OECD calls for the elimination of fossil fuel taxes

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Guest opinion by Alberto Zaragoza Comendador

There comes a point in your Internet life when you know what an article will be like before hitting the first dot. Not what it will be about, as that should be clear from the title, but specific things about the article’s content and structure. Perhaps you’re smart, perhaps you’re not; what matters is not your intelligence, but the fact that you have seen this movie before, and you remember the plot.

So when the press started issuing headlines like Report: fossil fuels receive $5.3 trillion in subsidies worldwide, I knew before clicking that:

a) The bulk of these ‘subsidies’ are not in fact money anybody in the fossil fuel business receives, whether in the consumer side or the production side, but untaxed negative externalities.

The number is simply too ludicrous to be made up of what we have traditionally known as subsidies. Thus, what the IMF is really saying is that fossil fuels cause a few trillion

Again before clicking, you know that the report is going to suffer from the irresolvable problem inherent to all externality studies: nobody knows how to calculate them. Even in the largely-unsettled field of climate science, specialists have been able to ‘agree’ on an equilibrium climate sensitivity ranging from 0.6C to 6C; virtually all the recent estimates fall between 1C and 3C. If the field of externality analysis was making any progress, you’d see a similar whittling away as outliers get discarded and academics converge on a series of ‘consensus’ estimates – but this isn’t happening. Is the social cost of CO2 $1,500 a ton, $1 a ton, or negative? Are we even taking into account all estimates? 100 years? 200 years? What is the discount rate for things that may in fact never happen? Assuming that we keep burning fossil fuels, how long into the future do you make the calculation? The issues even affect the underlying science (epidemiology, environmental impacts and so on). Are particulate matter emissions from diesel engines killing people or not? Are trans fats bad for you or are they fine?

The high political and financial stakes involved in any cost calculation and the endless, thoroughly entangled confounding factors conspire to make any estimate of ‘total costs’ essentially impossible. Sure, costs for US involvement in the Gulf War have to include the many billion spent caring for soldiers affected by Gulf War Syndrome – too bad the UK government concluded this syndrome does not exist.

Of course it doesn’t stop there. The moment you set your eyes on the actual IMF report and its associated press release you realize the authors jumped several more sharks. For example: they included several hundred billion in ‘subsidies’ as the untaxed negative externalities of… transportation. So if while driving you kill your neighbor’s dog and have to fork out $5,000 in compensation that’s considered a ‘fossil fuel subsidy’, never mind the fact that the money comes out of your own pocket and car repair is covered by your insurance (which you are already paying for), not to mention that (am I stating the obvious here) electric cars also kill dogs.

There’s healthcare costs which aren’t covered either by the culprit or the insurer, as well, but again these are largely private and the authors seem to have totally ignored that. The authors also rip out a page from the anti-car playbook and blame fossil fuels for congestion. Gee, I wonder who is ‘paying’ for the ‘costs’ of congestion – other than drivers and riders themselves!

While the IMF’s press release is short on caveats, the report covers its back:

Disclaimer: This Working Paper should not be reported as representing the views of the IMF. [Bolded in the original] The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate’

You know, it’s an IMF report when we want to have a headline. But in case when it turns out to be a load of rubbish, it will in fact be only the authors’ opinions, who were just trying to start a conversation.

There’s much, much more nonsense in the IMF paper. However, at one point I decided not to bother anymore because…

b) The report’s authors completely ignored positive externalities.

Hold your horses. It turns out the paragraphs above were unnecessary, as the IMF committed the same mistake as 95% of big externality analyses out there – discarding this report by intuition would have saved me a couple hours.

We may all agree that ‘externality’ is just fancy academic-speak for consequence. We may also agree that everything, absolutely every single thing you could find or do in this world has consequences.

An hour spent writing an article in front of the computer is an hour not spent reading a novel or playing football or working your biceps or strolling around the park or staring at the wall. Donuts may cause obesity, yes, but so do computers. And obesity, as about fourteen million peer-reviewed papers have shown, has healthcare costs (estimates of its cost range from – ok, you get the point). Computers are also obviously used to facilitate terrorist attacks, frauds, and mischief of all sorts. By providing healthcare to those who spend then hours of their every day playing League of Legends, aren’t we implicitly subsidizing these people and their gadgets at the expense of the rest of society? Shouldn’t we have some sort of computer tax, or perhaps more generally a gadget tax, to account for the untaxed negative externalities of electronics use? Somebody actually beat me to this idea.

To most readers, the idea of a computer tax to fight obesity and terrorist attacks may sound absurd from the get-go. Yes, computers can be used for bad stuff and can have negative consequences; the same can be said of every activity or item. What matters is not whether one activity has negative consequences, but whether on the net it leaves us better off or not. And yet, this is the very common sense that the authors of the IMF report forgot.

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If I consider the negative externalities of working for a year as a missionary in Kenya, and ignore all the benefits accruing to both myself and others, of course I will discard this idea (missionary tax, anyone?). If I look at the costs of jogging, in terms of lost time and injuries, I also have to think at the advantages in terms of calories burnt and steam blown off. If you’re thinking about getting a college degree, and simply fail to take into account the increased earnings and enriching life experience that people who go there usually get – well, if we did so colleges would be empty.

To consider only the costs and negative consequences, in any activity, is pure tomfoolery. That the IMF report did so invalidates it completely. I may still take a look at it in the future, if I happen to have a weekend with nothing else to do. Readers are also encouraged to take a look, if only for the fun of debunking yet another clueless paper. But it’s not worth a serious discussion.

Please notice that one can look at only one kind of externalities (positive, negative, or a subset) and still do worthy research. For example, here’s an estimate of the impact of CO2 on food production. The author was very upfront about what he was measuring, and did not attempt to estimate an ‘overall’ cost of CO2. The IMF’s fault is that it didn’t make clear, at any point in the report, that it was in fact excluding positive externalities. Before I showed that the word ‘positive’ didn’t appear at all, but in fact ‘negative’ was written only once; the authors simply assumed that externality equals negativity. So they didn’t consider stuff like warzone hospitals running on diesel and intrepid explorers saved by fossil-fuelled machines and gasoline-burning sports. Indeed, by assigning the cost of transportation externalities to fossil fuels, the authors are basically saying that without those fuels our transportation system would not exist. Well, now try to imagine a world without ambulances, fire trucks and helicopters to get a sense of how much we owe fossil fuels.

So the IMF report debunked itself, but what about the other estimates of fossil fuel subsidies?

Enter the OECD (Organisation for Economic Co-operation and Development)

A couple weeks ago I saw this headline and immediately knew something was off. The article states that the 34 OECD nations, plus the BRIICS, spend up to $200 billion a year subsidizing fossil fuels. Just intuitively, I knew that it was impossible for OECD to spend anywhere near that much, so I dug a bit deeper.

I must praise the OECD for actually disclosing how much of this money comes from OECD countries, as opposed to ‘emerging’ economies, in the very press release. Then again, instead of hiding behind a disclaimer the OECD endorses the results and even threw a mini-conference to announce their publication, so they understandably want to avoid tarnishing their reputation by publishing IMF-level balderdash.

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So the bulk of these ‘subsidies’ are in fact coming from Brazil, Russia, India, Indonesia, China and South Africa. Anti-fossil fuel activists usually try to stir up a bit of white guilt in their overwhelmingly Western audience by lumping all these ‘subsidies’ in one Big Bad Blob, as if their readers were somehow responsible for what goes on in India. And who are we to tell Indians what to do with their money, by the way?

I couldn’t find these numbers in the report itself, but it seems that OECD subsidies are in fact a bit over $60 billion, while total subsidies exceed $160 billion. (The PDF is unfortunately for-pay only, and I’m still not done reading the web version, but you don’t need to read it all to reach the conclusions I arrived at in this article).

Now, I’m not an expert in energy subsidies in the BRIICS region, but for OECD the $65 billion figure still seemed off. The US probably accounts for about half of fossil fuel consumption in this bloc, and EIA estimates yearly subsidies of $1 billion for coal, $2.3 billion for hydrocarbons, and $3 billion so that low-income people can heat their homes i.e. LIHEAP (page 16). That was in 2013, mind you; the OECD was instead talking about 2014, when average prices for all fossil fuels were considerably lower. There’s also $3 billion in ‘end use’ subsidies that probably include some fossil fuels, but then LIHEAP also includes electricity.

Apart from these subsidies there are of course a series of tax loopholes or incentives, which generally affect all manufacturers and extractive industries, from lithium miners to solar panel makers; the main ones are accelerated depreciation and the domestic production tax abatement. I’ll admit to being a bit ignorant here, as the issue involves not just the value of these subsidies but whether they should be considered subsidies at all. And since a lot has been written about US subsidies already, and by people who this better than me, I figured I could contribute something by zeroing in on my home country, Spain. What, exactly is the OECD counting as a subsidy?

It does not mean what you think it means

If I’m going to buy chocolate and I find that the milky one is cheaper than the composition, because the government has decided that this product shouldn’t collect value-added tax, well, whether that’s a ‘subsidy’ is at least open to debate.

So before calculating subsidies you have to know taxes. In Spain, as is the norm in Europe, hydrocarbons get hit first with an excise tax and then with the VAT (which is applied over the inflated, after-hydrocarbon-tax price). For the year 2014, the Impuesto Especial de Hidrocarburos was:

  • 330€ per thousand liters (diesel)
  • 400€ per thousand liters (gasoline)

There are other rates for kerosene and different types of gasoline and so on, plus a further tax charged by our ‘regions’ (Comunidades Autónomas), but let’s not get bogged down in details (here are a ton if that’s your thing). As stated before, both diesel and gasoline pay the standard VAT rate, i.e. 21%, on top of this. Of course not all products pay this rate; for example, I teach English for a living and my students don’t pay VAT at all – I’m subsidized like crazy.

So let’s see how this plays out in the real world. Assuming average oil prices of $80 over 2014, with average EUR/USD exchange rate of 1.2, that would mean in 2014 oil cost us in Europe €66.67/barrel. As there are 15€ of refining/transportation costs for gasoline and diesel; that would leave a pre-tax price of €81.67/barrel, or €0.51/liter.

This chart sums everything up:

Fuel Oil price per barrel ($) Oil price (€) Refined price (€) Refined price (€) (after hydrocarbon tax) Refined price (€) (after VAT)
Gasoline 80/barrel 66.67/barrel 0.51/l 0.91/l 1.101
Diesel 80/barrel 66.67/barrel 0.51/l 0.84/l 1.016/

I used assumed prices because there are different benchmarks for oil and its derived products, so it would take a lot more effort to get the ‘real’ price, and a difference of a few cents per liter between estimations and real prices doesn’t really matter.

Alright, so nearly half of diesel’s cost (and over half of gasoline’s) comes from taxes. Let’s exclude the portion of VAT applied to the ‘normal’ price (51 cents per liter), as we can argue that this is the tax paid for videogames and toilet paper; that happens to be 10.7 cents. We’re left with 39.9 cents of taxes for diesel (39.3% of retail price) and 48.4 cents for gasoline (43.9% of retail). Remember, this includes both the hydrocarbon tax itself, and the portion of VAT that exists only because of the hydrocarbon tax.

On the face of it it’s hard to see how the OECD could see any ‘subsidies’ here.

You’ve seen this movie before, so you know what’s coming: the OECD managed to find subsidized fossil fuels in my country. They do this because they consider it a ‘subsidy’ when a fuel pays a reduced hydrocarbon tax, even if said fuel still pays VAT.

Really.

Don’t take my word for it, click here. There are two categories of subsidies:

  • Budgetary transfer: this is actual money coming out of the government’s coffers. It has problems of its own, but I’ll deal with it later. In Spain it mostly exclusively means money for coal producers. In 2014 it accounted for €414 million.
  • Tax expenditures: a spectacularly misnamed category that actually counts foregone tax revenue. In 2014 it made up two thirds of overall subsidies, or €817 million.

 

And what are these tax expenditures tax cuts? Well let’s see:

  • Fuel tax exemption: well, as the name says some activities do not pay Impuesto de Hidrocarburos. However, the fuel these people buy is not exempt from VAT.
  • Fuel tax reduction: farmers and miners pay less hydrocarbon tax than others. Huh? They still pay some hydrocarbon tax plus standard VAT, and the OECD finds several hundred million worth of ‘subsidies’ here?
  • Fuel tax partial refund: another provision for farmers and perhaps a few more sectors. Remember when I said diesel pays 330 euros per liter? Well this gives them back 78 euros per liter, so of course OECD has to count it as a subsidy.

Now, I’m not sure if the ‘fuel tax partial refund’ effectively wipes out the hydrocarbon tax for farmers; you have to apply for it anyway, i.e. it’s not like you get the discount at the pump. But even if it does, I have to emphasize this again: farming diesel still pays VAT. Right now it costs €0.784/l, or €124.6/barrel, or $110/barrel; Brent right now is $48!

So you see why I didn’t want to pay 16€ for the PDF.

Now, to be fair to the OECD, at least they published a detailed database online so that the world could see their calculations. But that’s not an excuse for propaganda work.

And to be clear, the organization admits as much when explaining its methodology:

‘The OECD inventory addresses a broader range of measures, including many that do not reduce consumer prices below world levels. It uses a broad concept of support that encompasses direct budgetary transfers and tax expenditures that provide a benefit or preference for fossil-fuel production or consumption, either in absolute terms or relative to other activities or products.’

They just forgot to say what are the ‘other products’ they are comparing fossil fuels with… and those turn out to be other fossil fuels.

You couldn’t make this up.

Look, OECD, if you really want to get a big figure you can say that, because diesel pays less tax than gasoline, all of diesel is subsidized. You can squeeze another billion that way – imagine the returns if repeated across all the countries in the study.

Just to make it totally clear that this is in fact how they arrived at the $60 billion figure for OECD countries (and $160 billion when including BRIICS), here is the report itself, in page 35:

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And page 39:

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Budgetary transfers: real subsidies not for fossil fuels

What about the ‘real’ money my government spends subsidizing the Earth’s destruction? Well, one has to admit that there are real subsidies – all of them for coal producers. Many Spanish, myself included, consider these total nonsense and in fact the subsidies will be cut off when coal mining ends (probably before 2020). There’s a long backstory I don’t want to bore you with, but let me just say that if coal production subsidies have survived for decades it’s because of certain political sectors.

(The power plants would burn coal anyway, and will do so when the subsidies end. The aim of the subsidies has been not to prioritize coal per se, but to defend coal from Asturias over that of Australia).

If you click in the database, it turns out that by far the biggest category of ‘budget transfer’ is ‘Inherited liabilities due to coal mining’, which costs €353 million. And what is that?

This measure provides certain non-profit organizations — along with coal miners and their families — with budgetary transfers to help address the social and technical costs that stem from the decline of the coal-mining sector in Spain.

I can’t even…

Alright, so subsidies intended to ease people away from coal production are classified by the OECD as coal subsidies.

I’m not positive what is included in these €353 million; it may be miner pensions, or infrastructure for coal-mining regions or whatever. In any case, it is not intended to help coal as a fuel. If anything, its result will be the opposite; a case can be made that without this money, coal-mining regions would be even more insistent on keeping this activity alive, and as a result would receive more subsidies for actual production.

You know what’s funny: if you ask a government economist, he may tell you that these ‘liabilities’ (miner pensions and so on) are in fact an asset, and these ‘subsidies’ are a boon to government. Because, you know, the multiplier effect – for every dollar we spend on X, we get $1.60 or something like that. So to kickstart the economy we may have to subsidize these coal liabilities a bit more.

Leaving snark aside, the two categories that actually constitute subsidies to producers (there no consumer-side subsidies) are:

  • Operating aid to Hunosa / coal producers: this accounts for €53 million
  • Adjustment aid to coal producers: this adds another €8 million

That’s it: a big frigging $61 million. Quite a pullback from the €1.2 billion OECD reported!

I guess I could find a lot more problems and contradictions and sheer nonsense if I looked into the other countries’ databases; readers can of course check it and communicate any notable findings, either in the comments section, by email or on twitter. I will of course acknowledge any such find if/when a new article comes up. But my time is limited, and further debunking of a garbage study isn’t a priority.

What about the IEA?

This organization will publish its World Energy Outlook, which includes data on subsidies for the previous year, in November. I could use the 2013 version and see how their figures for the BRIICS stack up compared to OECD data… but since better data will be available in a month, it’s not worth the hassle.

One of the most curious things is that the much-quoted $548 billion in ‘fossil fuel subsidies’ for 2013 includes $130 billion spent on… wait for it… electricity.

How to put an end to fossil fuel subsidies

Perhaps the message the OECD is really sending has been lost. After all, this is the situation they are criticizing:

Fuel Pre-hydrocarbon tax price Hydrocarbon tax Post-hydrocarbon tax price Subsidy
Diesel €0.51/l €0.33/l €0.84/l €0.00/l
Special diesel €0.51/ €0.10/l €0.61/l €0.23/l

I assumed that ‘special diesel’ pays 100€ per thousand litres. Of course this special fuel does not exist; there are instead different fuels we call ‘diesel’ and different tax rates for ships, farming and so. But this simplification can help illustrate the message.

Perhaps what the OECD is suggesting is something like this:

Fuel Pre-hydrocarbon tax price Hydrocarbon tax Post-hydrocarbon tax price Subsidy
Diesel €0.51/l €0.00/l €0.51/l €0.00/l
Special diesel €0.51/ €0.00/l €0.51/l €0.00/l

So it looks like, by wiping out the hydrocarbon tax, we also wipe out subsidies. Now that is a subsidy cut I want to see!

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82 thoughts on “OECD calls for the elimination of fossil fuel taxes

  1. My complements on a clear and well written piece on the ‘fossil fuel subsidy’ farce. As for IMF policy, Christine Lagarde was just quoted yesterday in a speech at the IMF/WB annual meeting in Lima Peru advocating for global carbon taxes to solve global warming–while also raising alarm about the slowing global economy. She’s the IMF boss, and demonstrates that she is a politician with a legal background, and NOT an economist. Raising taxes harms economic growth. Laffer curve.

    • There may be a partial exception as when the personal tax rates were much higher in the early 1980’s (US) by up to 70%. But because there were deductions for re-investment that should have actually encouraged new business growth.

    • She is a french socialist. Look at France and Hollande. To make the country grow he increased taxes on employment, fuel, social security (by reducing retirement age after sakozy had increased it). Socialist all have magic money trees in their gardens. When you take money out of the economy for your favourite spend of the year the economy grows? Who’d a thunk ?

      • “The problem with socialism is that you eventually run out of other people’s money.”
        Margaret Thatcher

      • “The problem with socialism is that you eventually run out of other people’s money.”

        Yes. There is also another way to fail, which is running out of other people’s money by making their relative income too small to be useful any more.

        That is, socialism is making people unhappy by taxing your skills (the more skilled you are, the more you earn and the more you pay taxes, the Swedish socialism), communism takes all you produce and kills all motivation to do anything (Soviet Union), and laissez-faire makes most of people so poor the whole economy dies (many development countries with no will or ability to collect taxes from anybody who has high income).

        The balance between taxing and not taxing is somewhere. Many European countries have too high taxes, but those whose taxation does not work well, like Greece, are not doing well either).

  2. It is fascinating, in the same way that a slow motion train wreck or ship sinking is fascinating, to watch the climate obsessed deconstruct every aspect of tax, law, science, truth, history, finance, ethics, and reality.

  3. “too bad the UK government concluded this syndrome does not exist.”

    Well if a government concluded it doesn’t exist, it surely must not, yes?

    I was in the Navy and floating around in the Gulf on the USS Independence during Desert Storm and Desert Shield. I personally saw people become very ill after receiving rounds of anthrax shots. I don’t know if the shots had anything to do with it, but *something* made them sick.

  4. Sheesh, what is it about lovely fossil fuels that is getting all these “global” organisations so riled? The economists are attacking as described above, the international law is threatening to make dissent illegal, the UN is threatening to demonise and finger-point any country that does not toe the line, regime change cannot be far away.

    My theory: fossil fuels come from large free enterprise corporations, which annoys the hell out of some people, long may it continue.

    • This is all about the economy of consultants.

      All of these IMF types, at one time or another, become consultants.

      The consulting industry is getting subsidies from the UN and the IPCC, and they return the favor by supplying, not just jobs but, high paying jobs.

      • You didn’t think that the large capital transfers called out for by the UN and IPCC would actually go to help the poor, did you ?

    • Well written. It’s written with enough sharp turns that it gives the feel that was intended concerning fossil fuel cost accounting. Thanks

      Follow the money concerning who is making money on the asset or idea. You can also learn alot by who are the early investors and first exiters.

      “This” isn’t about the environment. Never was. This is about who wanted more of a cut of fossil fuel wealth but wasnt getting it. More pie please. CAGW pushers divested of fossils, trumped up CO2 badness, waged a war on coal and watched the resource prices get smacked and got in early on the alt energy giveaways.

      It’s a pendulum.

      Now that coal is depressed the leading investors into CAGW are moving into coal (Soros). I don’t have asset allocations for alt energy investment. If I had them I wouldn’t be surprised to see a leadership exit.

      The end game is that the one who wanted more pie but was denied, finally gets some.

      CAGW was the smoke, the mirror.
      Grabbing more of pie (asset value) was what your not supposed to see until they have enough pie.

      Not enough bananas. Too many monkeys. The alpha monkey gets distracted by some sacrificial lower ranking monkeys (the smoke) while the up in coming monkeys go take some bananas. Based on rhesus monkey behavoir.

    • Indeed, the very fact that OECD would organize a report, a database and a conference for the sole purpose of tracking fossil fuel subsidies is…weird. I mean, any objective person would look just intuitively know that these ‘subsidies’ are small relative to the economies involved, because OECD countries, generally speaking, don’t subsidize these fuels. Why would anybody spend these many resources researching this topic in particular?

      So it’s a perfect example of finding what you’re looking for, whether it’s there or not. I mean, after organizing all this circus, can you imagine the reaction if the researchers concluded that the whole OECD bloc ($40 trillion in GDP or so!) spends something like $10 billion a year subsidizing fossil fuels? 0.025% of GDP – wooo!

      Of course that would call the whole operation into question. They had to find more to justify themselves. And even the inflated $60 billion figure was not alarming enough so they had to lump it together with China et al and thus arrived at a figure ‘close’ to $200 billion.

      • Thanks for your good work and interesting information. Like others here, I find the leftist loonies amazing. Do they REALLY think they are being enlightened? Our wallets are certainly lightened by such silliness.

    • I state that anyone in the employ of state organizations and their collective organizations are socialist. They believe in, and profit from, greater state control of the riff-raff who do not. And why not, as they know better and the state is infallible.

    • It is a matter of leftist religion. They *hate* the fossil fuel industry and will use any way in hell to attack it. Remember the opposition to nuclear energy because it produced an unnatural element (plutonium)? Maybe we should look into the subsidies (tax forbearance) given to non-profit organizations. Let’s do away with this preference.

      • No, it’s not a matter of leftist religion. That’s you taking the bait. It’s a matter of reshuffling the money pile. More pie for those who are up and coming.

        They (message makers) throw the bait at you so that you shout at the wrong enemy. It’s a distraction.

        Leftist religion, rightist religion. Feel the distraction. Pay attention to that feeling. Don’t shrug off your instinct.

        The goal is to reshuffle the deck and create upfront opportunities for insiders to get more of the pie …. on all sides.

    • The bottom line is that a very large amount of money is spent on fossil fuels every day of the year. The UN/EU/US socialist/liberal leaders seek to get their hands on as much of that flow as possible without starting a shooting war.

      • Bulls eye.

        There are also second and third tier objectives involved.
        All related to wealth, who gets some and who doesnt.

        I’m not pointing out the obvious that most of the world’s pop thinks first tier nation pops have too much right ? And that within first tier nations there are others who think the same of groups above them ?

        The 35 and under flock of seagulls were educated to feel that poverty is their responsibility to fix … they are the children of the original war on poverty generation.
        They are doing what their parents couldn’t do. Righting the sins of the father and all that.

        Con men have tapped into the above belief.
        Obama Zombies. Good book. Think it’s about 6 or 7 years old now, but still good background reading of what’s being targeted emotionally.

      • Yup now you inspired me to elevate my plane.

        On a macro scale certain facts really matter. Wealth is currently and has been for 100s of years concentrated among Caucasians.
        The dewhitening (coloring of the world) is occurring. Plenty of stats in google.

        So what came first, the divestiture of Caucasians or the increasing colorization ?
        Gender wealth shifts are occurring also although somewhat slower.
        Does it matter ?

        Wealth is shifting.
        CAGW was created to help the shift.

        Perhaps in 50 years, books will be written about this period as the Wealth Realignment Era.

      • I think it depends on how quickly it happens or how painful it becomes (similar to the frog boil alluded here from time to time). Obviously they are showing you that they understand a large, quick shift in wealth was unacceptable.

        IF they can slowly institutionalize a redistribution by a 1000 cuts, the odds are they will achieve their goal. It’s brilliant to attach the hoax of CAGW to a measurable gas which reflects current wealth via consumption. Otherworldly smart to wield it through the UN.

        No way I could have ever come up with that scheme. While I think it’s corrupt, I can also admit it’s brilliant.

  5. Alberto Zaragoza Comendador mentions obesity.
    well, the CAGW mob saw obesity as an opportunity a long time ago.

    first, Egger with ABC Australia’s “highly-respected”, multi-award-winning broadcaster, Norman Swan:

    2007: ABC Health Report: Personal carbon trading to fight obesity
    Transcript
    In this morning’s edition of the Medical Journal of Australia, health, fitness and weight loss researcher Dr Garry Egger argues that one of the routes to weight loss may be to institute personal carbon trading…
    Norman Swan: So what do you suggest happens next, from the Australia card to the carbon card?
    Garry Egger: Yeah maybe. A carbon card wouldn’t be any different to a credit card and in fact the English looked at the prospects for fraud with such a card and found that it is no greater than….
    Norman Swan: Carbon fraud.
    Garry Egger: Carbon fraud exactly.
    Norman Swan: So fresher air and thinner abdomens.
    Garry Egger: Exactly and doesn’t it all make sense.
    Norman Swan: Makes sense indeed. That was Dr Garry Egger whose life is spent on lifestyle, he’s even a Professor of Lifestyle Medicine at the University of Southern Cross.
    http://www.abc.net.au/radionational/programs/healthreport/personal-carbon-trading-to-fight-obesity/3244660#transcript

    the full Egger:

    2007: Medical Journal of Australia: Personal carbon trading: a potential “stealth intervention” for obesity reduction?
    Author: Garry Egger
    Abstract
    •The obesity epidemic and global warming are linked through energy use.
    •A personal carbon trading scheme aimed at reducing fossil fuel usage could act as a “stealth intervention” for reducing obesity by increasing personal energy use.
    •Such a scheme would complement a corporate “cap and trade” system for carbon emissions, which should increase the relative price of processed, energy-dense foods.
    •The scheme would work by reducing global carbon emissions to a sustainable level (contraction), while offering potential for trade of emission rights between frugal and profligate users of non-renewable energy (convergence).
    •A key goal would be changed attitudes to conspicuous (and obesogenic) consumption…
    The proposal for individual carbon trading, first mooted by Aubrey Meyer of the Global Commons Institute in the United Kingdom in 1996 and expanded upon by others, stimulated interest in the development of a workable financial incentive system that provides equity and efficiency in reducing non-renewable energy use and greenhouse gas emissions…
    https://www.mja.com.au/journal/2007/187/3/personal-carbon-trading-potential-stealth-intervention-obesity-reduction

    • One of the most bizarre aspects of the whole anti-CO2 crusade is its anti-meat/fat tangent. Of course this reinforces the idea many skeptics have that CO2 is simply an excuse to pursue certain political/ideological goals.

      In this case, the environmental movement had long had a ‘vegetarian’ streak; even if being a vegetarian was not a condition to join the movement, it was at a minimum well seen. And now guess what… meat has a big CO2 fooprint!

      • Of course, vegetable matter decomposes to release the CO2 absorbed during its lifetime. So vegetarians are increasing their carbon footprint with every meal.

    • Think more simply.

      If you are obese and either poor or disenfranchised via minority status and can demonstrate that you live in a high CO2 emissions area you will get a check.

      Just take the word obese above and replace it with other things you don’t like. If you don’t like your house, your car, your clothing, your education, your health care, your whatever you can make as a bad thing for you, you will be able to tie it to getting a check.

      It’s a brilliant strategy.

  6. “Christine Lagarde was just quoted yesterday in a speech at the IMF/WB annual meeting in Lima Peru advocating for global carbon taxes to solve global warming–while also raising alarm about the slowing global economy……….Raising taxes harms economic growth. Laffer curve.”

    If we are talking about the IMF it should be the “laughter curve”.

  7. Please send this to the Parliamentary Librarian with the request it be made compulsory reading by all MPs who wish to retain their seat next time round. The real problem will be that the article would explain it to them but it won’t understand it for them.

  8. Here’s a thought.
    Here in the US the $/gal is on the pump and the tax is included. The receipt shows how many gallons x the price. The tax is not listed separately. To help make people more aware, list the taxes (Fed and State) separately. All that would need to be changed would be how the receipt is printed.

    • The math in Europe would be funny. Spain actually has below-average taxes; with the crude slump in many countries taxes now make up over 60% of retail gasoline price, and well over 50% for diesel.

    • I always thought that if a gas station had the “intestinal fortitude” to list the price without taxes at the road sign, with a separate sigh below stating “Taxes added at Pump”, that would raise some awareness. I wonder if it’s a law somewhere that the taxes MUST be included in the advertised fuel price. I really don’t know of any product where the government taxes are mandated in the advertised price.

      Are there any business lawyers out there that can answer this? Is it mandated?

      • It probably is. I had an interesting conversation with a pump jockey while waiting in line. When there is a price change, they have to be very careful how they go about changing the price at the pump vs the signs by the road. When there is an increase, they can’t raise the actual price at the pump until all the road side signs are altered. Likewise when they lower the price, the price has to be lowered first before they change the signs. Also, they can’t change the prices more than once a day. This is in New Jersey, YMMV elsewhere.

  9. I made a mistake in the section ‘It does not mean what you think it means’

    ‘Right now it costs €0.784/l, or €124.6/barrel, or $110/barrel’

    The last number is wrong. I divided the euro price by 1.1, instead of multiplying it; the correct figure would be $137. Perhaps a mod can edit this.

    Still, my point was that there is in fact a huge gap between Brent (some $50/barrel) and farming diesel at the pump ($137/barrel), so the mistake actually understated this difference.

    • Alberto, RE your “Fuel tax reduction: farmers and miners pay less hydrocarbon tax than others. Huh? They still pay some hydrocarbon tax plus standard VAT, and the OECD finds several hundred million worth of ‘subsidies’ here?”

      I believe the farming / mining tax reduction (at least in the US) is mostly based on off-highway use. The original fuel taxes was to be held in the ‘Highway Trust Fund’ and use to create & maintain the road system. Stories of HTF miss management, raiding the fund for general use and not paying out to show a more balance budget is a scary story.

      Since tractors plowing fields and mine vehicles in the pits (high consumers of fuel) did not use the roads they were exempted a good portion of the road tax.

      • I had hear that about the US, yes; no reason for tractors to pay for highway use. However here the hydrocarbon tax is totally disconnected from infrastructure. In fact, pretty much every year this tax (and its associated VAT) bring in a lot more money than is spent on highways.

        The reduced rates for heating and farming diesel have more to do with politics, i.e. it’s harder to demonize tractors and boilers than SUVs.

  10. “In economics, an externality is the cost or benefit that affects a party who did not choose to incur that cost or benefit …” (Wiki).
    I don’t understand why the ‘externalities’ argument put up by the usual suspects is taken seriously. No-one is forced to use fossil fuels but everyone does because the proven and obvious benefits by far outweigh any possible negatives.
    It’s simply another tax-grab by big, bigger and biggest government.

    • They think petrol use causes harms (like air pollution) that are too diffuse to warrant lawsuits and indemnification (unlike to dog hitting): everybody choose to use gasoline because everybody is selfish and doesn’t account for the nasty side effects of gasoline use on everyone else.

      You can see these horrible, horrible externalities by comparing the standard of living with and without access to petrol and petrol based products…

      • It’s about reshuffling the deck. The winners are the ones who get in early on the new direction.

        When alt energy begins to fail and fossils make a resurgence, the geographic areas that are depressed because they invested in alt energy will take their turn to make a case for disparate impact.

        It’s a new paradigm for the pendulum.

  11. Brilliant post Alberto.

    Propaganda does not inevitably involve lying. More often is found in reports where the disadvantages are exaggerated and the advantages are hidden. That seems the case here and in many environmental reports. I bet you the report does not mention anything about CO2 fertilization.

    By the way, about the car and the dog. In Spain, a few years ago if you kill your neighbour dog while driving your car, it was your neighbour fault, The dog should be restrained properly, or it may cause an accident either by hitting against your car or if you try to dodge it and end up crashing somewhere else, or even worse running over somebody. Then the authorities changed the law, and now it is your fault. Not a good move.

    • “Propaganda does not inevitably involve lying. More often is found in reports where the disadvantages are exaggerated and the advantages are hidden.”

      In the venacular it’s called “half truthing”. Obfuscation is the sister. It’s all part of the family of spin. If you deliver it with an emotionally hooking story it suspends the critical part of the brain and activates the emotional part. The brain struggles to be critical of someone you take a liking too.

      The Catholic Church (and I’m not picking on them) has the Jesuits. They are the sworn defenders of the papacy and also its leaders’ tutors. They also happen to be masters of teaching rhetoric.

  12. Also: sorry about the €/$ mixup.

    To be clear: all figures expressed in millions, billions and trillions are dollars. The euro only appears when discussing prices per barrel or per liter (and not for all such figures).

  13. Subsidies at best distort everything and end up as a financial entanglement as illustrated by this article. These articles are intended for the weak minded who will grasp that something is good or bad,( depending on the intention of the publisher), but be quite unable to understand what is really going on.

    These are the sheep in Orwell’s Animal Farm.

    Congrats to this publisher on its attempt to describe reality.

    Cheers

    Roger
    http://www.thedemiseofchristchurch.com

  14. Economics as currently practised by our Federal Governments and Climatology use the same math.
    Somehow the old hobgoblins have become investments and debt is savings.

    • The subsidy is the DIFFERENCE in taxes between different fuels.

      Now, I could understand that a partial or total VAT exemption meets the stretched definition of subsidy. That’s what happens for example with natural gas in the UK – iirc it pays a 5% VAT instead of the standard 20%. It’s also similar to the tax credit electric cars get in the US: rather than actually giving people money, the federal government allows EV buyers to reduce their income taxes by $7,500 (assuming you pay that much in the first place).

      (Of course, how many Britons want to raise the VAT on gas is another matter!)

      But this is not what I was talking about in the article. In Spain, where no fuels that I know of are VAT-exempt, OECD instead counted the reduced hydrocarbon tax that some kinds of fuel paid with respect to other fuels – even though all these fuels pay the standard VAT plus the hydrocarbon tax.

      The last two tables show that, if one were to simply eliminate the hydrocarbon tax (and thus eliminate any ‘difference’ in how fuels are taxed), then according to OECD subsidies would disappear as well.

      • Thanks Alberto.
        Kind of all hurts my brain.
        Are we done with smoke and mirrors yet ?

        Where do I go to get my check ?

  15. We may all agree that ‘externality’ is just fancy academic-speak for consequence.

    I have one better.
    Externality: An asserted harm which has no proven existence in objective reality. Various schemes to further assert an entity needs to pay real money for said asserted externality is also known as Rent Seeking.
    As Opposed: Any harm which can be measured, or at least perceived, is always given a specific name, such as pollution, illness, death. In these cases, “externality” is never invoked.

    • The harm does not have to be overt. The current buzz phrase is disparate. Makes the case for “institutional harm”. Originally intended as a result of the civil rights acts, it lay dormant for decades. It needed to be setup with proper data to back up claims. Westchester County in NY State is the first county government test case. There are others brewing via colluding NGOs.

      Ya know, the GOP knows about this too. They are too quiet. They have to chance to put a fork in it because of congressional majority but aren’t doing so.

      Seismic change.

  16. “I figured I could contribute something by zeroing in on my home country, Spain.”

    France idem!

  17. Everybody now knows that the fossil fuel industry is a net beneficiary of subsidies, derived from the state.
    Which explains countries which are burdened by the need to produce large quantities of fossil fuels, such as Saudi Arabia or Norway, are dirt poor and heavily indebted.
    Whereas countries that are not burdened with the need to subsidize fossil fuels, such as Bhutan or Malawi have become so amazingly rich.
    Wait a minute…something is wrong!!

  18. “If I’m going to buy chocolate and I find that the milky one is cheaper than the composition, ”

    Typo? Was “competition” meant?

  19. One thing you Americans should learn about the UK Govt from someone who has watched what they do for 30 years is this: any statement they issued is not issued with truth in mind, rather than entrenched interests being served.

    If the UK Government issue a report saying that Gulf War Syndrome does not exist, it means that officials in Whitehall have identified a multibillion dollar law suit which could potentially arise if the government admitted that it DID exist. So they script a whitewashing, stonewalling, propaganda piece and use all the media forces that the state can muster to make out that it is all rigorous, dispassionate science. Even if they know full well that it isn’t.

    We’ve all seen it before. The Government knew for over a decade that the men they had arrested for various 1970s IRA bombings on mainland Britain were not those who carried out the attacks, primarily as those who had done them were alive and free and telling folks off the record that they had done it. The evidence was forged by government scientists to justify a conviction by a bent judge and crooked media organisations reported it as ‘a triumph for British justice’. It was only a triumph is British ‘justice’ is defined not by truth but by a victory for the Establishment. Which in this case was: ‘putting anyone behind bars to convince the supine British Public that we are beating the terrorists hands down’……

    The recent Chilcot ‘enquiry’, spending tens of millions of tax payer pounds, has enriched Establishment lawyers very greatly and has still not issued a final report as printing a truthful one would savage relationships with THE HILL, even as most American citizens would applaud from the bottom of their hearts the honesty by which Establishment figures were coruscated, exposed as lying to Parliament, betraying the UK Cabinet and covering it all up for years afterwards. Most cynical UK observers do not expect the report to be published, as its aim is to enrich the Establishment whilst not hanging the guilty. All UK Public Enquiries are primarily for the enrichment of the Establishment, which is why so many are established and so few report anything which changes anything. It is rather like a controlling husband treating his wife worse and worse and then claiming that if she stabs him that she is a psychopath and he is a wounded caring husband. Quite frankly, most people would side with the long-suffering wife and cheer from the rafters as she described in court the years of suffering which finally caused her to treat the scumbag the way he deserved. Problem is, you will never be hired to Chair an Public Enquiry unless it is 100% certain that you will cover everything up that the Establishment wants covering up. It’s the old conundrum of how you hold the lawmakers to account…….

    I”m sure things are similar in the USA, but I don’t live there and so don’t have the knowledge gained from 30 years of watching the US Establishment at play……..hopefully you do it better, although your 9/11 official enquiries may not reach the standards required…..

  20. What matters is not whether one activity has negative consequences, but whether on the net it leaves us better off or not.

    Ding.

  21. ” the same can be said of every activity or item. What matters is not whether one activity has negative consequences, but whether on the net it leaves us better off or not.”

    Thank you for this alone.

    Now, about guns?

  22. The erudition of the WUWT family appears to be stymied by the concept of government subsidies. Back when Ted Kennedy was running for President, he gave an interview to Politics Today. He explained the reasoning behind all this in a thousand words or so (one of his more lucid moments).

    Whose imprints are on the currency? The government’s.
    Therefore, we must render unto the government that which ere be the government’s. Thus, ALL money rightly belongs to the government. Any money that the government allows an individual or corporation to use, therefore, is a subsidy, which includes anything left in a paycheck, dividends, or retained earnings. So, in the simple concept of fairness, it is the government’s duty to redistribute the money to those who are worthy. Obama has also discussed this from time to time.

    I hope this helps.

  23. In the article you point out: “untaxed negative externalities of… transportation. So if while driving you kill your neighbor’s dog and have to fork out $5,000 in compensation that’s considered a ‘fossil fuel subsidy’”

    I think the word “untaxed” is key. There’s no problem for the OECD in you having to pay that $5k compensation. What they dislike is the fact that it’s not taxed. So what they would like is for such payments to have a special fossil fuel tax applied to them. VAT doesn’t count, and obviously it wouldn’t be applied to compensation for dogs killed by electric vehicles even if their electricity is generated by gas/oil/coal. I wonder what the rate should be? And should there be a discounted rate for hybrids? Or should it be based on CO2 emissions like other vehicle taxes? I can see jobs for hundreds of tax accountants here…

    • Shall we also consider the large untaxed food industry, the one that pays NO taxes in many states? Should they not pay a health tax? They are just as responsible for the obesity, health, etc. as the Oil industry is for the pollution in the air. How about the manufactures of just about EVERYTHING you use? Are they not responsible for the accumulation of the broken, unrepaired, discarded items YOU no longer want that pollute the ground water, create toxins that are released into the air – in proportional quantities – Just because you are to lazy, in to big a hurry to repair that broken item (or just want to keep up with the Jones’s? And that is just three that I can think of in 3 minutes, there are a million examples that are receiving “Subsidies” when you measure subsidies the way those trying to demean technological improvement. I think anyone reading this can think of 100 ways that people are healthier, live longer, live better, enjoy a better life with their family and 1,000nds of lives saved daily because of CHEAP Coal generated electricity. Shut off ALL electricity for a month in any city, country and start counting the deaths. I think you will discover that the more advanced the country is the greater the number of deaths in that country will be. How many supposed, phony, imaginary “Subsidies” does those lives saved by burning even the dirtiest, polluting, coal cancel out what the lives saved are worth?
      [@Peter – This was not and is not meant to be toward you, @Peter, just my thoughts after reading your remarks, and felt that it followed your line of thinking.]

  24. This article ties in with the one today on JoNova – http://joannenova.com.au/2015/10/factories-in-china-produce-four-times-as-much-co2-as-western-factories/
    The USA, EU and Au has placed environmental restrictions on Coal that in essence forced all manufacturing to go off shore to China. Not only does this NOT reduce the amount of CO2 it increase the amount in many ways. Assuming that China production facilities were as efficient as in the USA and EU you now have the CO2 from shipping – no small amount. Next, The energy producing facilities burning coal in China presently are not as efficient as they are in the western nations. Then you need to add in the fact that China presently does not have 1/4 or even 1/3 of the restrictions on the amount of pollutants that is dumped into the atmosphere as the western nations. None of this is addressed in any of the climate conferences, agreements or even by the Environmental proponents trying to save the world.
    Look at the JoNova article. The aluminum surrounding that those cheap solar panels made in Chins produces 7 times as much pollution as if it was made in the west! Idiotic beyond comprehension!
    Every week I read of another ZERO CO2 producing Nuclear power plant (NPP) shut down by the Environmentalists “Saving The World” and thus forcing the use of natural gas – the Clean CO2. In the EU they are now burning more brown coal than they did in WWII again more CO2.
    So Environmentalists of the world PLEASE explain to me how reducing the amount of CO2 in the developing countries by sending all of the manufacturing to third world production like countries and shutting down NPPs is going to save the world? This is like a person trying to put out the fire that is burning down their house with a garden hose while they pay someone else to pour gasoline on the back side of the house. Unbelievable.

    • Senseless.

      When simple sense doesn’t occur it appears to be for one of two reasons. Either party is stupid or there is another agenda at play. If the agenda is about money or power it serves as a strategic advantage if your competitor doesn’t know what your objective is till its too late.

      In terms of stupidity, the brain does an awesome job in trying to make you aware of things you should pay attention too. That instinct keeps you alive. When we ignore that instinct we suffer. The brain is also subject to incredible bias and so you have to work hard to keep it straight.

      When a competitior is capable of either keeping your brain preoccupied or sufficiently confused he gains a big advantage.

      Watch monkeys do this in packs.

      Follow the money and always question authority. Sit back, see if you can compete. If not, see where else you can flourish.

    • They also deleted a comment which simply pointed to this same article in my blog, to see if they would accept it from a ‘non-denier’ site. Deleted as well. So that’s Clean Technica for you.

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