Mythical subsidies. The energy case.

© August 8, 2017. Michel de Rougemont

Following the decarbonisation goals set forth in the Paris climate agreement of December 2015, appeals are made to suppress energy subsidies linked to the use of fossil fuels, and to increase consumption taxes massively as an incentive to burn less of them.

According to « experts » of the International Monetary Fund (IMF) in a report published last December[1], energy is the beneficiary of subsidies amounting to $4’900 billion in 2013, or 6.5% of the global GDP. On its part, the International Energy Agency (EIA)[2] estimates them at $532 billion for that same year? The not so small 920% difference stems from considerations given to so-called negative externalities associated with the use of energy.

An externality is the non-intended consequence of a human action. For example, besides of lightening the streets, lamp-posts offer a rather attractive externality to dogs: they can conveniently pee at them. Depending on the value system in place in a society, externalities may be judged positive, bringing unexpected additional benefits, or negative, engendering a burden of additional costs or disadvantages. In our example, and since dogs are no free-acting economic agents, only the negative aspects of their urinary production should be contemplated.

According to the economist Pigou, taxes should be levied to compensate for the costs of negative externalities in such a way that an incentive would be created to refrain from the primary activity. In our example, a dog tax would tend to limit the demand for dogs, thus reducing the amount of urine of canine origin irresponsibly dispersed on the city streets. To remain fiscal neutral, the revenues obtained from such tax should be wisely spent to pay for the incurred damages if they are clearly identifiable, or merely redistributed; for example, the city council could decide to modify the lamp-posts so that they would function also as play-tools for children, alas without guarantee that they would remain dog-piss free.

A subsidy is a political act that consists in making a tangible allowance to someone with the objective to foster a practice, or to relieve a burden put upon her shoulder. Important is the word tangible, it must change the profit and loss situation of the recipient, as well as that of the state agency providing it. A subsidy is funded by taxation, either from the general fiscal revenues, from dedicated levies or excises, or from the indebtment of the state on the financial markets.

While subsidies are intended to provide access to cheap energy to the consumers, taxes raise its price and, if better alternatives are available, play a deterrent role to its use; on the contrary, if no economically attractive alternative is available, the only effect of raising taxes will be an artificial, state generated inflation, a price hike that will be transmitted down to the consumers and the taxpayers. But the state will have captured one bit more of the common wealth, and gained some additional arbitrary power.

Subsidies or taxes, both are market distorting measures that need profound political justification.

The EIA lists 41 countries that allegedly provide a consumption subsidy to their consumers who pay a price for energy that is inferior to the cost of its supply. Most of them are large energy producers where cheap local prices may also be understood as a dividend distribution from their export surpluses. All other countries in the World levy a substantial tax on energy, from the mere VAT to special excises to provide funds to the general budget of the state, or for specific tasks, e.g. maintaining a transportation infrastructure.

In its report, the IMF denominates the foregone taxes reported by the EIA as “pre-tax subsidies”. In addition, the IMF compounds “post-tax subsidies” represented by environmental and social externalities, such as air pollution by fine particulates, SOx, NOx, and O3, that have a negative impact on public health, emissions of carbon dioxide contributing to the warming of the climate and expected damages thereof, and traffic accidents with personal and social consequences. Their evaluated costs are in the form of present and future premature deaths, illnesses, material damages, social disturbances (migrations), loss of productivity, and further inconveniences. With very small exceptions concerning electrical power generation, all these negative externalities are attributed to fossil fuels.

Positive externalities are not considered at all, although they should be subtracted from the alleged costs. For example, almost all the World GDP could not be generated without energy; with just muscle power we would still be at medieval levels, whatever our intelligence would be. If energy consuming traffic is associated with social costs of accidents, aren’t there also social benefits in traveling and meeting people in other places, in being able to support all kinds of businesses, or enjoying gatherings among friends and family? Also, as a higher carbon dioxide concentration in the atmosphere clearly favours stronger plant growth, huge agronomic benefits must be subtracted from damages allegedly due to climate change. The IMF report is therefore highly biased, negatively.

Externality estimates, and therefore the Pigou theory itself, are good candidates for falsification. This will be the subject of another chapter and is not part of the present article.

What is at stake here are two pretentions, both utterly wrong!

First, EIA and IMF assume that any tax that is not perceived shall be construed as a subsidy. Yet, the state does not tax domestic work being provided by spouses in their household; is it therefore a subsidy for families? The state does not perceive any duty for the import of books and music records; is it a cultural subsidy? The state does not tax anymore the consumption of common salt; is it a subsidy to promote hypertension? Nobody is taxed for having built a horrible building, it is a subsidy for mediocrity? Thus, as we all live in national states with complex fiscal schemes and more or less generous subvention regimes, we are supposed to be all the recipients of a multitude of virtual subsidies. How rich we are!

And second, to allegedly promote a cleaner and safer environment, the IMF is proposing new fiscal policies based on a “fully efficient energy price”, calling it benignly “subsidy reform”. This means that the alleged $4’900 billion, or 6.5% of World GDP, should be perceived by a new kind of taxation regime. And therefore, all countries would need to profoundly revisit their current fiscal policies, one of their most sensitive political issues. In the OECD, the government spending represents between 29% (Ireland) and 57% (France, Finland) of GDP. Thus, changing the perception basis for one tenth to one quart of their fiscal revenues would be a daring endeavour; and it should be done in a neutral way, reducing taxation here and raising it there. To undertake such reform, politicians should be reassured that the intended effects would bear fruits. However, nobody can honestly provide this reassurance but climate modellers whose work is partial, approximate, and without validation proof. At best, with current Paris scenario and National Determined Contribution (NDC, or intended carbon reduction commitments), the expected warming would be contained by a mere 0.1 or 0.2 °C at the end of the century, far away from the claimed 2 °C apocalyptic threshold. Local air pollution has been quite successfully reduced by appropriate regulation; thus, the associated externalities have already been internalized; and asking for a new tax would mean introducing double counting. Regions and cities not having yet achieved acceptable air pollution standards know well how to address the problem, by improving combustion engines and installing scrubbers, not by adding taxes. They just have to do it, in line with their economic development. Also, politicians should be made aware that any intent to reduce negative externalities may put positive ones at risk.

Alarmist will continue to be disingenuous and to instil a bad conscience to people making their best to live well in a well-kept environment. But it is a political no-go to ask for blunt and immediate fiscal changes while modest corrective impact on negative externalities may, or not, be projected into a faraway future. Therefore, we can expect, with delight, that the political consensus will not go beyond symbolic gestures.

Rendez-vous cet automne à Paris, à l’invitation du climato-crédule ou du malin climato-hypocrite Macron.

clip_image004About the author:

Michel de Rougemont, chemical engineer, Dr sc tech, is an independant consultant.
In his activities in fine chemicals and agriculture, he is confronted, without fearing them, to various environmental and safety challenges.

His book ‘Réarmer la raison’ is on sale at Amazon (in French only)
He maintains a blog
blog.mr-int.ch, as well as a web site dedicated to the climate climate.mr.int.ch
E-mail: michel.de.rougemont@mr-int.ch


[1] http://www.imf.org/en/Publications/WP/Issues/2016/12/31/How-Large-Are-Global-Energy-Subsidies-42940

[2] http://www.worldenergyoutlook.org/resources/energysubsidies/

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54 thoughts on “Mythical subsidies. The energy case.

  1. First, EIA and IMF assume that any tax that is not perceived shall be construed as a subsidy.

    Basically just a take on imputed rent and a way to generate more revenue (translation: steal more from the productive sectors to fund the unproductive ones). Oddly enough that imputed tax is never applied to progressive tax codes (imagine what we could raise if every dollar was taxed at the highest marginal rate! /sarc)…

    Regardless, I think Coase is a better conceptual model, but you’re still left with the problem of quantitatively determining the net cost of externalities which I think is nearly impossible.

  2. de Rougemont gives what I think is an European view of subsidies used by the local greens, which is only sometimes used in the US. Most of what US greens call subsidies is ordinary business expenses written off against income.
    It is a common practice by the green blob to do mock cost-benefit analysis, and only count costs, as he notes.

    • That sounds about right to me. I must say though, the European Greens’ way of thinking makes me wonder if they have any grasp of economics or accounting. Every time I see examples of their arguments, I’m reminded of a bookseller who advised a young man looking for books on philosophy, “Stay away from Danish and Russian philosophers. Their winters are long, cold, and dark. They have entirely too much time to think.”

      • ..the European Greens’ way of thinking makes me wonder if they have any grasp of economics or accounting.

        No.

  3. The leftist goal: cut energy, and cut industry.

    For a long time the left has been against increased energy use regardless of any supposed negative effects. Their advocacy of prohibitively expensive and impractical “renewables” is just a cover for their true goal of radically reducing the use of energy itself. From John Holdren’s bizarre 1975 essay on the perils of energy itself:

    “The United States is threatened far more by the hazards of too much energy, too soon, than by the hazards of too little energy, too late.” -John Holdren (Obama’s Science Czar), 1975

    It wasn’t that energy in general posed any particular hazard. They just don’t like energy, period. In reality, for many, underneath it all is guilt and this desire: “We have wished, we ecofreaks, for a disaster… to bomb us into the stone age, where we might live like Indians.” -Stewart Brand, Whole Earth Catalogue

    Put another way: “Isn’t the only hope for the planet that the industrialized civilizations collapse? Isn’t it our responsibility to bring that about?” -ex UNEP Director Marice Strong

    That has been their goal for decades, and it has nothing to do with global warming. The global warming threat that the left contrived allowed them to push what they wanted from the start:

    “We’ve got to ride the global warming issue. Even if the theory of global warming is wrong, we will be doing the right thing.” -leftist Senator Tim Wirth, 1993

    Yet, in reality this “right thing to do” would be EXTREMELY destructive. The 2009 Cap & Trade bill that passed the US House mandated an 83% cut in CO2. This would have been detrimental to our economy and quality of life, and indeed would have pushed millions into poverty and death. The would be the real stark catastrophe.

    And in the meantime, in many parts of the world the leftist loons have succeeded to some degree in their quest to make energy use unattractive (and that is leading to degrees de-inudstrialization as well). Places with the greatest taxes on conventional energy and the greatest subsidies and mandates for fanciful wind and solar have by far the highest energy costs:

  4. Quote

    According to « experts » of the International Monetary Fund (IMF) in a report

    Unquote

    It starts with a lie, written by a person claiming to be employed by the IMF to foster the impression that it is an IMF report, then goes downhill from there.

    Its simple, fossil fuels are the most heavily taxed at all levels, not subsidised.

  5. Dear poster.

    Next time run your copy past me. Rather than google translate.

    I split my sides laughing at :

    “besides of lightening the streets”

    and that was just in the early part.

    However content was excellent.

    • He also wrote about tax being perceived rather than received. However I would not criticise him because even when I still remembered most of the French that I had learnt I would have been utterly incapable of writing in that language as well as the author wrote in English.

      • We have an engineer in our office who is a definite ESL. Sometimes he asks me for help with grammar or finding the right word to express his thoughts, always apologetically. I keep telling him, “Alex, your English is far better than my Russian.”

  6. Probably not the least awful thing about “externalities” is when the bad assumptions interact with other assumptions in different legislation.

    Thus, an old ship using a high-sulfur fuel doesn’t have so much in the way of bad externalities when it is belching smoke in the middle of the North Atlantic Ocean during a December storm. But the EU fancies to tax it on the externalities of when it is running its engines as it approaches port in Rotterdam alongside a hundred similar ships on a hot calm day in midsummer.

    Also, the pollution the ship releases is also quickly diluted and degraded away to nothingness in the vast cold waters of the North Atlantic. And on land NOx emissions from coal combustion have good externalities for plant growth once diluted and rained out of the atmosphere. But many environmental regulations are written to specifically forbid dilution as an acceptable form of disposal….another case of the baseless linear no-threshold model assumptions being employed to pervert the calculations in the direction desired. (Yes, such an approach may be justified in many cases of, say, heavy metal contamination where the toxin is not biodegradable, but I have experienced many instances of overzealous regulations where the best disposal method for a conscientious person/company really is just dilution and let natures microbes chew it all up into CO2, water, and other harmless inorganics.)

    Putting a meaningful cost on externalities is thus often just a case of pick a number your sponsor requires for the case in hand and select the assumption to produce the desired number. I wonder how often somebody actually calculates the “externalities” of foolish regulations that drives corporate pollution overseas to lower environmental standards than domestically? I would like to see Scott Pruitt get bigly on the EPA’s case.

    • Michael,

      Small correction: seaships must change to light fuel (somewhat heavier than regular diesel oil) when approaching ports, because of the sulphur content and particulates of using heavy fuel. Moreover, there are heavy fines if the exhaust shows too much visible smoke (soot/particulates).

      NOx is a different point and always high due to the very high compression factor used (40-45:1) for maximum yield, that means higher temperatures and thus more NOx. As far as I have read somewhere, modern passenger ships also have particulate filters and de-NOx catalysts…

      • “seaships must change to light fuel (somewhat heavier than regular diesel oil) when approaching ports, because of the sulphur content and particulates of using heavy fuel. Moreover, there are heavy fines if the exhaust shows too much visible smoke (soot/particulates).”

        I read where some new cruise ships are going to be powered using Natural Gas. I wonder how much of a trend that is going to be in future shipbuilding.

      • TA
        For sure a change to LNG as fuel is a significant change.
        It is coming – at least in Europe. There are, or will soon be, bunker stations for LNG in many ports.
        It is cleaner. No problem with that.
        It does increase costs – and I fear may cause accidents during bunkering when it is near-universal, as precautions for dealing with and handling a fuel at about -158C may not be properly applied in minimum wage, restricted competency, crews [economic pressure on ship owners to reduce costs – regardless of impacts on safe operation, sadly].
        Yeah, the ISM Code should reduce that for sure, but most ROs – recognised organisations (classification societies) – have now been captured by the major ship owners, so may not – necessarily (!) – ensure good standards.
        Look at the state of small ships carrying bulk cargoes.
        Again – market share over standards. I think it has been evident since, perhaps, 1997.
        Possibly before then.

        Auto

  7. There is a tremendous amount of obfuscating waffle in this article – what on earth is this writer trying to say? The points made could be written in about one paragraph.

    There are also some totally unfounded observations re.

    1) ‘Also, as a higher carbon dioxide concentration in the atmosphere clearly favours stronger plant growth, huge agronomic benefits must be subtracted from damages allegedly due to climate change’ – what a load of rubbish. How about mentioning increased ocean acidification instead as CO2 is absorbed into the oceans.

    2) ‘However, nobody can honestly provide this reassurance but climate modellers whose work is partial, approximate, and without validation proof.’ – another totally unfounded allegation and only goes to show the writer is not being objective in this article as they are promoting a climate sceptic agenda in this statement.

    3) ‘Regions and cities not having yet achieved acceptable air pollution standards know well how to address the problem, by improving combustion engines and installing scrubbers, not by adding taxes. They just have to do it, in line with their economic development.’ – this statement is absolutely ridiculous. The pollution situation is far more complex than this. Yes, let’s put a scrubber on every street corner. How ridiculous is this?

    I suggest that instead of reading a climate-sceptic funded article like this one (independent consultant – come off it), you read something by Michael Bloomberg, a highly successful US businessman and Mayor of New York who knows all about the dangers of global heating and what lies in store for his country:

    “Globally, cities account for about 70% of carbon emissions. That makes them the bulk of the problem, but they are also the source of the most effective solutions. In New York City, we were able to reduce emissions by 19% in just six years, while also outpacing the nation in job growth. Mayors around the world, from across the political spectrum, are increasing their use of clean energy sources, such as wind and solar, which is now often cheaper than fossil fuels.”

    https://www.theguardian.com/commentisfree/2017/aug/11/donald-trump-american-paris-climate-targets-michael-bloomberg?CMP=share_btn_tw

      • Jesus, another anti-capitalist red Commie. Perhaps it’s more that he is a hugely successful American businessman who just so happens to believe in the dangers of global heating.

    • ivankinsman,

      1. That more CO2 increases plant yield is proven in thousands of daily field tests: greenhouse growers apply 1000 ppmv CO2 and more to enhance plant growth in their greenhouses. In nature more CO2 enhances water management of the plants (less skin mouths, thus less water loss), with as result that (semi)deserts are greening. Confirmed by satellites looking for the amount of chlorophyl on earth…

      Increased ocean acidification? 0.1 pH unit in 150 years time. Peanuts compared to a full pH unit between poles and equator and a full pH unit change over the course of a day within coral reefs and much more in the neighbourhood of river discharges… Corals grow near CO2 belching fumaroles…

      2. Do you know of one climate model that accurately showed the non-increase of temperature 2001-2014 before the Karlisation?

      3. Pollution control must be at the source of the pollution, no matter if that is a coal fired power station or a car exhaust. The point is that CO2 is not pollution in any sense, as it has more benefits than drawbacks, is not toxic up to very high levels and helps plant growth for which CO2 levels are currently historical low, even dangerously low during glacial periods…

      Further The Guardian as main source of your belief in global warming/climate change? Wow…

      • That’s your own opinion man. Show me a independent peer to peer reviewed article in an established scientific journal like ‘Nature’ and I might just believe you.

      • Why bother showing you peer reviewed articles? From your comments here, I don’t see that you have either the inclination or the ability to understand what’s written in them. You have to rely on other people to tell you what the articles say, and if they misrepresent it, you’d never know.

        For example, several months ago the silly politicians and journalists were peddling a silly article, ostensibly alleging that oxygen loss in in the oceans from global warming was already becoming noticeable in some parts of the world. When I read the paper and sifted through the technical disclosure, I found that the paper did not say what the journalists thought it did. It’s conclusion was based on the results of a single model, that didn’t accurately simulate real-world ocean conditions. The paper’s authors admitted this at the end and said that the model’s results could therefore not be trusted, but requested that the paper be published nonetheless because – get this – the pictures looked scary.

        The article was published, the press release accompanying it mentioned nothing about the fact that the paper’s authors admitted that the results could not be trusted. The journalists reporting the paper misrepresented its conclusions even further by asserting that it found that oxygen loss was already noticeable; the paper’s conclusion, being based on a theoretical model, only stated that if the real oceans behaved as the model did, in some parts oxygen loss might already be considered statistically significant.

        This, unfortunately is representative of the vast majority of the peer-reviewed gibberish that passes for climate science these days. Most all of it is based on hypothetical computer models, where if you delve into the papers you find numerous examples of unfounded assumptions, that the authors make no attempt to validate, but if not true, would eviscerate every conclusion of the paper.

        Journalists are too lazy, uneducated, and terminally gullible to realize that they are being taken for a ride. Are you?

      • Ivan:

        1. https://www.nasa.gov/feature/goddard/2016/carbon-dioxide-fertilization-greening-earth
        Right from Nature Climate Change, peer reviewed and all…
        And for daily use of 1000 ppmv and more in greenhouses here one of many examples:
        http://www.omafra.gov.on.ca/english/crops/facts/00-077.htm

        About low pH in a coral reef:
        https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4640615/
        most studies of naturally low-pH reefs, including CO2 vents in Papua New Guinea (PNG) and Japan, freshwater seeps in Mexico, and upwelling regions of the eastern tropical Pacific, have yielded no evidence to support either scenario.
        Most negative scenario outcomes were obtained in laboratories by adding a strong acid (not CO2!) to a seawater solution in a very short period and looking at the reaction of the corals… Not at all comparable to the much slower changes due to more CO2…
        Further, CO2 levels during the Cretaceous era where several thousands of ppmv, still corals and coralline planton thrived as never before, as can be seen in the white cliffs of Dover and most of the South-West England and French Normandy underground…

        2. Have a look at the performance of the models that the IPCC used:
        https://wattsupwiththat.com/2013/06/06/climate-modeling-epic-fail-spencer-the-day-of-reckoning-has-arrived/
        Of course, not peer-reviewed, as neither Nature nor Sciene will ever publish the epic failure of near all climate models…

    • Also, as a higher carbon dioxide concentration in the atmosphere clearly favours stronger plant growth, huge agronomic benefits must be subtracted from damages allegedly due to climate change’ – what a load of rubbish.

      What planet are you living on Ivan?

    • “3) ‘Regions and cities not having yet achieved acceptable air pollution standards know well how to address the problem, by improving combustion engines and installing scrubbers, not by adding taxes. They just have to do it, in line with their economic development.’ – this statement is absolutely ridiculous. The pollution situation is far more complex than this. Yes, let’s put a scrubber on every street corner.”

      He is talking, correctly might I add, about putting scrubbers on the sources of the pollution not your ridiculous idea that he wants scrubbers to clean ambient air.

      Moreover the main point is that changing the alleged energy subsidies is full of unintended consequences passed over by many.

      I thought that was very well done

  8. What proportion of renewable energy is in the form of subsidies? If this was scaled up to equate to the global demand for energy, what would the cost to the taxpayers amount to?
    Without doing the figures I can guess that even if the specious claims for fossil fuel subsidy was true it would still be cheaper than renewable energy.
    And it ALL comes down to cost.

  9. So that I burn less fossil fuels I want the government to come and supply me with an all electric car and a solar energy system to charge up the car with and to supply my other energy needs so that I can take my home off grid if I want. The government needs to supply everything for free because I cannot afford to pay anything for it and everything on my property I own. As long as it does not cost me any moeny, I am willing to do my part.

  10. “An externality is the non-intended consequence of a human action.”

    That’s not an accurate definition. An externality is a cost born by someone who does not get the benefit from an economic action, or a benefit received by a person that does not pay a cost for an economic action. Whether it’s intended or not is irrelevant. An operator of a windmill may know in advance that operating the windmill will kill the birds from a neighboring wildlife refuge, creating an externality. Similarly, the developers of a luxury resort may know that it will drive up business for neighboring restaurants that do not pay for building the resort, Nonetheless, each of these are externalities.

    • That’s not an accurate definition. An externality is a cost born by someone who does not get the benefit from an economic action, or a benefit received by a person that does not pay a cost for an economic action.

      Excellent concept. Sums up what cAGW is to the taxpayers.

  11. Sorry Michel. While coming from a country wiped clean by the Weichselian glaciation not so long ago, most of mankind live on millions of years of accumulated defecation and decomposition a.k.a. sedimentation. Yet, I find myself unable to first identify and then overcome the problem of dog piss on a lamp-post. At least beyond the point of trying to imagine a b1tch at it. Never happened when I’m around.

  12. Low cost and accessible energy is the one of the avenues that enable people to be free. Those in power do not like freedom for the masses because it threatens their position. As I heard last night during an interview on Tucker Carlson (with Mark Steyn substituting), “the King doesn’t like it when the hamsters get off the wheel and out of the cage.”

  13. Excellent essay Michel.

    You make an important point about externalities.

    If the negative mythical) externalities of fossil fuels are accounted for as indirect subsidies, then the positive (real) externalities of fossil fuels have to be accounted for as indirect negative subsidies.

  14. Nice summary of what is wrong with the uneconomic analysis of subsidies for fossil fuels by the humophobic environmental religionists. Perhaps they would like to discuss the massive “subsidies” inherent in any system that supports fertility, health and longevity of the human species, since this ultimately leads to consumption of resources that should be reserved for Gaia and noone else. The kernel of this debate seems to be the division between those who want to promote and increase the wellbeing of human civilization (which of course means responsibility looking after the environment that supports us) and those who want to find everyway possible to define humans as a blight on Earth.

  15. Oil companies pay huge up-front fees. First they lease the land. Then they have to pay a gross fee, then income tax. They don’t get “subsidized”. North Sea oil for example was charged a super-tax of 50% BEFORE corp income tax. Expenses could only be taken for the same oil field, not for others. Outrageous.
    As far as externalities, every human activity has externalities. The positive benefits of having a heated home and electricity and transportation are simply enormous and are never counted in these types of analyses. Regions of the world cut off by topography from easy transportation end up poor.

  16. Consider a poor village in Africa or Asia. People are constantly cutting trees for fuel wood which when burned is very polluting, especially indoors where it causes lung disease. They strip out anything edible including eating monkeys and endangered species. They practice shifting agriculture which causes massive erosion. And so on. The best thing you could do to reduce environmental impacts would be to give them electricity. THAT is where these externality calculations are totally wrong.

  17. This graph of real time power production in the PNW (Pacific Northwest) may help some visualize the huge benefits compared to the insignificant ‘externalities’.
    https://transmission.bpa.gov/business/operations/wind/baltwg.aspx

    The red line is the regional demand for electricity. A huge benefit.

    The blue constant line is 1200 MWe coming from the nuclear power plant, Columbia Generating Station. Since the plant is located on the Hanford Reservation, and decommissioning and spent fuel storage is paid for; there are no externalities.

    The largest externality if the 1200 MWe in a 24 hour period would be the 100 car coal train bring coal from the Powder River region of Wyoming. This would be part of the brown line.

    If wind was producing 4000 MWe for 24 hours, this would be 4 less trains of coal. Since the wind farms are located in wheat fields, there are no externalities.

    The point is that externalities are insignificant when compared to benefits.

  18. The numerous activists studies showing the pseudo subsidies received by the fossil fuel industries exemplifies the logic and critical thinking skills of the AGW scientists and activists.

    Amazing that those individuals who lack the basic elementary skills to recognize a phantom subsidy, somehow have the superior intellectual skills to ascertain the validity of climate science.

  19. Michel: Excellent article. I abhor the deception created – especially in the mainstream media – when the absence of a Pigou tax is called a subsidy. The US has no taxes that were established using Pigou methodology. None. We have sin taxes on alcohol and tobacco, but they have not been selected on the basis of an economic analysis of the negative externalities caused by use of these products.

    I especially like the fact that the beneficial aspects of releasing CO2 are not included in the Pigou tax.

    Pigou taxes are great in theory – but they are impractical because the negatives externalities associated with many products are impossible to calculate in an unambiguous manner. The choices that need to be made in the process of doing such calculations belong in the realm of politics, not economics.

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