IMF report and counter reports

[Romero]

Last summer, the IMF updated its global report on energy subsidies and found that Canada provides a whopping $46.4 billion in subsidies to the energy sector in either direct support or uncollected taxes on externalized costs.



Globally, this figure balloons to US$5.3 trillion or 6.5 per cent of the world's GDP. To put that enormous sum in perspective, the global giveaway to the energy sector amounts to 40 times more money than is contributed in aid to the world's poorest people.



And what could Canada do with another $46 billion each year? In terms of badly needed public transit, we could immediately pay for both the new Broadway SkyTrain line and the Bloor Street subway extension in Toronto, and still have $40 billion left over. There are also 120 kilometres of proposed light rail projects in the country we could finally build and only be down to $35 billion. Remember, these badly needed infrastructure investments are one-time expenses and the subsidies identified by the IMF rack up every year.



Other urgent needs include building and maintaining affordable housing, estimated to be about $3 billion annually. The public portion of a national pharmacare program might amount to an extra $1 billion each year (though it could also save us money too). That still leaves billions of annual public revenue that could provide tax relief to those shifting away from fossil fuels as well as transition training for displaced workers in our beleaguered oil sector.



http://thetyee.ca/Opinion/2016/02/01/IMF-Fossil-Fuel-Subsidies/">//http://thetyee.ca/Opinion/2016/02/01/IMF-Fossil-Fuel-Subsidies/

[Anonymous]

In a recent opinion piece for The Tyee, freelance writer Mitchell Anderson bemoaned Canada's "incredible" $34-billion a year in energy subsidies. This figure is indeed not credible, since the IMF study it's based on sees subsidies where there are none.



The vast bulk of The Tyee's ludicrous figure falls under the rubric of negative "externalities," that is, societal costs presumably caused by a particular economic activity. According to the wonks at the IMF, fossil fuels are not sufficiently taxed to make up for externalities like air pollution, carbon emissions, and even traffic congestion and traffic accidents.



The cost of these is evaluated by the IMF with their crystal balls at nearly $20-billion just for transportation fuels like gasoline and diesel. Another $7.3-billion is for un-priced carbon emissions from burning natural gas, and an additional $4.5-billion is for un-priced carbon and sulfur dioxide emissions for the coal industry.



This is silly for a number of reasons. First of all, there are already plenty of taxes on fossil fuels. In 2012, gasoline taxes averaged 31% of the pump price. Federal excise taxes and provincial fuel taxes combined generated revenues of $13.7-billion for the 2012-2013 year. This means each Canadian – man, woman, or child – pays an average of almost $400 a year in taxes related to fuel consumption.



As for the production side, the industry that develops oil and gas resources in this country pays on average $18-billion a year in taxes and royalties to different governments across Canada. Hardly chump change.



More fundamentally, deciding what counts as an externality and how much that externality is worth in dollar terms is a tricky business, and it's most definitely not the same thing as putting a number on fossil-fuel subsidies. It's true that if Canadians could not move around by car as easily and affordably as they can now, there would be less traffic congestion, and the air in our cities might be less polluted. But if we all reverted to heating our homes with firewood instead of natural gas, air quality would suffer, and our forests would be stressed as well.



As for traffic jams, in addition to their direct costs in terms of productive hours lost, it's also true that they're stressful and that stress is a cause of heart disease. Why not include the additional costs to our health care system in our externality calculation?



These many billions of dollars, Anderson claims, could be put to better use. They could finance the building of hundreds of kilometres of light rail, fix our crumbling roads, or provide cheap daycare to millions of children.



The problem is that these billions of dollars simply do not exist, and trying to extract them from oil, gas, and coal producers (and consumers) would have devastating economic consequences. Production and consumption of these energy products would be discouraged, and with less production, higher tax rates would not be translated directly into the higher tax returns envisaged by would-be interventionists with their rose-coloured glasses. Indeed, economic growth would slow across the board, leading to less tax money in government coffers.



Supposed subsidy programs are actually just a particular tax treatment common to the natural resources sector

As for the $840-million in producer support to the oil industry (with some going to natural gas and coal producers) that Anderson mentions, this is based on an OECD study that at least has its feet on the ground. But even here, there is much to criticize.



This figure is in line with another, earlier analysis from the Global Subsidies Initiative that I examined in detail in a recent publication. What I found was that even this much smaller number makes subsidies to the oil industry seem far more generous than they actually are.



This is because many of the supposed subsidy programs are actually just a particular tax treatment common to the natural resources sector as a whole, which is faced with a specific economic reality. Given the large amounts of start-up capital involved, the high degree of risk, and the many years that go by between initial investments and (hopefully) profits, companies are allowed to reduce the taxes they have to pay in the short term and defer them until later in the production cycle.



But this is not a subsidy. It's just a common-sense measure for ensuring the neutrality of the tax system between different industries. And while governments get less revenue initially, they ensure the economic viability of certain projects that would not otherwise see the light of day. This means more tax revenue down the line when these projects are finally carried through and wealth is created.



As for actual subsidy programs, the largest of these are being eliminated, and will be gone within the next two years. This means that of some $211-million of real subsidies that currently exist, just $71-million will remain as of 2016.



Now, $71-million of subsidies is still $71-million too much, in my opinion. But it's a very small fraction of the subsidies handed out by the federal and provincial governments to various sectors of the economy, which totalled a whopping $15.8-billion in 2009. And it's a far cry from the tens of billions touted by the IMF and uncritically repeated by The Tyee.

http://business.financialpost.com/fp-comment/imfs-imagined-34-billion-silly-stats-are-behind-claims-that-canada-subsidizes-oil-industry">http://business.financialpost.com/fp-co ... l-industry">http://business.financialpost.com/fp-comment/imfs-imagined-34-billion-silly-stats-are-behind-claims-that-canada-subsidizes-oil-industry

[Anonymous]

The Tyee as a source is about as reliable as the National Enquirer. Anyone who has ever been to a gas station knows no consumption subsidy exists.



Like mining, the oil industry requires large amounts of startup capital. Its activities also entail a high degree of risk. And many years go by between the initial investment and the profits that, if all goes according to plan, come with commercial production.



Since the exploration stage does not lead immediately to production revenue, companies have to rely on investors who are ready to support an activity with a high risk of failure, but for which success can mean sizable profits. In response to this reality, certain government programs allow companies that develop natural resources to reduce the taxes they have to pay in the short term and defer them until later in the production cycle.



But to call this a subsidy is to be disingenuous. This is just a common sense measure whose purpose is to ensure the neutrality of the tax system between different industries. Governments get less revenue initially, but they ensure the economic viability of certain projects that would not otherwise have seen the light of day. This means more tax revenue down the line when these projects are finally carried through and wealth is created.

[RW]

IMF = ???

[RW]

I'm going to be merging these threads going forward just so you know Shen.

[Anonymous]

IMF = ???

Traffic jams=subsidy?

[Anonymous]

I changed the title to better reflect that this is a merged thread.

[Romero]

The vast bulk of The Tyee's ludicrous figure falls under the rubric of negative "externalities," that is, societal costs presumably caused by a particular economic activity.

It's not the Tyee's figure. It's the IMF's figure.



Remember how much you love "unfunded liabilities"? Externalized costs are actually real.

[RW]

What does IMF stand for?

[Romero]

IMF sees years of austerity for Saudi Arabia



The IMF has predicted years of higher taxes and low fuel subsidies for oil-rich Saudi Arabia. As crude prices have fallen more than 70 percent in 18 months, weaker players could soon start to default on debts.



Saudi Arabia will need to stop relying so heavily on oil revenues, which make up more than 80 percent of the government's wealth, said Masood Ahmed, head of the Middle East department at the IMF.



According to IMF estimates, Saudi Arabia may be running a $140 billion budget deficit, much more than the official figures of $98 billion.



To change that, Riyadh will have to change its electricity, water and oil subsidies for population of 30 million.



https://www.rt.com/business/330857-saudia-arabia-oil-austerity/">//https://www.rt.com/business/330857-saudia-arabia-oil-austerity/

[RW]

Ah, it's the International Monetary Fund.

[Anonymous]

That's quite the stretch of the definition of subsidy that the IMF uses. But, if you want to know where real subsidies go, look no further than green energy.



Green Energy is the Real Subsidy Hog

http://www.wsj.com/news/articles/SB10001424127887324432404579051123500813210">http://www.wsj.com/news/articles/SB1000 ... 3500813210">http://www.wsj.com/news/articles/SB10001424127887324432404579051123500813210

Bjorn Lomborg ran an op-ed in the Wall Street Journal a few days ago in which he concluded the real problem with energy markets is that there are too many subsidies to green energy.  Lomborg argues that people who complain about subsidies to fossil fuels are in part misguided by the considerable "misinformation" on the subject, and he aims to "debunk" key "myths" around the numbers.   While he agrees that fossil fuels shouldn't be subsidized either, his main focus is on government largesse to renewables.