This paper provides a comprehensive global, regional, and country-level update of: (i) efficient fossil fuel prices to reflect their full private and social costs; and (ii) subsidies implied by mispricing fuels. The methodology improves over previous IMF analyses through more sophisticated estimation of costs and impacts of reform. Globally, fossil fuel subsidies were $5.9 trillion in 2020 or about 6.8 percent of GDP, and are expected to rise to 7.4 percent of GDP in 2025. Just 8 percent of the 2020 subsidy reflects undercharging for supply costs (explicit subsidies) and 92 percent for undercharging for environmental costs and foregone consumption taxes (implicit subsidies). Efficient fuel pricing in 2025 would reduce global carbon dioxide emissions 36 percent below baseline levels, which is in line with keeping global warming to 1.5 degrees, while raising revenues worth 3.8 percent of global GDP and preventing 0.9 million local air pollution deaths. Accompanying spreadsheets provide detailed results for 191 countries.

Despite the many benefits of energy, most of which are reflected in energy market prices, the production, distribution, and use of energy causes negative effects. Many of these negative effects are not reflected in energy market prices. When market failures like this occur, there may be a case for government interventions in the form of regulations, taxes, fees, tradable permits, or other instruments that will motivate recognition of these external or hidden costs. The Hidden Costs of Energy defines and evaluates key external costs and benefits that are associated with the production, distribution, and use of energy, but are not reflected in market prices. The damage estimates presented are substantial and reflect damages from air pollution associated with electricity generation, motor vehicle transportation, and heat generation. The book also considers other effects not quantified in dollar amounts, such as damages from climate change, effects of some air pollutants such as mercury, and risks to national security. While not a comprehensive guide to policy, this analysis indicates that major initiatives to further reduce other emissions, improve energy efficiency, or shift to a cleaner electricity generating mix could substantially reduce the damages of external effects. A first step in minimizing the adverse consequences of new energy technologies is to better understand these external effects and damages. The Hidden Costs of Energy will therefore be a vital informational tool for government policy makers, scientists, and economists in even the earliest stages of research and development on energy technologies.

"This report describes a geospatial analysis method to estimate the economic potential of several renewable resources available for electricity generation in the United States. Economic potential, one measure of renewable generation potential, may be defined in several ways. For example, one definition might be expected revenues (based on local market prices) minus generation costs, considered over the expected lifetime of the generation asset. Another definition might be generation costs relative to a benchmark (e.g., a natural gas combined cycle plant) using assumptions of fuel prices, capital cost, and plant efficiency. Economic potential in this report is defined as the subset of the available resource technical potential where the cost required to generate the electricity (which determines the minimum revenue requirements for development of the resource) is below the revenue available in terms of displaced energy and displaced capacity. The assessment is conducted at a high geospatial resolution (more than 150,000 technology-specific sites in the continental United States) to capture the significant variation in local resource, costs, and revenue potential. This metric can be a useful screening factor for understanding the economic viability of renewable generation technologies at a specific location. In contrast to many common estimates of renewable energy potential, economic potential does not consider market dynamics, customer demand, or most policy drivers that may incent renewable energy generation"--Page ii.