Essay On Global Fuel Subsidies

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Over the past couple of years, global fuel subsidies have had tremendous influence on energy market systems. The incentives created by global fuel subsidies create excess consumption as well as ineffective markets. In his article titled: “The Environmental Cost of Global Fuel Subsidies”, Lucas W. Davis explains that it is necessary for countries to reform fuel subsidies in order to accurately reflect private costs and external costs in energy prices (Davis, 2017). In other words, Lucas W. Davis attempts to quantify the external costs from global fuel subsidies in order to reflect the true cost on environmental externalities. This is an important issue because the presence of fuel subsidies not only damages energy market systems but it …show more content…

Notably, Lucas explains that two thirds of the total external cost comes from accidents and congestion. He mentions: “These components are rarely mentioned in policy discussions about fuel subsidies, but there is a growing consensus that these are the largest components of the external cost of driving” (Davis, 2017). In conclusion, global subsidies present large inefficiencies for energy market systems. In particular, the largest components of the external costs of driving are traffic congestion as well as accidents. Secondly, in order to conduct the research, Lucas Davis relies upon the latest available data, estimates from the World Bank and International Monetary Fund. He explains that his paper relies heavily on studies that were conducted previously and carried out in the context of global fuel subsidies (Davis, 2017). In particular, he explains that most of his results rely on the previous study conducted by a team of researches at the International Monetary Fund (Davis, 2017). Ian W. H. Parry and Kenneth A. Small conducted this study in 2014, it is titled: “Getting Energy Prices Right: From Principle to Practice” (Parry et al., 2014). Lucas explains that previous studies measured marginal damages for particular energy types and individual countries. Unlike previous studies, Ian W. H. Parry and Kenneth A.

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