Kate Mackenzie The cost of fossil fuel subsidies: $557bn

The popularity of fossil fuel subsidies didn’t take much of a hit despite a big run-up in prices in 2008.

Thirty-seven of the world’s biggest developing countries are spent $557bn subsidising fossil fuels that year, according to new estimates by the IEA seen by the FT.

More recent data is not yet available. But that represents quite a steep jump.

The IEA’s most recent previous estimate was for $310bn spent in 2007 by 20 non-OECD economies; this was extrapolated out to a figure of $400bn for all non-OECD countries, according to the Global Subsidies Initiative.

And, if you’re wondering how that stacked up against other types of energy subsidies, here is the GSI’s estimates:

The G20 agree last year to phase out fossil fuel subsidies. This move alone would cut greenhouse gas emissions by 10 per cent by 2050, the IEA estimated.

For some developing countries, fossil fuel subsidies are becoming an ever heavier burden. Iran is one country thought to be struggling and China has signalled it may need to cut subsidies soon. Even Saudi Arabia is suffering somewhat with the effect of its electricity subsidies; it’s facing a growing problem with domestic natural gas supply, of which it is now a net exporter despite having the world’s fourth-biggest  reserves of the stuff.

Despite this, many countries are reluctant to abandon subsidies. The American Petroleum Institute opposed the US signing the G20 agreement, and India says it needs subsidies to encourage development and fight inflation.

Their opposition might be misguided, however.

The IEA’s modelling in 2008 showed that removing subsidies are actually raise per-capita GDP “in most countries concerned”.

Related links:

Saudi Arabia struggling with gas needs – FT Energy Source
Is sanctions talk already affecting Iran’s troubled energy supply? FT Energy Source