WASHINGTON (Reuters) — Developing and industrialized countries should rein in energy subsidies that totaled $1.9 trillion in 2011 to ease budgetary pressures and free resources for public spending in areas like education and health care, International Monetary Fund economists said in a research paper published Wednesday.

In the paper, “Energy Subsidy Reform — Lessons and Implications,” the economists reviewed a database of 176 countries and analyzed ways to change energy subsidies by examining case studies of 22 countries.

In 2011, energy subsidies intended to contain energy prices for consumers accounted for 2.5 percent of global gross domestic product, or 8 percent of all government revenue, the fund said.

“The paper shows that for some countries the fiscal weight of energy subsidies is growing so large that budget deficits are becoming unmanageable and threaten the stability of the economy,” David Lipton, first deputy managing director of the fund, said in a speech on Wednesday.

The paper said that subsidies were expensive for governments, and that, instead of helping consumers, they detracted from increased investment in infrastructure, education and health care, which would help the poor more directly.

Subsidies have been a counterproductive way to help the poor because they are more beneficial to the rich, who consume more energy, the fund said. The richest 20 percent of households in low- and middle-income countries received six times more in fuel subsidies than the lowest 20 percent, the fund said.

According to its research, 20 countries have pretax energy subsidies that exceed 5 percent of gross domestic product. The top three subsidizers are the United States at $502 billion, China at $279 billion, and Russia at $116 billion.

In advanced economies, like the United States, removing subsidies for fossil fuels could inject revenue into government coffers, the fund said.

“Insufficient energy taxation, including in the largest economy in the world, the United States, is a problem not only for the environment, but many advanced economies are in need of additional resources to support the effort to lower public debt, which is very high now in those economies,” said Carlo Cottarelli, director of the fund’s fiscal affairs department.

Over the longer term, limiting energy subsidies could spur stronger economic growth because it would encourage a more efficient distribution of resources and encourage investment in energy-efficient alternative technologies, Mr. Lipton said.

Article source: http://www.nytimes.com/2013/03/28/business/imf-calls-for-curbing-fuel-subsidies.html?partner=rss&emc=rss