The hidden health and environmental costs of using fossil fuels could amount to as much as US$5 trillion a year across the world, according to the International Monetary Fund (IMF).
Policy makers must start capturing those costs, which are valued at roughly 6 percent of global GDP, in fuel prices now to curb the damaging effects, the IMF said in a report.
The costs far surpassed the savings gleaned in the past year as governments cut traditional energy subsidies.
Vitor Gaspar, head of the IMF’s fiscal affairs department, called the estimates shocking and “one of the largest negative externalities ever estimated,” the Wall Street Journal reported.
Uncounted costs of pollution from coal, oil and natural gas should be considered subsidies because economies are burdened with mounting costs resulting from their use, the IMF says.
Based in part on new World Health Organization data, the fund estimates those “post-tax subsidies” will hit US$5.3 trillion this year alone.
The IMF accepts that eliminating subsides by raising energy taxes would be costly for consumers. Hence, it recommends a gradual increase.
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