Independent Repeats Fake Fossil Fuel Subsidy Claims

From the failed Independent:

A global carbon tax that would raise trillions of dollars if applied across the world should be introduced if the world is to avoid dangerous climate change, 13 leading economists have said in a new report.

Led by Professor Nicholas Stern, who produced the groundbreaking Stern Report in 2006, and Professor Joseph Stiglitz, who won the Nobel Prize for economics in 2001, the experts suggested a price for a tonne of carbon dioxide of $50 to $100 (£39-78) by 2030.

If implemented all over the world, the top price would raise about $4 trillion – more than the UK’s and Germany’s gross domestic products, but less than Japan’s – although the report suggested poorer countries might charge less.

Currently about 85 per cent of carbon dioxide emissions are not subject to a tax – while the fossil fuel sector receives subsidies of up to an estimated $5.3 trillion. The world’s largest carbon pricing scheme is in the EU, but it only charges about $6.70.

The fact that the report was led by Lord Stern rather says it all.

As always with these calls for a carbon tax, it is claimed that all the revenue could be redistributed to various good causes. However, the supposed logic of such a tax is to force us to shift from fossil fuels to more expensive renewables. Once this has happened, there would be no carbon tax left to redistribute, but we would still all be stuck with the extra costs.

(It is regularly claimed that renewable energy is rapidly becoming competitive on price, so why on earth does there need to be a carbon tax anyway?)

But the Independent also repeats the myth about fossil fuel subsidies:

“while the fossil fuel sector receives subsidies of up to an estimated $5.3 trillion.”

This figure comes from a report last year, How Large Are Global Fossil Fuel Subsidies?

This was the Abstract:

This paper estimates fossil fuel subsidies and the economic and environmental benefits from reforming them, focusing mostly on a broad notion of subsidies arising when consumer prices are below supply costs plus environmental costs and general consumption taxes. Estimated subsidies are $4.9 trillion worldwide in 2013 and $5.3 trillion in 2015 (6.5% of global GDP in both years). Undercharging for global warming accounts for 22% of the subsidy in 2013, air pollution 46%, broader vehicle externalities 13%, supply costs 11%, and general consumer taxes 8%. China was the biggest subsidizer in 2013 ($1.8 trillion), followed by the United States ($0.6 trillion), and Russia, the European Union, and India (each with about $0.3 trillion). Eliminating subsidies would have reduced global carbon emissions in 2013 by 21% and fossil fuel air pollution deaths 55%, while raising revenue of 4%, and social welfare by 2.2%, of global GDP.

https://www.researchgate.net/publication/310750518_How_Large_Are_Global_Fossil_Fuel_Subsidies

The implication in the Independent is clear, that taxpayers are forking over trillions to fossil fuel companies in subsidies, and that this money could be better spent elsewhere. And that, since fossil fuels are subsidised, why should not we subsidise those nice renewables too? This is a message frequently put across by the BBC and other left wing media.

Yet, as the Abstract states, the vast bulk of the ”subsidy” is nothing of the sort. It covers externalities, such as the supposed cost of global warming, air pollution and “broader vehicle” externalities. These all add up to 81%.

There is of course no evidence that the small amount of global warming experienced in the last century has even been harmful. Air pollution largely concerns countries like China.

So as far as the UK is concerned, these costs simply don’t exist.

It is certainly true that some countries subsidise their own energy industries, simply because they are strategically important. They do exactly the same for other industries and agriculture that are also economically vital to them.

There are other countries which subsidise the price of energy to consumers, because access to cheap energy is important for both households and industry. This is true regardless of where the energy has come from. Just because there is much more fossil fuel energy than renewable does not mean that the former is being given an unfair advantage.

It is anyway extremely arrogant of Stern and his cronies to tell other countries what to do. What gives them the right to demand that, for instance, Iran stop providing subsidies to its poorest people for energy (and for that matter food as well)?

If they wish to do that, or China wants to carry on burning coal, that is for them alone to decide.

But back to the UK. What subsidies do fossil fuels receive here?

The simple answer is none. Quite the opposite in fact.

Government revenues from North Sea oil and gas production have far exceeded what normal Corporation Tax would have brought in.

In the last ten years, total revenue has amounted to £57.7bn, of which only £25.7bn is accounted for by normal corporation tax. (Even this is “ring fenced”, which means oil companies are not allowed to charge losses in other parts of their business against the production side).

In other words, North Sea oil has paid an extra £32.0bn on top of normal Corporation Tax, mainly in the form of Petroleum Revenue Tax and Supplementary Charge.

https://www.gov.uk/government/statistics/government-revenues-from-uk-oil-and-gas-production—2

And as drivers will be only too aware, it does not stop there. Fuel duties brought in another £27.9bn last year.

So, far from being subsidised, fossil fuels have contributed hundreds of billions in tax in recent years.

Environmental Audit Committee

Discussion of fossil fuel subsidies in the UK cannot be allowed to pass without a mention of a thoroughly fatuous and mendacious report from the Parliamentary Environmental Audit Committee in November 2013.

The Committee, which included such luminaries as Labour’s Joan Walley, Zac Goldsmith, and Caroline Lucas, began their report (their bold):

Globally, subsidies for fossil fuels exceed $500 billion a year. They are inconsistent with the global effort to tackle climate change, providing incentives for greater use of such fuels and disincentives for energy efficiency. Energy subsidies in the UK are running at about £12bn a year; much directed at fossil fuels. There is no single internationally agreed definition of what constitutes energy subsidy, which has provided a way for the Government to reject—erroneously, in our view—the proposition in some areas that it provides energy subsidies.

https://www.publications.parliament.uk/pa/cm201314/cmselect/cmenvaud/61/6103.htm

And just what led them to such a conclusion?

1) VAT is charged at 5% on energy bills to domestic and small business users, instead of the standard rate of 20%.

2) Capacity market payments to gas (and other generators) to provide standby capacity.

Neither claim stands up to scrutiny.

Food, for instance, is zero rated, but nobody in their right minds would say assert that food is subsidised. It is telling though that these ecotards would be quite willing to see people paying an extra 15% VAT for their electricity and gas, just to salve their consciences.

As for standby payments, far from them being a subsidy to conventional generators, they are actually a subsidy to the renewable generators, which cannot produce reliably and when needed.

Many would argue that this cost should be borne by those renewable operators.

FOOTNOTE

Throughout the Committee Report, the name of Dr William Blyth keeps cropping up time and time again, as a witness. It is apparent that he has heavily influenced the Committee’s findings.

Blyth runs Oxford Energy Associates, which according to the website, is a team of trusted and impartial advisors who research, inform and influence the global transition to a sustainable energy system, taking account of climate change and social equity.

Quite why the Committee gave so much undue prominence to this heavily biased crank remains a mystery.

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