Guest Post by Willis Eschenbach
There’s a new study out in the Proceeding of the National Academy of Sciences that’s being hyped by phys dot org under the headline
Fossil fuel companies get $62B a year in implicit subsidies, economist reports
Whenever I hear about “implicit subsidies”, “social costs”, or any accounting of “externalities”, my bad number detector starts ringing like crazy. The problem is that just about anything can qualify as an “implicit subsidy” or one of its equally vague cousins.
The study, paywalled of course, is called “The producer benefits of implicit fossil fuel subsidies in the United States”, by Matthew Kotchen.
So … just what qualifies as an “implicit subsidy” to the eeevil fossil fuel companies?
Like any good liberal, he starts with their favorite scare tactic, “climate change”. So let me digress for a moment about that.
For forty years or so, people have been warning us about what they call a “climate emergency”. The Oxford Dictionary defines “emergency”as “a serious, unexpected, and often dangerous situation requiring immediate action.” Since we’ve been breathlessly warned about this “emergency” for forty years with absolutely no sign of it happening, it’s hardly “unexpected”. And since we’ve seen neither “serious” nor “dangerous” results from this situation, at this point describing it as an emergency is a sick joke. And that’s just the start of why calling our current situation a “climate crisis” or “climate emergency” is just Chicken Little screaming that the sky is falling.
Here’s the current situation. Crop yields continue to rise.
There is no increase in the rate of sea-level rise. The number of extreme weather events like hurricanes, floods, and droughts are unchanged and have been with us forever. Deaths from climate-related disasters are at an all-time low.
The additional CO2 has led to about a 10% increase in “greening”, the amount of new plant life covering the planet. The 300-year-long gradual warming has been generally good for humans, animals, and plants alike. Cold kills. Today, people from rich to poor are generally better fed, better clothed, better housed, and more insulated from the endless historically common vagaries of the weather than at any time in history … where’s the problem?
So I’m calling bullshi@t on the entire climate “emergency” nonsense. Where is the “emergency”? We’ve seen about a degree and a half of warming since 1800. I’ve asked over and over again for someone, anyone, to point out any catastrophic negative effects of that warming … crickets …
But I digress. Kotchen figures that the companies are getting a subsidy for each ton of CO2 emitted. The burning of fossil fuels emits about 37 gigatons of carbon dioxide per year. So right there is a huge, totally invisible, and totally meaningless “implicit subsidy”.
Now, I can’t figure out just how Kotchen calculated the amount of the “climate subsidy”. He says he’s using the Nordhaus estimate of the so-called “social cost of carbon”, which is $31 per ton of CO2 emitted. But that would make the “implicit subsidy” $1.15 trillion dollars, and his total is only a “mere” $62 billion. However, he’s an economist, so he’s covered up his work with thick layers of confusulation and bafflegab, like dividing the “implicit climate subsidy” into separate amounts for “foreign climate” and “domestic climate”, and I had neither the time nor the inclination to unravel the idea that “climate” has domestic and foreign versions. Suffice it to say that the majority of the “implicit subsidy” is imaginary climate costs.
So what else counts as an “implicit subsidy” on Kotchen’s planet? Well … pollution. People only very rarely have “pollution” listed on their death certificates, so economists have complex computer models to spit out numbers of “years of life lost” to pollution. Of course, much `like with climate models, no one knows if the numbers have any relationship to reality, and no two of them give the same answer. So I rather suspect that Kotchen just grabbed the biggest numbers and used them.
From there, however, it gets truly bizarre. The other three items that are treated as an “implicit subsidy” are the imputed costs of traffic congestion, automobile accidents, and road damage.
Seriously. Road damage.
My guess is, you never thought that when your local transportation authority used your tax money to fix potholes, it was an “implicit subsidy” to Exxon Mobil …
The logic seems to run like this. If we didn’t have fossil fuels, we wouldn’t have costs for pothole repair, car crashes, and traffic congestion … so all of the costs of those are an “implicity subsidy” to BP, Exxon, Total, and the other fossil fuel companies. Of course, without fossil fuels we wouldn’t have cars either … but somehow that doesn’t matter.
Now me, I simply can’t follow that logic. For example, if we didn’t have fossil fuels we also wouldn’t have costs for road, bridges and traffic lights … so why isn’t Kotchen counting the costs of those in the “implicit subsidy”?
You could argue that he’s only looking at the cost of damages (potholes, crashes) and inconveniences (congested roads) caused by cars … but if that’s the case, what about the damages due to airplanes, trains, and ships? The good ship Ever Given has already caused tens of billions of dollars in costs due to the “congestion” at the Suez Canal … why is that kind of cost not counted? Plus there’s the fact that maritime transport already contributes to between 2% to 3% of global greenhouse gas emissions. Ships that have to go around Africa instead of going through the Suez Canal, and which are traveling faster to make up for lost time, means additional fuel consumption and emissions. But it isn’t the first time this kind of thing happened, and such previous ship, train, and airport costs and additional emissions are not counted. Runways and railroad lines have to be fixed just like roads, but those costs are not counted. Why?
(I suppose I shouldn’t be giving Kotchen any ideas or he’ll soon be up to $124 billion in “implicit subsides” instead of his current $62 billion dollar claim …)
This points out my biggest problem with such “external costs”, “social costs”, “externalities”, and “implicit subsidies”—the people like Kotchen who are pulling these numbers out of their fundamental orifices can pick and choose anything that they want to include or exclude.
And here’s the second-biggest problem for me—the underlying logic makes no sense. Look, they count car congestion and car accidents as an “implicit subsidy” to Exxon because it’s damage caused by the use of fossil fuel …
But if that’s the case, shouldn’t we count the cost of the damage done by computers through computer online crime as an “implicit subsidy” to the computer manufacturers?
Or how about the electrocutions and the house fires caused by people having substandard electric house wiring? Are they an “implicit subsidy” to Pacific Gas and Electric, my local power utility? If the fossil fuel folks get charged with “implicit subsidies” for providing energy for cars, shouldn’t PG&E get charged with “implicit subsidies” for providing energy for houses?
Now, you could argue that the fixing of potholes is an “implicit subsidy” because it’s paid by taxes … but at the end of the day, the government has no money, so the cost always lands on some subset of the population, just like the costs of house fires, traffic congestion, and computer crime.
And finally, he goes on in great detail as to just which energy companies are getting what amount of subsidies … whereas in fact, they aren’t the ones burning the fossil fuels. If a man sells me a knife, isn’t what I do with that knife on me and not on the Gerber Knife Company? Whether I use it to carve up a Thanksgiving turkey or to carve up my neighbor is on me, not on the knife supplier. Similarly, if I buy some oil, whether I use it to make nylon for ski jackets or burn it to make electricity is on me, not on Exxon or BP … so why should the “implicit subsidies” be claimed to go to the oil companies? I want my implicit oil subsidy, and I want it now!
My conclusion? I see no logical reason that fixing potholes is an “implicit subsidy” to those terrible people whose only crime is supplying the energy that has lifted the world out of misery, sickness and poverty.
I am compelled to add, however, that the amount of bumwad that passes peer-review and is published in “scientific” journals these days is a crime against science …
Here, it was lovely and warm, so the good lady and I went to Occidental, our local “Census Designated Place”. It’s not a town, no town council, no mayor, so that’s what it’s called. As always I was bemused by the statue made by an amazing local sculptor named Patrick Amiot. It stands in the middle of Occidental as a tribute to the closest person we ever had to a mayor, a man everyone called “Ranger Rick”. Here he is, in his perennial San Francisco Giants hat.
Occidental is a wonderful place, a village from another time. Nearly a decade ago now, I wrote about Ranger Rick here.
Businesses in Occidental are starting to return to life, and if Governor Newsom ever gets up off his dead asterisk and ends the lockdown and mask lunacy, we’ll be good again. When the Governor of Texas did that 26 days ago, Joe Biden called it “Neanderthal thinking” and said it risked “thousands of more deaths” … but here’s how it has actually worked out.
You say that 26 days is not enough time for new deaths to show up? OK, here’s new cases …
As you can see, the lifting of the mask and lockdown mandates haven’t made the slightest bit of difference in Texas.
This is the first pandemic in history where we’ve quarantined the healthy instead of the sick, and it has been a total unqualified disaster. As I posted up a year and a week ago, End The American Lockdown Now. Our response to this pandemic has been totally insane.
And while that wonderful woman and I are waiting for sanity to return, we had tacos outdoors at the Mexican restaurant and enjoyed people-watching on a beautiful spring day.
Best of the sunshine to all, keep laughing or you’ll cry,
w.
The Usual: When you comment, please quote the exact words you are discussing, so we can all be clear on what and who you are talking about.
Democrats are the party of death, their policies are already responsible for the depletion of millions of human life years from the planet and are scaling up such policies dramatically.
How can you say that, Jon?
The DemoKKKrats would NEVER lock infected Covid patients in nursing homes with the most susceptible; just as they would never politicize a serious viral epidemic by banning possible treatments and locking down the young and healthy! Only the evil Repubicans would stoop to that level! Just look at how well the governors of NY, NJ, CA and Michigan handled their states!
If someone was trying to design a virus to cripple the US economy and our urban centers, they couldn’t have come up with a much better plan! I’m just glad that this occurred now before the gain-of-function experiments that Fauxi help finance came up with something really deadly!
Some nincompoop climate liar website listed the subsidies to oil companies made by the Canadian government. It contained all the fuel cost for the Canadian military, and diesel fuel for northern communities, and fuel for civil service vehicles. It was pointed out that most people involved would consider these to be necessary expenses, not subsidies. Foregone taxes that the authors thought should be 50% but aren’t, made up another section of their “report”.
Australia has 42.3 c per litre excise on fuel plus other taxes. That is about US$1.30 a gallon. This is for fixing up potholes.
As for lockdowns. They work IF you’re an island and you have a small number of infected people. It also depends on the strain.
“The ring of negative cases tells us the risk of infection in more casual contacts is extremely low.
Like the recent local lockdowns in Queensland and WA, Victoria’s lockdown does not seem to have contributed to containment. As it turned out, the outbreak was effectively controlled by rapid case detection, testing, tracing and isolation by the time lockdown came into effect.”
I wonder how much tax money is subsidizing pseudoscience and the environmental terror industry?
Last I checked, my local electrical power, gas, water, and waste removal utilities were all coercive monopolies operated under government planning agencies by unelected officials not subject to any single layer of elected oversight. How does that add up?
From the Tax Foundation:
“Between 1981 and 2008, the oil industry paid more than $388 billion to the federal and state governments in corporate income taxes, but they paid almost twice that amount, $683 billion, to foreign governments.”
That’s a cool trillion + over 27 years only considering US based industry… but wait, there is more!
“Excise tax collections have grown steadily. Between 1981 and 2008, $1.1 trillion was collected in excise and sales taxes on petroleum products.”
That’s over another trillion during the same period. But that ain’t all. The US industry alone has a payroll of about 12 Billion a year or over 300 Billion in today’s dollars over the 27 years (and employees pay ~ (say 20% in taxes) or 60 Billion during this period. Finally, there is an economic ‘multiplier’ effect of an industry. Petroleum gets lumped in with mining, the group having a a multiplier of 3.5 × the economy generated by the industry itself – so several more cool trillions that would not be there without the industry. This lost economy and tax revenue streams aren’t considered in the GND replacement costs and the tax streams for wind and solar are hugely negative.
For example, if we didn’t have fossil fuels we also wouldn’t have costs for road, bridges and traffic lights … so why isn’t Kotchen counting the costs of those in the “implicit subsidy”? – article
Why? Because it is an “inconvenient truth” that what pays for it is taxes, not his ninnyhammered ideas, that’s why. It’s denial of reality, and reality is too painful for people like that to be able to face it.
Lovely sunny Spring day here in my kingdom. I’m getting out with my camera tomorrow. Should be birds (geese, herons, egrets, songbirds, etc.) everywhere.
It’s amazing what the media does with the word “subsidy”. Technically, it means money given by a government, so that would negate all the examples in the article by the NAS. Fossil fuels receive mostly tax breaks or depreciation allowance, which aren’t subsidies. The media erroneously combines the 2 under “subsidy” so as to say “look-fossil fuels receive subsidies, too”, and fool the general populace. With a tax break you keep more of what was yours to begin with-with a subsidy you’re handed money. There is no way those two are even close to the same thing, hence that’s where the media steps in. Another thing the study astonishingly misses is that taxes are a negative subsidy, and the fossil fuel industry is one of the most heavily taxed commodities in the world. A gallon of gas is sold, and immediately 18 cents goes right back to the federal government and an average of about 23 cents goes right back to the state of sale. So about 60-90 billion dollars a year goes right back to federal and state coffers, and that’s not counting aviation taxes.
And another point:
The ironic thing is, is that renewable energy will require the fossil fuel industry to be government subsidized eventually.
Warren Buffett group pitching $8 billion fix for Texas grid
http://www.elpasoinc.com/news/texas/warren-buffett-group-pitching-8-billion-fix-for-texas-grid/article_d0a8d840-8fe6-11eb-b4fa-ff7546aabd5c.html
What investor is going to invest in a fossil fuel plant, that will need to continuously go offline or produce at half-capacity to accommodate intermittent renewables? (In addition to the reputational hit you will take as a fossil fuel polluter.) Yet, to stabilize the grid these plants will be required. And to do that you are going to need some entity (ie the government) to guarantee you a profit.
The IMF’s study a few years back used the same logic, including examples like the cost of fixing potholes. It also counted the discounts on gasoline that oil-producing countries give to their citizens as subsidies to big oil, and also the subsidies the U.S. gives to low-income citizens who use heating oil.
I really like how Willis Eschenbach is able to pick apart a couple of huge absurdities in today’s Narrative — that is, how fuel subsidies that aren’t subsidies just *aren’t*, and how CoVid “good for us” tyranny just *isn’t*. Now, lately, we have the amazingly alarming discovery that viruses *mutate* (i.e., they develop more “variants” over time).
When we all get done choking on the “variants are going to kill us” idea, do we finally get an end to the CoVid scare, at least?
It’s going to be great fun figuring out how to pay for roads, public transit, and other infrastructure when everyone’s driving EVs.
Right now most of it comes from fossil fuel and ICE excise taxes so other taxes (electricity? income tax?) will have to be increased.
When it starts to happen, people with common sense will start to catch on to the lie that fossil fuels are being subsidized in any way. It’s literally quite the opposite.
There is an implicit subsidy in the fact that the authorities allow you to live and impose all of the huge burdens we impose by simply living. In other words, they begrudge our lives and everything salted to them.
Study this for a minute and tell me that subsidies for wind and solar are useful
The production from solar is so small it is difficult to see in the chart; much like trying to find actual benefits from Unreliables when economics and the environment are considered!
Plenty of examples in history of regions experiencing periods of a few degree colder .. leads to famine, death & less construction. Look at regions that experienced changes to climate (not from AGW) .. some have warmer temps & more rain so now these areas had greater productivity & more people than previous.
What puzzles me is there is almost no mention of the social BENEFIT of carbon consumption. If you accept that carbon emissions (fuel, land use, manufacturing, transportation, cement, etc) are the engine of the economy then with $20.93 trillion us yearly gdp and about 5.3 gt yearly carbon emissions the social revenue benefit of carbon is almost $4000/ton ($3949). 99% of These benefits are Accrued by other than the Us oil and gas companies since their yearly revenue is around $.2 Trillion.
So 99% of the carbon “subsidies” are going to the users not the producers. And if you eliminate the producers ….what happens to the GDP? Check out worldata.com for the clear relationship between per capita gdp and per capita energy use.
Indeed. What is the “social profit” of carbon emissions- life saving services by rapid first responders, extended shelf life of produce delivered locally by truck, the extended lives due to central heating and A/C , the convenience of indoor lighting at night, home computers, home appliances and every other “carbon” fueled labor saving devices which subtract hours of labor daily from ordinary people. Doesn’t the ” Social Cost” equation work both ways ?
How can road repairs, congestion etc. be an implicit subsidy for fossil fuels when the same things would happen if all cars were EVs and powered by renewables?
PNAS is a joke.
The best way to find out what the SOCIAL BENEFIT or WORTH of something to society is, ..
is to ask the simple question.
CAN SOCIETY FUNCTION WITHOUT IT ?
Wind and solar…. society has functioned without them for many decades..
…. societal worth or benefit = ZERO
Fossil fuels. society cannot exist without them…
… even the AGW cultists are TOTALLY DEPENDENT on them.
…. societal worth or benefit = INFINITE !!!
.
That economic assessment, his not yours, is totally one sided as you describe it. It includes cost without the benefit, so is wholly unbalanced. The whole of Climate Change rhetoric from the UN IPCC is in fact an attack on the use of cheap and plentiful energy, that has made the West successful, so China can take over by being allowed to do this while the West is not.
ECONOMICS 101: If you include the cost of maintaining roads, then you have to include the benefit of the economic activity they enable, which is fundamentally the total benefit in per capita GDP produced per person from increased energy use per capita, which drives the level of economic prosperity directly, as any (real) economist knows.
This is also why Maurice Strong’s attack on CO2 use with pseudo science created with UN funding was a way to attack successful Western economies’ wealth generating use of energy, primarily CO2 producing, so the “Developing Nations” , AKA China, could power past the West making all its stuff. The same China who gave Strong sanctuary when his theft of $1M in UN funds was discovered, until he died in disgrace.
As you noted with shipping, roads and transport in general move people to work, materials to factories (but more and more in China not the USA, and goods to market. If you add the GDP this creates to the benefit from maintaining roads, the net benefit from transport is huge, and energy dependent. Less is less. The more the potholes, the more wealth is being generated, in fact. Even more if you fix them. Having roads to fix is the first step. See Africa.
The assessment of one side of this equations as stand alone cost of energy use without the benefits accrued by their generation is not a rational form of economic assessment, which is a pseudo science in itself. But this one sided claim could not survive any peer review by anyone who claims to be an economist by educational qualification, more so for their livelihood.
+1000 even though i can only upvote you once. Yes, fixing potholes sucks but when the alternative is no road, subsistence farming and poverty, fixing roads is fantastic.
I will consider it a privilege every time i hit a pothole from now on, a sign of advancing civilization
‘…the amount of bumwad that passes peer-review and is published in “scientific” journals these days is a crime against science …’
My understanding is that PNAS uses ‘pal review’ now, which explains why bumwad like this gets published. The inmates run the asylum. But you have to be on The Team to qualify.
Prior to the invention of the automobile, people traveled on horseback or in horse-drawn carriages. Horses need to be fed, and to be housed somewhere (in a stable) when they are not used for transportation, and their waste needs to be cleaned up. Most city-dwellers or suburbanites do not own horses anymore, but if we went back to them, wouldn’t there be an “implicit subsidy” to stable owners, horse trainers, and oat growers to balance out the “implicit subsidy” to gasoline refiners? What about the “social cost” of the methane emitted from horse manure?
Anyone who has driven down a cobblestone street built during horse-and-buggy days knows that they also have lots of potholes, and tend to be much bumpier than modern asphalt or concrete roads. Who subsidized the repairing of potholes during horse-and-buggy days? To whom were these “subsidies” paid?
Even if all cars with internal combustion engines were replaced by electric cars, electric cars would likely be heavier than gasoline-powered cars due to battery weight, and would likely generate more potholes, so that the cost of pothole repair would likely increase for the same amount of traffic. If we no longer have a gasoline tax to fix potholes, who gets taxed to repair potholes generated by electric cars?
Replacing ICE cars by electric cars would also greatly increase the demand for electric power, requiring more generation plants and more high-tension wires and transformers. Who would pay for the cost of building these extra power plants and transmission lines? The power companies, or would they (as regulated monopolies) ask for some government assistance, which would be an implicit (or explicit) subsidy?
If people try to pin costs on “implicit subsidies”, they have to be counted for both the current system and any substitute system, and balanced against one another. This would likely result in a very small “social cost of carbon (dioxide)”.
“confusulation”
I LOVE learning new words, thanks Willis.
My wife has a word for when someone messes things up but the children are in the room,
“fuckeltated”.
You are welcome to borrow it
Also, i note that EV’s are also using the roads, is it no longer a subsidy if the car doesn’t burn gasoline?