Henry Ergas in yesterday’s Australian cited a letter from the former chief economist to the International Monetary Fund (IMF) that describes that organization’s claim of $5.3 trillion of world fossil fuel subsidies as “highly questionable” and “dubious”.
The IMF, like the Organisation for Economic Co-operation and Development has jumped on the subsidies bandwagon in recent years. This is especially disappointing in the case of the OECD, given that it exists solely to promote economic growth.
A true energy subsidy is a payment, or other measure, that reduces prices below the true market price. Energy subsidies, like all subsidies, distort the natural flow of investment, demand and supply in markets, and should not be supported, especially given that the long-suffering taxpayer is the one that ultimately foots the bill.
In September the IPA published The Fossil Fuel Subsidy Myth which found that the phrase “fossil fuel subsidy” in the Australian context had been used by environmentalists as a political weapon to demonise the mining industry and artificially bolster the case for renewables.
A refund of overpaid tax is not a fossil fuel subsidy, and neither is a campaigner’s calculation of what a company or consumer “should” have paid. Tax systems exist to raise enough revenue to pay the government’s bills, and should not be used to pursue political vendettas.