive fossil fuel and large-scale industrial agribusiness exports, in order to earn the dollars needed for debt repayment.

And the difficult decisions continue, with many countries spending more on servicing their debt than on education and health. Even though many have paid back their original loan amounts, a combination of rising interest rates, successive currency devaluations, fluctuating global commodity prices and the destructive impacts of climate change have kept the debt repayment finish line perpetually out of reach.

Indeed, sometimes the climate crisis has forced countries to take on more loans at even higher interest rates.

Even worse, loans from the World Bank and the IMF almost always come with rules attached – that countries privatise their public services, cut public spending, and go gung-ho into producing export commodities. These “conditionalities” and the power wielded by these institutions are worsening the climate crisis, and undermining countries’ capacity to take climate action through investing in green technologies, resilience or recovery from disasters.

Sniffing the climate winds of change, the IMF and the World Bank are now desperately attempting a makeover, and trying to present themselves as responsible climate leaders. But in reality, the IMF has advised more than 100 countries to expand their fossil fuel infrastructure, while the World Bank has spent $14.8bn supporting fossil fuel projects and policies since the Paris Agreement was signed. Their claims of being responsible climate leaders do not hold up to any scrutiny.

New research by ActionAid finds that 93 percent of countries most vulnerable to the climate crisis are in debt distress, or at significant risk of debt distress. This reflects a vicious cycle in which climate impacts put countries into debt, but that debt accelerates the climate crisis and leaves countries even more exposed to its impacts. And so the cycle continues.

All this points us towards a clear conclusion: that the global debt crisis is a major barrier to climate action and that debt cancellation can be a highly effective climate solution.

In general, when the most powerful organizations in the world start blaming each other for the problems of the world, it’s a good idea to look into why they might want your eyes elsewhere. Fossil fuel subsidies are a serious problem, but they are far from the only problem. The causes of the climate crisis are baked into how our global economic system has come to operate with the “end” of colonialism over the last century.

And this is where you can all join in on the chorus – global warming is a systemic problem, and solving it requires systemic change.

The people and institutions that wield global power are all very aware of the dangers posed by a rapidly warming planet, and are also aware of their own role in creating this crisis. While many of them may genuinely want to see it go away, they are willing to let everything be destroyed if it means that they aren’t the first to give up wealth or power. It’s basically the same as when US pundits and politicians point the finger at Chinese or Indian emissions, when saying that the US shouldn’t lead. Leaving aside the childishness of this response, the reality is that everything needs to change at least a little, and the closer you get to the top of global wealth and power, the more change needs to happen. We can’t expect the powerful to be honest, but I think they’re more likely to tell the truth about other powerful people and entities, when deflecting attention away from their own problems.

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