Reuters: Global Fossil Fuel Subsidies Rise Despite Calls for Phase-Out

Article published: 23 November 2023

IB Economics Syllabus: Microeconomics (market failure, government intervention)

In a notable report by Reuters on November 23, 2023, global fossil fuel subsidies have alarmingly increased to $7 trillion, up from $5 trillion, despite international commitments to reduce them. This surge, highlighted by the International Monetary Fund, is a response to rising energy prices and geopolitical tensions. China leads with subsidies at $2.2 trillion, or 12.5% of its GDP, followed by the United States at $760 billion, Russia at $420 billion, and India at $350 billion. These figures underscore the complex challenge of balancing economic stability with environmental sustainability in the face of global energy crises.

IB Economics (IA) Commentary Suggestions:

In your IA, analyze the impact of these escalating subsidies on market equilibrium and resource allocation. Focus on how these subsidies, intended to shield consumers from rising energy costs, result in market distortions, leading to overconsumption and exacerbation of negative externalities. Discuss the implications of these subsidies on global efforts towards sustainable energy, using supply and demand diagrams to illustrate the shifts in market dynamics. The key concept to explore is the unintended consequences of government intervention in the energy market.

Source of image: REUTERS/Navesh Chitrakar/File Photo

Do you need a little boost with IB Economics?

Check out my IB Economics Revision Notes (Study Guide)

Or get personalized help from an examiner: check out private lessons

Looking for more articles? Click here

If you would like to get useful exam tips, accurate definitions, solutions to exam questions, explanations, real-world examples, diagrams and more, stay tuned and hit that follow button!

Cheers!