OVER the past year energy subsidies have become a target for politicians on austerity drives. In June Indonesia increased petrol prices by 44% to cut its annual subsidy bill of $20 billion. More recently Malaysia followed suit, in the hope of filling a budget hole which had reached 4.5% of GDP. It slashed petrol subsidies, and on January 1st household energy bills went up by 15%. Countries such as Egypt and India are considering similar measures to reduce their growing budget deficits; Egypt’s is now at 14% of GDP.

It is the growing cost of subsidies, rather than worries about climate change, that explains the renewed interest in cutting them, says Fatih Birol at the International Energy Agency (IEA). They have become unaffordable as global oil prices have more than doubled between 2009 and 2012. In Jordan, for instance, their cost increased more than tenfold in just two years. And in many other countries they now account for more than 5% of GDP.

Globally, the cost of government subsidies for fossil fuels increased from $311 billion in 2009 to $544 billion in 2012, the IEA estimates. Once lost tax revenues are included, this figure rises to around $2 trillion, equal to over 8% of government revenues, according to a recent IMF report.

Other research suggests that most of this spending leads to big “deadweight losses”, meaning lost economic efficiency as a result of government intervention. In the case of fuel subsidies for road transport, worth $110 billion globally in 2012, these losses reached $44 billion, reckons Lucas Davis at the University of California, Berkeley, in a new paper.

Yet it is not only that the economic cost of subsidies is at a new high. The case for cutting them this year is particularly strong. Countries with high fuel subsidies are more exposed to external shocks, as holding down prices causes their budget deficits to explode, making them vulnerable to rising global interest rates. Cutting subsidies now would help them prepare for when borrowing gets harder as quantitative easing ends. It would also leave more money for growth-boosting policies, such as infrastructure investment.

Inequality would be reduced, too. IMF research shows that only 7% of fuel subsidies in poor countries go to the bottom 20% of households; 43% end up in the pockets of the richest 20%. Petrol subsidies are particularly regressive (and polluting, see picture), as richer people are more likely to drive cars. Money saved could be spent on targeted cash-transfer schemes for the poor, as is done in Malaysia.

Subsidy cuts are widely associated with higher inflation: energy costs rise. But in a world of falling inflation the risks this poses are lower. The IMF forecasts that Malaysia’s cuts will push up its inflation rate only slightly, from 2% in 2013 to 2.6% this year. While it may put a dent in real wages, slightly higher inflation would chip away at the country’s public debt—and help its government avoid a breach of its statutory debt ceiling of 55% of GDP.

Whether more countries will follow the lead of Indonesia and Malaysia, however, does not depend only on economics. On New Year’s Eve thousands turned out in Kuala Lumpur, Malaysia’s capital, to protest against the cuts. And in Indonesia public opinion has put politicians under pressure to roll back some of the reforms this year. When it comes to cutting subsidies, politics can still trump even the best economic or environmental arguments.