Waste not, harm not

BLUNDERS in economic policymaking abound, but among the worst are energy subsidies. They stoke waste, squeeze other spending, enrich middlemen and help the comfortably-off more than the poor, who use little energy.

Include the cost of pollution and the bill is even higher. A new IMF working paper puts it at a stonking $5.3 trillion, or 6% of global GDP—more than all government spending on health care. The+ biggest subsidies are in the poorest countries (where they can reach 18% of GDP) and the lion’s share goes to coal, the dirtiest fuel, which no country taxes properly. By contrast, renewable energy subsidies (mostly in the rich world and not covered in the IMF paper) amount to a mere $120 billion, and would vanish if fossil fuels were taxed fully. The biggest subsidiser of fossil fuels is China at $2.3 trillion, followed by America ($700 billion), Russia ($335 billion), India ($277 billion) and Japan ($157 billion).

Big numbers bring big headlines. In this case, they also introduce much greater margins for error. The common and strict definition of subsidies is “pre-tax”: directly intervening to keep a price...

from The Economist: Finance and economics http://ift.tt/1AhtE9v