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Independent Repeats Fake Fossil Fuel Subsidy Claims

June 1, 2017
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By Paul Homewood

   

From the failed Independent:

   

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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.

http://www.independent.co.uk/environment/climate-change-carbon-tax-4-trillion-save-humanity-global-warming-economists-nicholas-stern-joseph-a7763376.html

  

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.

   

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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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19 Comments
  1. Broadlands permalink
    June 1, 2017 4:06 pm

    That figure does not include the cost of capturing and safely storing the 50 ppm of CO2 already in the atmosphere to get us back to a “safe” 350 ppm. Do the math. 100 billion metric tons times $50-$100 per ton. Where is reality in any of this?

    One ppm of CO2 is two gigatons….source: CDIAC

  2. Joe Public permalink
    June 1, 2017 4:27 pm

    The International Energy Agency’s list of Energy Subsidies by Country, 2015 (Million USD):

    http://www.iea.org/statistics/resources/energysubsidies/?utm_content=buffer0c20c&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer

    Note the absence of the UK on that list.

    • Jack Broughton permalink
      June 2, 2017 11:21 am

      Very interesting, but I do not understand the list. It seems that almost all of the oil producers subsidise oil, I assume that is for domestic use??

      Interesting also that the massive French support for the capital cost of its nuclear fleet does not appear: that was a true and in my view proper subsidy for French industry that has paid back many times over.

  3. martinbrumby permalink
    June 1, 2017 4:31 pm

    Many of the same scam artists shamelessly advocate the abolition of the “Tampon Tax”.
    Readers will be aware that there is no such thing. But the usual suspects want VAT to be abolished on women’s sanitary goods.

    There is an argument that, in fact, these goods should be VAT zero rated. I don’t especially care one way or the other. There is little enough logic behind several of the things that attract no VAT or VAT at a reduced rate.
    Much more here:-
    http://www.bbc.co.uk/newsbeat/article/39947862/election-2017-what-the-parties-are-saying-about-tampons

    Would Caroline Lucas and all her chums moan if they got there way and I loudly pointed out that they were being “subsidised”?

    You can bet diamonds they would!

    I think however, it might be more to the point if we started a campaign to have a few of these twats sectioned under the 1983 Mental Health Act. “Lord” Stern would be an excellent place to start. No-one in their right mind could come out with his continual putrid bullshit without at least laughing at how much money he is trousering for robbing the poor and damaging the economy.

    • Tim Hammond permalink
      June 2, 2017 8:27 am

      Strangely many of those campaigning for getting rid of the Tampon Tax (which I support) quietly dropped the issue when it became known that it was a result if EU membership!

      The EU has to agree to VAT not being charged.

    • Stonyground permalink
      June 2, 2017 9:13 am

      ““Tampon Tax”.
      Readers will be aware that there is no such thing.”

      There is currently a 20% tax levy added to the cost of tampons. In what way is this not a tampon tax? When VAT was introduced it was claimed that it would only be added to luxuries, life’s essentials would be exempt. Luxuries such as clothing and tampons are fair game now though.

    • dennisambler permalink
      June 2, 2017 10:00 am

      It is because of the money he is trousering that he can be shown to be fully in his right mind, (or should it be left?) The World Bank is effectively a UN body, Stern and Stiglitz are former WB Chief Economists:

      “The close partnership between the World Bank and the United Nations goes back to a 1947 agreement, which designated the World Bank an Independent Specialized Agency of the UN system.”

      http://www.un.org/en/peacebuilding/pbso/unwb.shtml

  4. A C Osborn permalink
    June 1, 2017 5:37 pm

    Paul, the BBC rolled out a Grantham women today (I didn’t bother to get her name) to talk about President Trump and the Decision today, of course she gushed about Renewables etc.

    On another note the Greenhouse Gas affect gets shot down today with the (finally published) latest theory from PhD physicists Ned Nikolov and Karl Zeller over at Roger’s Talkshop, it looks even better than the preliminary version.

    https://tallbloke.wordpress.com/2017/06/01/foundations-of-greenhouse-theory-challenged-by-new-analysis-of-solar-system-observations/

  5. Graeme No.3 permalink
    June 1, 2017 6:41 pm

    So, IF global warming is occurring the costs (pluck figure from the air) must be charged to fossil fuels, in order to make them so expensive that ‘renewables’ will be used.
    I think the first step would be to ask for conclusive proof that global warming is occurring. Then conclusive proof that it is due to the use of fossil fuels.
    Then you might well ask for evidence that global warming would be harmful (even the IPCC stated that up until 2050 any warming would be beneficial) so the taxes could be realistic.

    It little matters in the real world. With the USA very unenthusiastic about the idea of getting rid of cheap energy for the next 4 years or more, and China, Russia and India having no intention of cutting their emissions, there will be no international agreement for many years. Throw in the producers of fossil fuels who would object to losing their revenue in return for a share in a (as you point out) diminishing tax yield and I think the signing ceremony for the treaty can be scheduled at least 50 years in the future.
    Long before that is even contemplated the climate will turn cool, possibly cold. No one, except Lord Stern and a few demented economists is going to rely on renewables to keep warm.

    • Derek Buxton permalink
      June 2, 2017 9:43 am

      Hands up all those who think that “lord” Stern only uses “renewables”? Nobody I suggest would put up their hands. The man probably uses more fossil fuels than i have done in my 80+ years alive. Every one of that group is a hypocrite!

  6. diogenese2 permalink
    June 1, 2017 8:46 pm

    “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.”

    Perhaps he was the only one who gave them the answers they wanted.

    “Hail to thee. blyth spirit!
    Bird thou never wert”

    As of this moment in time, all of their geese are Cooked.

    • Tim Hammond permalink
      June 2, 2017 9:03 am

      This is a more general problem with government, and to an extent, businesses and other institutions as well.

      If you think there is an issue, who do you get advice from? The “experts”. But if you have already decided there is an issue, then you get advice only from those who think there is an issue and who care passionately about it, and those people tend to be both fanatical and certain.

      So governments and businesses and places like Oxford University turn to the campaigning groups, and so get a very extreme view of the problem and its supposed solutions. There are no moderate groups (who campaigns moderately?) and no groups who disagree because until somebody makes the changes, what is there to disagree with?

      In this way we get extreme and simplistic solutions to what my actually be non-issies or what are probably complex and poorly understood issues.

    • Derek Buxton permalink
      June 2, 2017 9:44 am

      “Impartial”???? How does that work then?

  7. CheshireRed permalink
    June 1, 2017 8:48 pm

    As usual the eco-tossers lie, lie and lie again. They couldn’t hold a truthful debate about climate if their miserable lives depended on it.

  8. Bitter&twisted permalink
    June 1, 2017 10:08 pm

    I have the charlatan, Stern, in my sights.
    Complaint submitted- I’ll keep you posted.

  9. NeverReady permalink
    June 1, 2017 10:10 pm

    Sand. Arab. Snow. Eskimo

  10. Tim Hammond permalink
    June 2, 2017 8:56 am

    “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.”

    No, that’s not what they are saying. The issue is largely externalities, not tax.

    Take a simple example: I produce or consume something that brings me value. In doing so, I reduce the value of something you have. My costs of consumption should include in the price of consumption or production, compensation for your reduction in value.

    That is a standard economic (and moral) proposition.

    What Stern et al are claiming is that our consumption of fossil fuels creates costs for people, and thus there should be an increase in the price of such consumption to cover the costs being incurred as a result of their use. That’s fine in its way, but there are two big problems.

    First, are there actually any costs, and are the costs quoted net of the benefits (e.g. greening)? And second, if we are all consuming and we are all bearing the costs in a roughly equal way, then the whole thing is a wash – we tax everybody and give everybody back the tax.

    It is the latter point that drives a number of Alarmist claims – sea level rise for example, which clearly hurts some more than others, the climate wars claims and so on. This allows Alarmists to claim that it is not a wash and thus there should be redistribution.

    To beat back these claims, we have to clearly udnerstand the arguments being made.

    • June 2, 2017 9:36 am

      No, that’s not what they are saying. The issue is largely externalities, not tax.

      We know what they mean Tim.

      But I bet most of their readers don’t, and that of course is the intention

  11. June 2, 2017 11:28 am

    Is anyone still in doubt that it is foremost a giant money-grab?

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